EXHIBIT 2.3
AMENDMENT NO. 2 TO THE TRANSACTION AGREEMENT
THIS AMENDMENT NO. 2 ("Amendment No. 2") to the Transaction Agreement
dated as of May 28, 1999 and amended by Amendment No. 1 thereto dated July 15,
1999 (as amended, the "Agreement") by and among Xxxxxx-Xxxxxx Associates, Inc.,
a Virginia corporation and a wholly-owned subsidiary of Xxxxxx-Xxxxxx Company
("Oldco"), XXXXXX-XXXXXX COMPANY, a Virginia corporation ("Seller") and MD
Acquisition Corporation, a Virginia corporation ("Buyer") is entered into as of
July 29, 1999.
The parties desire to amend the Agreement and hereby agree as follows:
1. Section 1.1(b)(ii) of the Agreement is deleted in its entirety and the
following inserted in lieu thereof:
"(ii) the aggregate of the Oldco Shares (representing all of the
issued and outstanding capital stock of Oldco immediately prior to the
Effective Time) shall, at the Effective Time, be converted into the right
to receive (A) that number of fully paid and nonassessable shares of
Surviving Corporation Common Stock such that, immediately following the
Effective Time, Seller will own 7% of each class of the issued and
outstanding Surviving Corporation Common Stock; (B) $204,212,700 cash,
subject to a working capital adjustment as provided in Section 1.2; (C)
junior subordinated notes in the principal amount of $7.5 million (the
"Junior Subordinated Notes"), in the form attached hereto as Exhibit B;
and (D) junior subordinated notes in the principal amount of $10 million
(the "10% Junior Subordinated Notes"), in the form attached as Exhibit B,
except that the interest rate in Section 2 thereof shall be ten percent
(10%) per annum, ((A), (B), (C), and (D) are collectively referred to in
this Agreement as, the "Merger Consideration")."
2. Exhibit A to the Agreement is deleted in its entirety and Exhibit A
attached hereto is inserted in lieu thereof.
3. Section 1.2(f) of the Agreement is deleted in its entirety and the
following inserted in lieu thereof:
"(f) At or before submission to Seller of the Preliminary Working
Capital Statement, Buyer shall submit to Seller a schedule setting forth
any indebtedness, including capital lease obligations, of the Companies
not included on the Preliminary Working Capital Statement (the "Closing
Debt"). Subject to the same dispute resolution mechanisms set forth in
Sections 1.2(b) through (d) above, Seller shall promptly remit to
Buyer funds in an amount equal to the Closing Debt less the amount
deducted from cash on hand at the Closing pursuant to Section 3.7."
4. Section 2.1(c) of the Agreement is deleted in its entirely and the
following inserted in lieu thereof:
(c) Capitalization of the Company; Validity of Shares. The authorized
capital of Mattress Discounters consists solely of 3,000 shares of
common stock, $.01 par value, of which, as of the date hereof, 100
shares are validly issued and outstanding, fully paid and
nonassessable. The authorized capital of TJB consists solely of
5,000 shares of common stock, no par value, of which, as of the date
hereof, 100 shares are validly issued and outstanding, fully paid
and nonassessable. The authorized capital of Bedding Experts
consists solely of 1,000 shares of common stock, no par value, of
which, as of the date hereof, 100 shares are validly issued and
outstanding, fully paid and nonassessable. The authorized capital of
the subsidiary described on Schedule 2.1(r) consists solely of the
shares set forth thereon and all the outstanding shares of such
subsidiaries set forth thereon are validly issued and outstanding,
fully paid and nonassessable and are owned beneficially and of
record by Mattress Discounters. The authorized capital of Oldco
consists solely of 5,000 shares of common stock, $1.00 par value, of
which, as of the date hereof, 100 shares are validly issued and
outstanding, fully paid and nonassessable. Seller owns the Shares
and the Oldco Shares beneficially and of record. The Shares
constitute all of the outstanding shares of capital stock of the
Companies. The Oldco Shares constitute all of the outstanding shares
of capital stock of Oldco. Seller has good title to the Oldco Shares
and the Shares, free and clear of encumbrances and upon the transfer
of the Shares to Oldco pursuant to this Agreement Oldco will have
good title to the Shares, free and clear of encumbrances. None of
the Companies or Oldco have any commitment to issue or sell any
shares of their capital stock or any securities or obligations
convertible into or exchangeable for, or giving any person or entity
any right to acquire from them, any shares of their capital stock
and no such securities or obligations are issued or outstanding. The
Shares and the Oldco Shares have been offered, issued and sold in
compliance with all applicable laws. Seller has full voting power
over the Shares and the Oldco Shares, subject to no proxy,
shareholders' agreement, voting trust or other agreement relating to
the voting of any of the Shares. Other than this Agreement, there is
no agreement between Seller and any Person with respect to the
disposition of the Shares or the Oldco Shares or otherwise relating
to the Shares or the Oldco Shares."
5. Section 3.4(a) of the Agreement is amended by adding the following at
the end thereof:
"Seller acknowledges that the provisions of this Section 3.4 shall
equally apply to
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warrants to acquire Surviving Corporation Common Stock attached to the
Senior Sub Notes. In the event senior notes of Mattress Discounters are
offered in lieu of senior subordinated notes of Mattress Discounters, all
references to "Senior Sub Notes" shall be deemed to be reference to senior
notes of Mattress Discounters."
6. The Agreement is amended by adding the following new section after
Section 3.6:
"Section 3.7 Cash on Hand at Closing. Notwithstanding anything
contained in the Transaction Agreement to the contrary, the Companies'
cash on hand at the Closing less $543,750 (representing the Closing Debt
estimated as of the Closing) and less book overdrafts as of the Closing
shall be distributed as follows (provided, however, that cash in store
accounts and cash in transit and not available for immediate payment as of
the Closing shall be paid to Seller within 15 days of the Closing): (i)
the first $250,000 thereof shall be paid to Seller in satisfaction of
accrued return allowances and rebates for mattress sold to Seller or its
affiliates and (ii) the remainder as a dividend.
7. Section 4.1(k) of the Agreement is deleted in its entirety and the
following inserted in lieu thereof:
(k) All intercompany accounts payable and receivable between the
Seller, on the one hand, and the Companies, on the other, including (other
than accrued return allowances and rebates for mattresses sold to Seller
or its affiliates paid pursuant to Section 3.7) intercompany Taxes
payable, will be deemed settled by the Seller and contributed to the
capital of the applicable Company, except that the intercompany trade
receivables of the Companies from the Seller for sales of mattresses, box
springs and foundations manufactured by the Companies and accrued return
allowances and rebates related thereto in excess of $250,000 shall be paid
in cash after the Closing Date in accordance with the terms of the
Mattress Supply Agreement, which is attached hereto as Exhibit D.
8. Section 5.3(b) of the Agreement is deleted in its entirety and the
following inserted in lieu thereof:
"(b) the Junior Subordinated Notes and the 10% Junior Subordinated
Notes."
9. Section 8.1 of the Agreement is amended by adding the following new
subsection at the end thereof:
"(c) After the Closing, Seller shall pay to Employees who were
participating in Seller's Annual Performance Based Bonus Plan immediately
prior to the Closing the bonuses to which such Employees would be entitled
to receive as if the Closing occurred at the end of Seller's current
fiscal year, based on performance through July 1999 and based on
performance through July 1999 and pro rated for the portion of
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Seller's current fiscal year through July 1999."
10. Except as expressly set forth in this Amendment, all other terms and
conditions of the Agreement shall remain in full force and effect. Capitalized
terms used herein and not otherwise defined shall have the meaning assigned to
such terms in the Agreement.
11. This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute one
instrument.
12. This Amendment shall be governed by and construed in accordance with
its laws of the Commonwealth of Virginia without regard to the conflict of laws
rules thereof.
13. This Amendment shall be effective, as of July 29, 1999, upon receipt
by Seller of all necessary consents of its lenders under its credit facilities.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
Buyer:
MD Acquisition Corporation,
a Virginia corporation
By:/s/ Xxxxxxx X. Xxxxxx
_____________________________________
Title: Vice President
Oldco:
Xxxxxx-Xxxxxx Associates, Inc.
a Virginia corporation
By: X. X. Xxxxxxx
_____________________________________
Xxx X. Xxxxxxx
Executive Vice President
Seller:
Xxxxxx-Xxxxxx Company,
a Virginia corporation
By: X. X. Xxxxxxx
_____________________________________
Xxx X. Xxxxxxx
Executive Vice President
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