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EXHIBIT 2.1
RECAPITALIZATION, REDEMPTION
AND PURCHASE AGREEMENT
AMONG
SLEEPMASTER HOLDINGS L.L.C.,
SLEEPMASTER L.L.C.,
XXXXX/XXXXXXXXXX HOLDINGS, INC.,
THE MEMBERS OF SLEEPMASTER HOLDINGS, L.L.C.,
THE INVESTORS NAMED HEREIN
AND
SLEEP INVESTOR L.L.C.
DATED: OCTOBER ___, 1996
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TABLE OF CONTENTS
Page
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ARTICLE I .............................................................. 2
Accounting Terms ................................................. 2
Singular and Plural Forms ........................................ 3
Other Defined Terms .............................................. 3
ARTICLE II ............................................................. 9
Senior Debt Recapitalization ..................................... 9
Authorization of New Senior Subordinated Notes ................... 9
Authorization of Redemption of Membership Interests
and Recapitalization Notes .................................... 9
Resignation of Certain Members; Reclassification of
Membership Interests .......................................... 10
Purchases by the Investor from the Existing Members .............. 10
Purchase and Sale of B/S Interest ................................ 10
Closing .......................................................... 10
Payments by Investor to the Existing Members ..................... 10
Payments by the Company to the Existing Members .................. 11
The Warrant ...................................................... 11
Cancellation of Equity Plan ...................................... 11
Method of Payment ................................................ 11
ARTICLE III ............................................................ 11
Payments of Debt and Related Charges ............................. 11
Sleepmaster Distribution ......................................... 11
Redemption Price ................................................. 12
Pre-Closing Adjustment ........................................... 13
Post-Release Adjustment .......................................... 13
Allocation ....................................................... 15
ARTICLE IV ............................................................. 15
Organization and Good Standing, etc .............................. 15
Financial Statements ............................................. 16
Authorization; No Violation; Consents ............................ 17
Authorization and No Violation ....................... 17
Consents ............................................. 17
Enforceable Agreement ................................ 17
Properties of the Business ....................................... 18
Title to Assets and Related Matters .................. 18
Owned Real Property .................................. 18
Leased Real Property ................................. 18
Personal Property Leases ............................. 18
Compliance with Laws ............................................. 19
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Litigation ....................................................... 19
Absence of Certain Changes ....................................... 19
Patents, Trademarks, Trade Names ................................. 21
Contracts and Commitments ........................................ 22
Compliance with Labor and Employment Laws ........................ 23
Employee Benefit Plans ........................................... 24
Environmental Matters ............................................ 25
Licenses, Permits and Authorizations ............................. 27
Taxes ............................................................ 27
Sufficiency and Condition of Assets .............................. 29
Broker's or Finder's Fee ......................................... 29
Undisclosed Liabilities .......................................... 29
Notes and Accounts Receivable .................................... 30
Insurance ........................................................ 30
Product Warranty ................................................. 30
Certain Business Relationships with the Company and
its Affiliates ................................................ 30
Disclosure ....................................................... 31
ARTICLE V .............................................................. 31
Organization and Authority ....................................... 31
Consents and Approvals of Governmental Authorities ............... 32
Ownership of Membership Interests ................................ 32
Investment Intent ................................................ 32
ARTICLE VI ............................................................. 33
Organization and Authority ....................................... 33
Consents and Approvals of Governmental Authorities ............... 34
Investment Intent ................................................ 34
Sufficient Funds ................................................. 34
Brokerage ........................................................ 34
ARTICLE VII ............................................................ 35
Representations and Warranties True; Obligations
Performed ..................................................... 35
No Material Changes .............................................. 35
Performance ...................................................... 35
Consents ......................................................... 35
Essential Contracts .............................................. 36
Environmental Matters ............................................ 36
Affiliate Transactions ........................................... 36
Amended Operating Agreement ...................................... 36
Exercise of Warrant .............................................. 36
Resignation of Manager ........................................... 36
Financing ........................................................ 37
Employment Agreements ............................................ 37
No Proceedings ................................................... 37
ARTICLE VIII ........................................................... 37
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Representations and Warranties True; Obligations Performed........ 37
Performance ...................................................... 38
Consents ......................................................... 38
Xxxxx Letter of Credit ........................................... 38
Environmental Matters ............................................ 38
Employment Agreements/Option Agreements .......................... 38
No Proceedings ................................................... 38
ARTICLE IX ............................................................. 38
Deliveries by the Company, Sleepmaster, B/S and the
Existing Members .............................................. 38
Deliveries by the Investor ....................................... 40
Waiver of Condition Precedent .................................... 40
Closing Escrow ................................................... 40
Release .......................................................... 41
Name Change of Partnership ....................................... 41
ARTICLE X .............................................................. 41
General .......................................................... 41
Provide Access to Information .................................... 41
Conduct Prior to Release Date .................................... 42
Prohibited Transactions Prior to Release Date .................... 42
Confidentiality .................................................. 43
Notices and Consents ............................................. 43
Notice of Developments ........................................... 43
No Affiliate Transactions ........................................ 43
Exclusivity ...................................................... 43
ARTICLE XI ............................................................. 44
Survival ......................................................... 44
Limitations on Liability ......................................... 45
Indemnification .................................................. 47
Defense of Claims ................................................ 48
Certain Payments to the Investor ................................. 50
Remedies Cumulative .............................................. 50
ARTICLE XII ............................................................ 51
Termination ...................................................... 51
Effect of Termination ............................................ 51
ARTICLE XIII ........................................................... 52
Public Announcements ............................................. 52
Rights of Third Parties .......................................... 52
Notices .......................................................... 52
Parties in Interest .............................................. 54
Entire Agreement; Amendment; Waiver .............................. 54
Headings ......................................................... 55
Counterparts ..................................................... 55
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Governing Law .................................................... 55
Severability ..................................................... 55
Expenses ......................................................... 55
Incorporation of Exhibits and Schedules .......................... 55
Specific Performance ............................................. 55
Submission to Jurisdiction ....................................... 55
Waiver of Jury Trial ............................................. 56
Time is of the Essence ........................................... 56
LIST OF EXHIBITS
Exhibit A Existing Members
Exhibit B Form of Investor Notes
Exhibit C Form of Recapitalization Notes
Exhibit D Form of Restated Operating Agreement
Exhibit E First Source Commitment
Exhibit F Pacific Commitment
Exhibit G Employment Agreement (Xxxxxxxxxx)
Exhibit H Employment Agreement (Xxxxxxx)
Exhibit I Employment Agreement (Xxxxxx)
Exhibit J Employment Agreement (DuPont)
Exhibit K Option Agreement (Xxxxxxxxxx)
Exhibit L Option Agreement (Xxxxxxx)
Exhibit M Option Agreement (Xxxxxx)
Exhibit N Option Agreement (DuPont)
Exhibit O Form of Securityholders Agreement
Exhibit P Form of Opinion of Xxxxxxxxxx & Xxxxx
Exhibit Q Form of Opinion of Xxxxxxxx & Xxxxx
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RECAPITALIZATION, REDEMPTION
AND PURCHASE AGREEMENT
This RECAPITALIZATION, REDEMPTION AND PURCHASE AGREEMENT is made and
entered into as of the ____ day of October, 1996 by and among SLEEPMASTER
HOLDINGS L.L.C. a New Jersey limited liability company (the "Company"),
SLEEPMASTER L.L.C. ("Sleepmaster"), a New Jersey limited liability company,
XXXXX/XXXXXXXXXX HOLDINGS, INC. ("B/S"), a Florida corporation, each of the
members of the Company (each referred to individually as an "Existing Member"
and collectively as the "Existing Members," and all of whom are listed on
Exhibit A), and SLEEP INVESTOR L.L.C., a Delaware limited liability company (the
"Investor").
RECITALS
WHEREAS, the Existing Members are all of the members of the Company
and own all of the Membership Interests (as defined in Section 1.3 below) of the
Company;
WHEREAS, the Company owns a 98% Membership Interest of Sleepmaster;
WHEREAS, B/S owns a 2% Membership Interest of Sleepmaster;
WHEREAS, Sleepmaster is engaged in the sale, marketing and
distribution of mattresses and other bedding products, including those products
that bear one or more of the "Serta" trademarks;
WHEREAS, subject to the terms and conditions of this Agreement, the
Company intends to cause Sleepmaster to borrow certain additional funds from one
or more lenders, and thereafter to repay all Debt and certain other obligations
of the Company and Sleepmaster at the time outstanding;
WHEREAS, subject to the terms and conditions of this Agreement,
Sleepmaster intends, subsequent to the borrowing and repayment of obligations
referred to in the preceding recital, to distribute to B/S and the Company
certain funds in excess of those required to repay such obligations, all as
specified in this Agreement;
WHEREAS, subject to the terms and conditions of this Agreement, the
Company intends, subsequent to the distribution to be made to it by Sleepmaster,
to repurchase from the Existing Members, and the Existing Members intend to sell
to the Company, certain of their respective Membership Interests in the Company,
each to the extent further described in this Agreement, for a redemption price
consisting of cash and Recapitalization Notes;
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WHEREAS, subject to the terms and conditions of this Agreement, the
Existing Members intend, subsequent to the repurchase of Membership Interests of
the Company referred to in the preceding recital, to amend and restate the
Operating Agreement to provide for the reclassification of the Company's then
remaining Membership Interests into (a) Membership Interests of the Company
having certain preferences in distribution, allocation, liquidation and other
matters (the "Preferred Interests") and (b) other Membership Interests of the
Company having characteristics similar to shares of common stock of a business
corporation (the "Common Interests");
WHEREAS, subject to the terms and conditions of this Agreement, the
Investor intends, subsequent to the reclassification of the Membership Interests
of the Company into the Preferred Interests and the Common Interests, to
purchase from the Existing Members, and the Existing Members intend to sell and
assign to the Investor, certain of the Preferred Interests, certain of the
Common Interests and all of the Recapitalization Notes for the consideration
comprised of cash and the Investor Notes, all as more fully set forth in the
Agreement; and
WHEREAS, subject to the terms and conditions of this Agreement, the
Investor also intends, subsequent to the acquisition by the Investor of the
Preferred Interests and the Common Interests to be acquired by it, to acquire,
and B/S intends to sell and transfer to the Investor, the Membership Interest of
Sleepmaster owned by B/S for the consideration and all as more fully set forth
in the Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants which are made and to be performed
pursuant to this Agreement, the Company, Sleepmaster, the Existing Members and
the Investor hereby agree as follows:
ARTICLE I
DEFINITIONS
2.1. Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP (as hereinafter
defined) consistently applied and each amount included in the Estimated
Pre-Closing Statement and the Closing Date Statement shall be calculated in
accordance with GAAP and shall be consistent with the books and records of the
Business (which books and records shall be correct and complete); provided, that
all known errors and adjustments shall be taken into account in the calculation
of each account set forth above, regardless of their materiality. With respect
to the calculations made in connection with the Estimated Pre-Closing Statement
and the Closing Date Statement, no change in accounting principles shall be made
from those utilized in preparing the Financial Statements (without regard to
materiality), including, without limitation, with respect to the nature or
classification of accounts, closing proceedings, levels of reserves or levels of
accruals. For purposes of the preceding sentence, a "change in accounting
principles" shall include any change in accounting principles, policies,
practices, procedures or methodologies with respect to financial statements,
their classification or their display, as well as any change in practices,
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methods, conventions or assumptions utilized in making accounting estimates,
other than any change necessitated by a change in underlying circumstances.
2.2. Singular and Plural Forms. The use herein of the singular form also
denotes the plural form, and the use of the plural form herein also denotes the
singular form, as in each case the context may require.
2.3. Other Defined Terms. The terms listed below in this Section shall
have the following respective meanings in this Agreement:
"Act" shall mean the New Jersey Limited Liability Company Act
codified as Chapter 2B of Title 42 of the New Jersey Revised Statutes.
"Action" shall mean any action, suit, claim, investigation, order,
judgment, decree, ruling, charge or legal, administrative or arbitration
proceeding.
"Adjusted Net Redemption Price" shall mean the aggregate Net
Redemption Price less the aggregate original principal amount of the
Recapitalization Notes.
"Affiliate" of an entity shall mean any entity that directly or
indirectly controls, or is controlled by, or is under common control with
such entity and, with respect to any individual, such individual's spouse
or any person within the first degree of kinship of such individual.
"Xxxxx" shall mean Xxxxxxx X. Xxxxx, an individual.
"B/S Membership Interest" shall mean the Membership Interest of
Sleepmaster owned by B/S.
"B/S Purchase Price" shall mean the amount by which 2% of the Gross
Redemption Price is greater than 2% of the Sleepmaster Distribution.
"Business" shall mean the manufacture, sale, marketing and
distribution of mattress and other bedding products, including those
products that bear one or more of the "Serta" trademarks, as conducted by
the Company and Sleepmaster on June 30, 1996.
"Change of Control Payments" shall mean all payments, other than
payment of the Net Redemption Price, to which any member or manager of the
Company or Sleepmaster, any Affiliate of the Company or Sleepmaster or any
warrant holder is entitled to receive as a result of the transactions
contemplated hereby, including without limitation any amounts paid by the
Company to the holder of the Warrant if and to the extent the Warrant has
not been exercised as of the Release Date.
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"Closing" shall have the meaning given in Section 2.7.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company Assets" shall mean all rights, properties, assets,
contracts and leases of every kind, character and description, whether
tangible or intangible, whether real, personal or mixed, whether accrued,
contingent or otherwise, and wherever located relating to the Business as
of the opening of Business on the Closing Date.
"Company Expenses" shall mean the aggregate amount of the fees and
expenses of the Company incurred and unpaid at or prior to the Closing by
the Company in connection with this Agreement which inure directly or
indirectly to the benefit of the Existing Members and the consummation of
the transactions contemplated hereby, including, without limitation, any
investment banking, brokers, finders' and legal fees, and including the
fees of Xxxxxx Xxxxxxxxx Xxxxxx & Co. ("BHC"), transfer taxes, conveyance
and recording fees, documentary stamp taxes and all other similar charges;
in no event shall Company Expenses include any fees or expenses paid or
payable by or paid or payable to the Investor, First Source or Pacific or
to any of their respective counsel.
"Debt" shall mean all indebtedness of the Company or Sleepmaster
including without limitation (i) all obligations of the Company or
Sleepmaster for borrowed money or evidenced by bonds, debentures, notes,
letters of credit or other similar instruments, but in no event amounts
due in connection with the New Sleepmaster Debt or the Recapitalization
Notes; (ii) obligations as lessee under capital leases; (iii) obligations
to pay the deferred purchase price of property or services, including (A)
any amounts in excess of $104,150 due under the Pennsauken Non-Competition
Agreements, and (B) obligations to pay certain taxes of the Partnership
pursuant to the agreement, dated January 12, 1995, between Sleepmaster and
the Partnership annexed as Schedule 1.1 hereto, except accounts payable
arising in the Ordinary Course of Business; (iv) all debt of others
guaranteed or otherwise supported by the Company or Sleepmaster, or
secured by a lien on any of the assets of the Company or Sleepmaster; (v)
all amounts owed by or any obligations of the Company or Sleepmaster to
any Affiliate of the Company or Sleepmaster other than pursuant to this
Agreement or the employment contracts listed in Schedule 4.9; (vi) any
Change of Control Payments; and (vii) any interest, principal, prepayment
penalty, fees or expenses in respect of those items listed in clauses (i)
through (vi) of this defined term (other than the New Sleepmaster Debt and
the Recapitalization Notes).
"DuPont" shall mean Xxxxxxx XxXxxx, an individual.
"Employee Members" shall mean Schweitzer, Koscica, DuPont and
Xxxxxx.
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"Equity Plan" shall mean Sleepmaster's Executive Equity
Participation Plan.
"Equity Plan Participant" shall mean each Person currently entitled
to receive any benefit under the Equity Plan.
"Essential Contracts" shall mean the Linden Lease and the Serta
Licenses.
"Existing Senior Loan Facility" shall mean the obligations of the
Company or Sleepmaster to NationsCredit Commercial Corp. ("NCC")
outstanding under the Credit Agreement, dated as of January 12, 1995,
among Sleepmaster, the Company, the lenders referred to therein and NCC as
agent bank.
"Facility" shall mean Sleepmaster's operating facility located at
0000 Xxxxx Xxxx, Xxxxxx, Xxx Xxxxxx.
"First Source" shall mean First Source Financial, Inc.
"Financial Statements" shall have the meaning given in Section 4.2.
"GAAP" shall mean United States generally accepted accounting
principles, as in effect from time to time, applied on a basis consistent
with prior periods.
"Governmental Entity" shall mean any court, arbitral tribunal,
administrative agency or commission or other governmental or other
regulatory authority or agency.
"Gross Redemption Price" shall mean the amount determined as such
pursuant to Section 3.3(a).
"Intangible Property Rights" shall mean all of the following,
irrespective of where any of the same were issued, are pending or exist:
United States and foreign patents of any description, and applications
therefor, registrations of trademarks and of other marks, registrations of
trade names, labels or other trade rights, registered user entries, and
applications for any such registration or entries; United States and
foreign copyrights, copyright registrations and applications therefor;
United States and foreign trademarks and other marks, corporate names,
trade names, business names, labels and other trade rights, whether or not
registered; inventions, discoveries, improvements, designs, processes,
formulae, technology, know-how, trade secrets, confidential information
and technical information, whether patented, not patented, patentable or
not patentable; and shop rights and other rights relating in whole or in
part to any of the foregoing.
"Investor Indemnitee" shall have the meaning given it in Section
11.3(a).
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"Investor Notes" shall mean the Senior Notes of the Investor, each
of which shall be substantially in the form of Exhibit B, dated as of the
Release Date, made by the Investor to the Existing Members in the original
aggregate principal amount of $7,000,000.
"IRS" shall mean the Internal Revenue Service.
"K(k)nowledge" when used as a qualification to any representations
or warranties made by the Company shall include Sleepmaster and shall mean
the best knowledge of Schweitzer, Koscica, Xxxxxx, XxXxxx or Xxxxx.
"Xxxxxxx" shall mean Xxxxx X. Xxxxxxx, an individual.
"Labor Contract" shall mean the Collective Bargaining Agreement,
dated May 1, 1994, between Sleepmaster and AFL-CIO CLC Local Union 396 of
the Aluminum, Brick and Glassworkers Union.
"Lien" or "Liens" shall mean any mortgage, pledge, security
interest, conditional sale or other title retention agreement,
encumbrance, lien, easement, claim, right, covenant, restriction, right of
way, warrant, option or charge of any kind, including without limitation
any liens to secure the payment or collection of Taxes.
Any reference to any event, change or effect having a "Material
Adverse Effect" means with respect to an entity (or group of entities
taken as a whole), such event, change or effect that is materially adverse
to the consolidated condition (financial or otherwise), properties, assets
(including intangible assets), liabilities (including contingent
liabilities), business, results of operations or prospects of such entity
(or, if with respect thereto, of such group of entities taken as a whole).
"Linden Lease" shall have the meaning given it in Section 4.4(c).
"Membership Interest" shall mean a limited liability company
interest as defined in Section 2B-2 of the Act.
"Net Redemption Price" shall mean the amount determined as such
pursuant to Section 3.3(b).
"Net Working Capital" shall mean the Company's consolidated current
assets (other than cash and deferred financing costs), less the Company's
consolidated current liabilities (other than (i) the current portion of
any long-term indebtedness, (ii) any funded debt of the Company or
Sleepmaster, (iii) amounts due under the Pennsauken Non-Competition
Agreements and (iv) deferred taxes).
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"New Sleepmaster Debt" shall mean the New Senior Loan Facility and
the New Senior Subordinated Notes.
"New Senior Loan Facility" shall mean the obligations of Sleepmaster
to First Source under the Secured Credit Agreement, dated as of the
Release Date, among Sleepmaster, the Company and First Source as agent
bank for the banks named therein.
"New Senior Subordinated Notes" shall mean the 12% Senior
Subordinated Notes of Sleepmaster, issued as of the Release Date, to
Pacific in the original aggregate principal amount of $15,000,000.
"Operating Agreement" shall mean the Operating Agreement of the
Company, dated as of December 19, 1994, among the Company and the members
named therein and signatories thereto.
"Ordinary Course of Business" means the ordinary course of business
of the Company or Sleepmaster, as the case shall be, consistent with past
custom and practice as of June 30, 1996 (including with respect to
quantity and frequency).
"Pacific" shall mean PMI Mezzanine Fund, L.P., a Delaware limited
partnership.
"Partnership" shall mean Sleepmaster Products Company, L.P., a
Delaware limited partnership, as the same shall be known after the change
in name contemplated by this Agreement.
"Pennsauken Non-Competition Agreements" shall mean each of the two
Non-Competition Agreements, dated November 30, 1993, between the
Partnership and Xxxxxxx Xxxxxxxxx and Xxxxxx Xxxxx, respectively, as
assumed by Sleepmaster.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization or a Governmental Entity.
"Purchased Membership Interests" shall mean the Preferred Interests
and the Common Interests being purchased by the Investor from the Existing
Investors pursuant to Section 2.5.
"Recapitalization Notes" shall mean the Junior Subordinated Notes of
the Company, each of which shall be substantially in the form of Exhibit
C, dated as of the Release Date, in the original aggregate principal
amount of $7,000,000 made by the Company to the Existing Members and
immediately thereafter purchased by the Investor.
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"Redeemed Interests" shall have the meaning given it in Section 2.3.
"Xxxxxx" shall mean Xxxxxxx Xxxxxx, an individual.
"Release" shall have the meaning given it in Section 9.5.
"Release Date" shall mean the date on which the Release occurs.
"Representative of the Existing Members" shall mean Xxxxx or such
other Person that is named as such in a written instrument signed by the
Existing Members holding a majority in percentage of the Membership
Interests of the Company measured as of the date of this Agreement.
"Restated Operating Agreement" shall mean the Operating Agreement,
as amended and restated in the form of Exhibit D.
"Retained Interests" shall mean all Membership Interests of the
Company other than the Redeemed Interests.
"Xxxxxxxxxx" shall mean Xxxxxxx Xxxxxxxxxx, an individual.
"Serta" shall mean Serta, Inc., a Delaware corporation.
"Serta Consent" shall mean the consent of Serta and the stockholders
of Serta to the transactions contemplated by this Agreement, to the extent
required by the by-laws of Serta and the Serta Licenses; the Serta Consent
shall include a letter agreement to be entered into between Serta and
First Source relating to certain rights of First Source in the event of a
default by Sleepmaster under the New Senior Loan Facility.
"Serta Licenses" shall mean the two Standard License Agreements and
the two Memoranda of Agreement (collectively, the "Serta Licenses"), dated
January 12, 1995, between the Company and Serta covering certain
territories in Pennsylvania, New Jersey, New York, Connecticut, Maryland
and Delaware.
"Sleepmaster Distribution" shall mean the distribution to be made by
Sleepmaster to B/S and the Company pursuant to Section 3.2.
"Sleepmaster Operating Agreement" shall mean the Operating
Agreement, dated as of December 19, 1994, among Sleepmaster and its
members.
"Tax" means, with respect to the Company or Sleepmaster, any taxes,
fees, charges, levies, excises, duties, or assessments of any kind
whatsoever, including, without limitation, income, gross receipts, ad
valorem, premium, excise, real property, personal property, windfall
profit, sales, use, transfer, licensing, import, export, withholding,
employment, payroll, social security, medicare,
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environmental (under Code Sec. 59A), customs duties, value added,
alternative or add-on minimum estimated and franchise taxes, together with
additions to tax or additional amounts, interests and penalties relating
thereto that may be imposed by any Governmental Entity on or with respect
to the Company or Sleepmaster with respect to all taxable periods ending
on or prior to the Closing Date;
"Tax Returns" mean all returns, reports, declarations and forms,
including any schedule or attachment thereto, and any amendment thereof,
required to be filed in respect of any Taxes.
"Warrant" shall mean the warrant to purchase a 10.20% non-voting
membership interest in the Company, dated January 12, 1995, expiring
January 12, 2005 and issued by the Company to NCC.
Other capitalized terms used herein shall have the respective meanings accorded
them throughout this Agreement.
ARTICLE II
RECAPITALIZATION TRANSACTIONS
2.4. Senior Debt Recapitalization. The Company will authorize, and will
cause Sleepmaster to authorize, the New Senior Loan Facility. Subject to the
terms and conditions of this Agreement, the Company will cause Sleepmaster to,
and Sleepmaster will, enter into the New Senior Loan Facility and borrow
initially $30,720,000 and thereafter such amounts as Sleepmaster deems necessary
or advisable.
2.5. Authorization of New Senior Subordinated Notes. The Company will
cause Sleepmaster to authorize, and Sleepmaster will authorize, the issue, sale
and delivery of the New Senior Subordinated Notes to Pacific. Subject to the
terms and conditions of this Agreement, Sleepmaster will issue, sell and deliver
the New Senior Subordinated Notes to Pacific in the aggregate principal amount
of $15,000,000.
2.6. Authorization of Redemption of Membership Interests and
Recapitalization Notes. The Company will authorize the redemption of the
Membership Interests of the Company owned by the Existing Members to the extent
set forth in Schedule 2.3 (the Membership Interests of the Company being so
repurchased by the Company being referred to in this Agreement collectively as
the "Redeemed Interests"), for the aggregate redemption price determined
pursuant to Section 3.3 and referred to in the aggregate in this Agreement as
the "Net Redemption Price." In order to pay a portion of the Net Redemption
Price, the Company will authorize the issue, sale and delivery of the
Recapitalization Notes to all of the Existing Members on a pro rata basis (based
on the amount of their respective Membership Interests). Subject to the terms
and conditions of this Agreement, the Company will redeem the Redeemed Interests
from the Existing Members, and the Existing Members will jointly and severally
sell
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and transfer the Redeemed Interests to the Company as set forth in Schedule 2.3,
all for the Net Redemption Price, which price consists of cash and the
Recapitalization Notes.
2.7. Resignation of Certain Members; Reclassification of Membership
Interests. Subject to the terms and conditions of this Agreement (a) the
Existing Members (other than the Employee Members) hereby resign from the
Company, such resignations to become effective only immediately following the
Existing Members' receipt of the Net Redemption Price; provided that
notwithstanding such resignations, the Existing Members will retain their
respective Membership Interests in the Company until the Investor purchases
their Membership Interests pursuant to Section 2.5. Each Existing Member and the
Company hereby waive the provisions of Section 2B-38 of the Act and consent to
the effectiveness of the resignations of the Existing Members (other than the
Employee Members) as stated in the preceding sentence; and (b) immediately
following their receipt of the Net Redemption Price payable to them, the
Employee Members and the Company will enter into and deliver the Restated
Operating Agreement.
2.8. Purchases by the Investor from the Existing Members. Subject to the
terms and conditions of this Agreement, (i) the Investor will purchase from the
Existing Members, and the Existing Members will sell and assign to the Investor
in the respective allocations set forth in Schedule 2.5, Membership Interests of
the Company, all for an aggregate purchase price of $12,984,286 less the B/S
Purchase Price (such net amount being referred to as the "Investor's Purchase
Price") payable in cash, all to the extent set forth and for the allocations of
the Investor's Purchase Price that are set forth in Schedule 2.5, and (ii) the
Investor will purchase and assume from the Existing Members, and the Existing
Members will sell and assign to the Investor, the Recapitalization Notes in
exchange for an equivalent aggregate principal amount of Investor Notes. In
connection therewith, the Investor will authorize the issue, sale and delivery
of the Investor Notes to the Existing Members in an aggregate principal amount
equivalent to the aggregate principal amount of the Recapitalization Notes, and
will authorize the purchase of the Recapitalization Notes by the Investor.
2.9. Purchase and Sale of B/S Interest. Subject to the terms and
conditions of this Agreement, B/S will sell and assign to Investor, and Investor
will purchase from B/S, the B/S Membership Interest for the B/S Purchase Price,
payable in cash.
2.10. Closing. The closing of the transactions described in Sections 2.1
through 2.6 (the "Closing") will be held on October 17, 1996 at 10:00 A.M. or at
such other time and date not later than November 15, 1996 at least three
business days after the waiver or satisfaction of all closing conditions set
forth in Articles VII and VIII as the parties hereto mutually agree (the
"Closing Date") at the offices of counsel to the Company or such other place as
the parties hereto mutually agree. At the Closing, the parties will deliver into
the escrow contemplated by this Agreement those documents listed in Sections 9.1
and 9.2.
2.11. Payments by Investor to the Existing Members. Upon the Release, the
Investor will pay the Investor's Purchase Price for the Purchased Membership
Interests to such respective bank accounts of the Existing Members as the
Representative for the Existing
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Members shall advise the Investor in writing not less than three business days
prior to the Closing.
2.12. Payments by the Company to the Existing Members. Upon the Release,
the Company will pay the Existing Members the cash portion of the consideration
due to be paid under this Agreement to such respective bank accounts as the
Representative for the Existing Members shall advise the Company in writing not
less than three business days prior to the Closing.
2.13. The Warrant. At the Closing, if and to the extent that the Warrant
has not theretofore been exercised, the Warrant shall be cancelled by the
Company in accordance with its terms, and the holder of the Warrant shall
deliver to the Company an instrument acknowledging the cancellation of such
Warrant and the full and final release of any obligations of the Company or
Sleepmaster thereunder.
2.14. Cancellation of Equity Plan. Each outstanding right issued pursuant
to the Equity Plan shall be cancelled simultaneously with the Closing.
2.15. Method of Payment. Subject to Section 11.5, all payments to be made
upon the Release or otherwise under this Agreement shall be made by bank wire
transfer of federal funds.
ARTICLE III
PAYMENTS BY THE COMPANY
2.16. Payments of Debt and Related Charges. At the Release, the Company
shall pay, or cause to be paid, in full:
(a) the Existing Senior Loan Facility;
(b) all Change of Control Payments;
(c) $104,150 of the amount outstanding under the Pennsauken
Non-Competition Agreements; and
(d) the Company Expenses.
2.17. Sleepmaster Distribution. At the Release, Sleepmaster will
distribute to its members in proportion to their Membership Interests the amount
by which $43,000,000 exceeds the amounts to be paid or caused to be paid by the
Company pursuant to Section 3.1.
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2.18. Redemption Price.
(a) The "Gross Redemption Price" shall be the amount by which
$65,000,000, as adjusted pursuant to Section 3.4(b), exceeds the sum of the
amounts paid pursuant to clauses (a) through (d) of Section 3.1.
(b) The "Net Redemption Price" shall mean the Gross Redemption Price
reduced by (i) an amount equal to 2% of the Sleepmaster Distribution, (ii) the
Investor's Purchase Price, (iii) the B/S Purchase Price and (iv) $2,015,714.
(c) At the Release, the Net Redemption Price shall be allocated and
paid to the Existing Members as follows:
(i) Each Existing Member (including, for purposes of clauses (i)
through (iii) of this Section 3.3(c), the holder of the Warrant, if the
holder has exercised the Warrant on or prior to the Release Date) will
receive in partial payment for the redemption of its Membership Interest
in the Company its pro rata share (based on the amount of its Membership
Interest in the Company as a percentage of all Membership Interests, after
giving effect to the exercise of the Warrant, if and to the extent the
Warrant shall have been exercised) of the Recapitalization Notes, duly
executed and delivered by the Company and registered in its name;
(ii) Each Existing Member (other than the Employee Members) will
receive as payment for the redemption of the remainder of his or its
Redeemed Interests its pro rata share of 50.52% of the Adjusted Net
Redemption Price (the "Non-Employee Members' Share") determined as
follows: the amount payable to each such Existing Member shall be the
product of the Non-Employee Members' Share and a fraction, the numerator
of which shall be the Membership Interest of the Company held by such
Member, expressed in percentage terms (without reduction for the partial
redemption effected by the issuance of the Recapitalization Notes), and
the denominator of which shall be the aggregate of the Membership
Interests of the Company held by all of the Existing Members, expressed in
percentage terms (other than the Employee Members); as of the date of this
Agreement, after giving effect to the exercise of the Warrant if the same
shall have been exercised on or prior to the Release Date; provided, that
if the Warrant shall not have been exercised in full on or prior to the
Release Date, the percentage of the Adjusted Net Redemption Price subject
to this Section 3.3(c)(ii) shall be 44.9% and not 50.52%); and
(iii) Each Employee Member shall receive as payment for the
redemption of his Redeemed Interests his pro rata share of 49.48% of the
Adjusted Net Redemption Price (such net amount being referred to as the
"Employee Members' Share"), determined as follows: the amount payable to
each Employee Member shall be the product of the Employee Members' Share
and a fraction, the numerator of which shall be the Membership Interest of
the Company
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held by such Member, expressed in percentage terms (without reduction for
the partial redemption effected by the issuance of the Recapitalization
Notes), and the denominator of which shall be the aggregate of the
Membership Interests of the Company held by all of the Employee Members as
of the date of this Agreement, expressed in percentage terms; provided,
that if the Warrant shall not have been exercised on or prior to the
Release Date, the percentage of the Adjusted Net Redemption Price subject
to this Section 3.3(c)(iii) shall be 55.1% and not 49.48%).
2.19. Pre-Closing Adjustment.
(a) Not later than five days prior to the Closing Date, the Company
shall deliver to the Investor a financial statement of the Company (the
"Estimated Pre-Closing Statement") setting forth the Company's good faith
estimate of Sleepmaster's Net Working Capital (the "Net Working Capital
Estimate") as of the opening of business on the Closing Date. The Estimated
Pre-Closing Statement shall have been prepared in accordance with GAAP applied
in a manner consistent with the Financial Statements.
(b) Based on the Estimated Pre-Closing Statement, if the Net Working
Capital Estimate is negative, the Gross Redemption Price shall be reduced by
such negative amount on a dollar-for-dollar basis.
2.20. Post-Release Adjustment.
(a) Commencing promptly after the Release Date, the Investor shall
cause the Company to prepare and deliver to the Investor and the Representative
of the Existing Members within 30 days following the Release Date a statement
(the "Release Date Statement") of Net Working Capital of the Company as of the
opening of business on the Release Date.
(b) The Representative of the Existing Members and its accountants
shall review the Release Date Statement and in connection with such review shall
have reasonable access to work papers and personnel to be able to determine the
manner in which any item reflected on the Release Date Statement was determined
and the accuracy of any such determination. The Investor shall provide, and
shall cause the Company to provide, the Existing Members and their accountants
reasonable access at all reasonable times to the Company's books, records,
premises and facilities and other materials, and shall furnish the
Representative of the Existing Members and its accountants with such information
and assistance as either of them shall reasonably request to assist them in
their review of the Release Date Statement in accordance with this Section.
Within 30 days after delivery of the Release Date Statement (the "Review
Period"), the Existing Members shall deliver a written notice to the Investor
setting forth a description of all their objections, if any, to the Release Date
Statement. If no such objection is delivered to the Investor within the Review
Period, then on the day following the last day of the Review Period, the
Existing Members will be deemed to have accepted the Release Date Statement.
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(c) The Investor and the Representative of the Existing Members
shall attempt to resolve all of the Existing Members' objections in good faith
within 15 days of delivery by the Representative of the Existing Members of the
notice of objections. If any objections remain unresolved after the end of such
15-day period, the Investor and the Representative of the Existing Members shall
retain the New York City office of Ernst & Young, LPP, or another public
accounting firm of national reputation mutually acceptable to the Investor and
the Representative of the Existing Members (the "Arbitrator"), to resolve all
disputes relating to the Release Date Statement. The Investor on the one hand
and the Existing Members on the other hand shall each pay one-half of the
Arbitrator's fees and expenses. The Arbitrator shall be instructed to (i) make
its determination based on the terms and conditions of this Agreement and (ii)
select the position of the Investor, the Existing Members or one that falls
between and (iii) make a final resolution of all disputes within 10 days after
being retained by the Investor and the Representative of the Existing Members.
(d) Within 10 days after the resolution of all disputes arising out
of the review of the Release Date Statement in accordance with Section 3.5(c),
or, if the Representative of the Existing Members shall not have delivered the
notice setting forth their objections pursuant to Section 3.5(b), the end of the
Review Period, whichever is later, the following adjusting payments shall be
made:
(i) If the Net Working Capital Estimate is negative and if the
Release Date Net Working Capital is less (i.e., negative to a
greater extent) than the Net Working Capital Estimate (as finally
determined in accordance with this Section), then the Existing
Members shall jointly and severally pay to the Company the amount of
the difference;
(ii) If the Net Working Capital Estimate is negative and if
the Closing Date Net Working Capital is also negative but is greater
(i.e., negative to a lesser extent) than the Net Working Capital
Estimate, the Company shall pay the Existing Members the amount of
the positive difference;
(iii) If the Net Working Capital Estimate is negative and if
the Release Date Net Working Capital is positive, then the Company
shall pay the Existing Members the amount by which the Gross
Redemption Price was reduced pursuant to Section 3.4(b);
(iv) If the Net Working Capital Estimate is positive and the
Release Date Net Working Capital is negative, the Existing Members
shall jointly and severally pay the Company the amount by which the
Release Date Net Working Capital is negative; and
(v) If both the Net Working Capital Estimate and the Release
Date Net Working Capital are positive, no adjusting payments shall
be due or payable.
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All payments made pursuant to this Section 3.5(d) shall be adjustments to the
Net Redemption Price and shall be made by wire transfer of federal funds.
2.21. Allocation. The aggregate of the Net Redemption Price and the
Investor's Purchase Price shall be allocated among the Company Assets pursuant
to Schedule 3.6. No party to this Agreement shall take any position for purposes
of Federal or state income tax respecting the allocation of such amounts which
is inconsistent with the allocation so agreed upon by the parties in accordance
with this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY, SLEEPMASTER, B/S
AND THE EXISTING MEMBERS
The Company, Sleepmaster, B/S and the Existing Members hereby
represent and warrant, jointly and severally, to the Investor that the
statements made in this Article IV are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date and as of
the Release Date.
2.22. Organization and Good Standing, etc.
(a) Each of the Company and Sleepmaster (i) is a limited liability
company duly formed, validly existing and in good standing under the laws of its
jurisdiction of formation; (ii) has full power and authority to carry on its
business as it is now being conducted and to own the properties and assets it
now owns; and (iii) is duly qualified to transact business in all jurisdictions
in which the ownership or leasing of assets, or conducting of its business,
requires such qualification and in which the failure to so qualify would have a
Material Adverse Effect on the Business.
(b) The Company has heretofore delivered to the Investor complete
and correct copies of the Articles of Formation and Operating Agreement, as
amended as currently in effect, of each of the Company and Sleepmaster.
(c) Prior to giving effect to the transactions referred to in
Article II, Schedule 4.1(c) sets forth a true, correct and complete list of (i)
all holders of any Membership Interests of the Company and the amount of such
Membership Interests expressed as a percentage of the profits and losses of the
Company to which such holder is entitled; and (ii) all holders of any Membership
Interests of Sleepmaster and the amount of such Membership Interests expressed
as a percentage of the profits and losses of Sleepmaster to which such holder is
entitled. Other than as set forth in Section 2.3 and the Warrant, there are no
subscriptions, commitments, options, warrants or other arrangements to issue
Membership Interests of the Company or of Sleepmaster or any other securities
convertible into, exchangeable for or
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evidencing the right to subscribe for any Membership Interests of the Company or
of Sleepmaster.
(d) Except for the Company with respect to Sleepmaster, neither the
Company nor Sleepmaster has any investment in and does not control, directly or
indirectly, any other corporation, partnership, joint venture, association or
other entity or business concern.
2.23. Financial Statements. Attached hereto as Schedule 4.2 are (a) the
consolidated balance sheet of the Company as at December 31, 1995 (the "1995
Balance Sheet") and the related consolidated statements of operations and cash
flows of the Company and Sleepmaster for the fiscal year then ended, together
with the notes thereto, in each case audited by Edelman & Kalosieh, the
Company's independent certified public accountant, together with the audit
report of such firm as to such statements (collectively, with the 1995 Balance
Sheet, the "1995 Financial Statements"); (b) the consolidated balance sheets for
the Partnership as at December 31, 1994, December 31, 1993 and December 31,
1992, and the related consolidated statements of operations and cash flows of
the Partnership, each audited by an independent certified public accountant,
together with the audit report from such firm as to such statements (the
"Historical Financial Statements"); and (c) an unaudited consolidated balance
sheet for the Company and Sleepmaster as at June 30, 1996 and unaudited
statements of operations and cash flow for the six-month period then ended (the
"Interim Financial Statements"; the 1995 Financial Statements, the Historical
Financial Statements and the Interim Financial Statements being collectively
referred to as the "Financial Statements"). The Financial Statements (i) were
compiled from and are consistent with the books and records of the Company and
Sleepmaster, or of the Partnership, as the case shall be, regularly maintained
by management and used to prepare the financial statements of the Company and
Sleepmaster, or of the Partnership, as the case shall be, (ii) are used by the
Company in the ordinary conduct of the business of the Company and Sleepmaster,
(iii) except as disclosed in Schedule 4.2, were determined on a basis consistent
with the past practices of the Company and Sleepmaster, or of the Partnership,
as the case shall be, (iv) present fairly the financial position, results of
operation and other information of the Company and Sleepmaster included therein,
or of the Partnership, as the case shall be, including, without limitation,
adequate reserves with respect to inventory, and (v) except with respect to the
absence of footnotes and normal year-end adjustments to be made to the Interim
Financial Statements, have been prepared in accordance with GAAP as consistently
applied by the Company and Sleepmaster during the period covered.
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2.24. Authorization; No Violation; Consents.
(a) Authorization and No Violation. Except as set forth in Schedule
4.3(a), each of the Company and Sleepmaster has full power and authority to
execute and deliver this Agreement and the other agreements and documents
contemplated hereby and to perform its respective obligations hereunder and
thereunder. The execution and delivery by each of the Company and Sleepmaster of
this Agreement and the other agreements and documents contemplated hereby and
the consummation of the transactions contemplated hereby and thereby, the
performance by each of the Company and Sleepmaster of their respective
obligations contemplated hereby and thereby (i) have been duly and validly
authorized by all necessary action on the part of each of the Company and
Sleepmaster, including without limitation all actions taken by the members or
managers of the Company and Sleepmaster, (ii) do not conflict with or violate
any of the terms of the Articles of Formation or Operating Agreement of the
Company or Sleepmaster, (iii) do not violate any applicable law, ordinance, rule
or regulation or any judgment, order, writ, injunction or decree of any court,
administrative or Governmental Entity, and (iv) except as set forth in Schedule
4.3(a), do not violate or conflict with the terms of, or result in a breach of,
or constitute a default under, or result in the creation or imposition of any
Lien upon any property or assets of the Company or Sleepmaster under, any
mortgage, indenture, lease, agreement, license or other instrument to which the
Company or Sleepmaster is a party or by which the Company or Sleepmaster, or the
assets thereof, may be bound, which violation, conflict, default or Lien, in the
aggregate with all other such violations, conflicts, defaults and Liens, would
have a Material Adverse Effect on the Company and Sleepmaster, taken as a whole.
(b) Consents. Except as set forth in Schedule 4.3(b), there are no
consents, authorizations or approvals of, notices to, or filings or
registrations with, any Governmental Entity or any other third party, required,
and no Change of Control Payments become payable, in connection with the
execution and delivery by the Company or Sleepmaster of this Agreement and the
other agreements and documents contemplated hereby, the consummation of the
transactions contemplated hereby and thereby and the performance by the Company
or Sleepmaster of their respective obligations contemplated hereby and thereby,
except where the failure to obtain such consents, authorizations or approvals
would not have a Material Adverse Effect on the Company and Sleepmaster, taken
as a whole. Except as otherwise set forth in Schedule 4.3(b), all consents,
authorizations, approvals, notices, filings and registrations set forth in said
Schedule have been obtained or made.
(c) Enforceable Agreement. This Agreement and the other agreements
and documents contemplated hereby constitute the legal, valid and binding
obligations of the Company, Sleepmaster and the Existing Members, as the case
shall be, enforceable in accordance with their respective terms, except that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding may be brought, and that applicable bankruptcy and
other laws of general application may affect the rights and remedies of
creditors.
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2.25. Properties of the Business.
(a) Title to Assets and Related Matters. Except as set forth in
Schedule 4.4(a), the Company or Sleepmaster, as the case shall be, has good and
marketable title to all of the Company Assets, and on the Release Date the
Company Assets shall be free and clear of all Liens, except such Liens which are
set forth in Schedule 4.4(a). All property and assets (tangible and intangible)
used or required by the Company or Sleepmaster in the conduct of the Business as
presently conducted are owned by the Company or Sleepmaster, as the case may be,
or licensed or leased to the Company or Sleepmaster, as the case may be,
pursuant to a license or lease listed in Schedule 4.4(c), Schedule 4.4(d),
Schedule 4.8 or Schedule 4.9. The Company Assets include all properties and
assets (other than cash and cash equivalents) utilized in carrying on the
operations of the Business in the Ordinary Course of Business.
(b) Owned Real Property. Neither the Company nor Sleepmaster owns
any real property in fee simple.
(c) Leased Real Property. Schedule 4.4(c) sets forth all leases or
other agreements pursuant to which the Company or Sleepmaster leases, occupies
or otherwise uses real property. The lease covering real property located at
0000 Xxxxx Xxxx, Xxxxxx, Xxx Xxxxxx, dated October 13, 1993, between Xxxxx
Mountain Industries, Inc. ("Xxxxx"), a New York corporation, as landlord, and
the Partnership, as tenant, as modified and assigned under the Landlord's
Consent and Modification Letter Agreement and the Assignment and Assumption of
Lease Agreement, dated January 12, 1995, between the Partnership, as assignor,
and Sleepmaster, as assignee (as so assigned and amended, the "Linden Lease") is
in full force and effect and is enforceable in accordance with its terms. The
Company has previously delivered to the Investor a true and complete copy of the
Linden Lease including all amendments, supplements and other modifications
thereto. Other than Sleepmaster, there are no parties in possession or parties
having any rights to occupy all or any portion of the Facility. The Facility is
in good condition and repair and is sufficient and appropriate for the conduct
of the Business as presently conducted. The Facility and all plants, buildings
and improvements located thereon conform to all applicable building, zoning and
other laws, ordinances, rules and regulations, other than nonconformances, none
of which, either individually or in the aggregate, would have a Material Adverse
Effect on the Business. There is no pending or, to the knowledge of the Company,
any threatened condemnation proceeding affecting any portion of the Facility. To
the Company's best knowledge, all utilities enter the Facility from an adjacent
public street or valid private easement owned by the supplier of such utility;
the Facility has direct access to a public street adjoining the Facility and no
existing accessway crosses or encroaches upon any property or property interest
of any third party; and no improvement forming a portion of the Facility
encroaches upon any property or property interest of any third party.
(d) Personal Property Leases. Schedule 4.4(d) contains a complete
list of:
(i) all leases pursuant to which the Company or Sleepmaster
leases any type of personal property (including without limitation
computer
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hardware and software) which provide, singly, for rental payments in
excess of $10,000 per annum; and
(ii) all leases pursuant to which the Company or Sleepmaster
leases to others any type of property which provide, singly, for
rental payments in excess of $25,000 per annum or which have an
unexpired term in excess of three years.
2.26. Compliance with Laws.
(a) Since the inception of the Company and Sleepmaster, each has
conducted its business in compliance with all applicable federal, state or local
laws, rules and regulations, ordinances, orders, judgments, decrees or
administrative rulings, except for (i) possible violations which in the
aggregate do not have a Material Adverse Effect on the Business, and (ii) those
described in Schedule 4.5.
(b) Since the inception of the Company and Sleepmaster, B/S and each
of the Existing Members have complied with all federal, state or local laws,
rules and regulations, ordinances, orders, judgments, decrees or administrative
rulings that are applicable to the Company Assets, the Business or the ownership
of the Membership Interests, to the extent such laws, rules and regulations,
ordinances, orders, judgments, decrees and administrative rulings are applicable
to B/S and each of the Existing Members, as the case may be.
2.27. Litigation. Except as set forth in Schedule 4.6, there are no
Actions pending against the Company, Sleepmaster, B/S or any of the Existing
Members or any properties or rights of the Company or Sleepmaster or otherwise
relating to the Company or Sleepmaster, and none of the Company, Sleepmaster,
B/S nor any of the Existing Members is subject to any Action, before any court,
arbitrator or administrative or Governmental Entity. Except as set forth in
Schedule 4.6, to the Company's knowledge there are no Actions threatened against
the Company, Sleepmaster, B/S or any of the Existing Members or any properties
or rights of the Company or Sleepmaster or otherwise relating to the Company or
Sleepmaster, except those Actions which, either individually or in the
aggregate, would not have a Material Adverse Effect on the Company and
Sleepmaster, taken as a whole. No Actions are pending or, to the Company's
knowledge, threatened against the Company, Sleepmaster, B/S or any of the
Existing Members or otherwise which question or challenge the validity of this
Agreement or any action taken or proposed to be taken by the Company or
Sleepmaster pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement.
2.28. Absence of Certain Changes. Except as set forth in Schedule 4.7,
since June 30, 1996 each of the Company and Sleepmaster has conducted its
business only in accordance with the Ordinary Course of Business and has not:
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(i) suffered any Material Adverse Effect on the Business or
the financial condition or prospects of the Business;
(ii) suffered any damage, destruction or loss, whether covered
by insurance or not, materially adversely affecting its property,
plant or equipment;
(iii) paid, discharged or satisfied any material liability or
other expenses other than the payment, discharge or satisfaction of
liabilities at the time the same were due and payable and in the
Ordinary Course of Business;
(iv) sold, assigned, transferred, mortgaged, pledged or
permitted or allowed the imposition of any Liens upon any of its
properties or assets (real, personal or mixed, tangible or
intangible) other than (a) mechanic's, materialmen's and similar
liens, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money;
(v) created or incurred any Debt, except incurred in the
borrowing of money in the Ordinary Course of Business from its bank
lender or created or incurred any other material liability;
(vi) delayed or postponed the payment of accounts payable or
other liabilities not in the Ordinary Course of Business;
(vii) cancelled or compromised any material liabilities, or
waived or permitted to lapse any material claims or rights, except
in the Ordinary Course of Business;
(viii) disposed of or permitted to lapse any rights to the use
of any patent, trademark, trade name, copyright, slogan or telephone
number material to the Business;
(ix) granted any material general increase in the compensation
of officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or commitment) or
any increase in the compensation payable or to become payable to any
managers or employee, other than in the Ordinary Course of Business;
(x) entered into any contract, license, commitment or
transaction not in the Ordinary Course of Business, invested in, or
committed to invest in, or acquired the assets of another Person in
excess of $25,000, or made any capital expenditures or commitment
for any additions to property, plant or equipment which exceed
$25,000 in any one case or $100,000 in the aggregate;
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(xi) accelerated, terminated, modified or cancelled any
agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses) involving more than
$25,000 to which the Company or Sleepmaster is a party or by which
it is bound and the Company or Sleepmaster has no knowledge of any
action by any party to do any of the foregoing;
(xii) made any material change in any method of accounting or
accounting practice;
(xiii) paid (other than any payments in the Ordinary Course of
Business), loaned or advanced any material amount to, or sold,
transferred or leased any properties or assets (real, personal or
mixed, tangible or intangible) to, or entered into any agreement or
arrangement with, any of its managers, employees, or any family
member of any of its managers or employees, or any Affiliate of the
Company or Sleepmaster, or any manager or employee of any such
Affiliate or Sleepmaster;
(xiv) granted or entered into any license or sublicense of any
rights under or with respect to any Intangible Property Rights;
(xv) declared, set aside or paid any dividend or made any
distribution with respect to its membership interests (whether in
cash or in kind) other than tax distributions or redeemed, purchased
or otherwise acquired any of its membership interests;
(xvi) entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement; and
(xvii) agreed, whether in writing or otherwise, to take any
action described in this Section 4.7.
2.29. Patents, Trademarks, Trade Names. Subject to matters disclosed in
Schedule 4.4(a), Sleepmaster owns all right, title and interest in and to, free
and clear of any Liens, or is licensed or otherwise has the full right to use,
insofar as the same relate to its business and its operations, all of the
Intangible Property Rights necessary for the operations of the Business as
presently conducted, subject to such exceptions which in the aggregate would not
have a Material Adverse Effect on the Business. Schedule 4.8 contains a complete
list of (a) all registered Intangible Property Rights and all other material
Intangible Property Rights (registered and otherwise) and all pending patent
applications and applications for registration of other Intangible Property
Rights owned by the Company or Sleepmaster, (b) all trade names, corporate
names, unregistered trademarks and material unregistered copyrights owned or
used by the Company or Sleepmaster and (c) all licenses and other agreements
relating to any Intangible Property Rights which the Company or Sleepmaster is
licensed or authorized to use by others or licenses or authorizes others to use.
Except for matters set forth in Schedule 4.8 and for immaterial nonexclusive
licenses granted to third parties, to the Company's knowledge, the
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Company or Sleepmaster has the sole and exclusive right to use the Intangible
Property Rights. Neither the Company nor Sleepmaster has received notice of any
claims and, to the Company's knowledge, no claims have been asserted by any
Person to the use of any Intangible Property Rights, or challenging or
questioning the validity or effectiveness of any such license or agreement,
which claim, if correct, would have a Material Adverse Effect on the Business.
The Company has received no notice that the use of such Intangible Property
Rights by the Business infringes, misappropriates or otherwise conflicts with
any Intangible Property Rights of any other Person, which claim, if correct,
would have a Material Adverse Effect on the Business.
2.30. Contracts and Commitments.
(a) Schedule 4.9 (together with the leases disclosed in Schedule
4.4(c) and 4.4(d), the licenses disclosed in Schedule 4.8 and the employee
benefit plans disclosed in Schedule 4.11) contains a true and complete list of
the following types of agreements of the Business which require the performance
of any obligation or the payment or delivery of any consideration by any party
thereto after the date hereof:
(i) the Serta Licenses;
(ii) all agreements, contracts and commitments to which the
Company or Sleepmaster is a party or by which any of the Company
Assets is bound which by their terms (A) can reasonably be expected
to require future payment by or to the Company or Sleepmaster of
$25,000 or more or (B) cannot be terminated by any party thereto on
less than 90 days prior notice;
(iii) all other written employment contracts and commitments
with employees of the Company or Sleepmaster providing for direct
remuneration for any employee or containing any severance or
termination pay or obligations for any employee;
(iv) all collective bargaining agreements and union contracts
to which the Company or Sleepmaster is a party;
(v) all other contracts and commitments of the Company or
Sleepmaster reflecting Debt or guarantees thereof;
(vi) all other contracts of the Company or Sleepmaster for or
relating to the construction of capital assets which exceed $25,000
in any one case or $100,000 in the aggregate;
(vii) all partnership or joint venture agreements to which the
Company or Sleepmaster is a party;
(viii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products
or other personal property, or for the furnishing or receipt of
services, the performance of
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which will extend over a period of more than one year, result in a
material loss to the Company or Sleepmaster, or involve
consideration in excess of $25,000;
(ix) any agreement concerning confidentiality or
noncompetition; or
(x) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the Business.
(b) The Company has made available to the Investor full and complete
copies of the documents identified in Schedules 4.4(c), 4.4(d) and 4.9 (the
"Material Contracts").
(c) Except as provided in Section 4.9(e), other than the Serta
Licenses, neither the Company nor Sleepmaster is a party to any written
agreement and is not subject to any other instruments or documents that would
materially restrict the Business.
(d) The Material Contracts are valid, binding, enforceable and in
full force and effect and there does not exist any default on the part of the
Company or Sleepmaster, or, to the Company's knowledge, any default on the part
of the other party thereto or any event which with notice or lapse of time or
both would constitute a default, under a Material Contract, which default would
allow the termination thereof and would have a Material Adverse Effect on the
Business. Each Material Contract will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby (including the assignments
and assumptions thereof).
(e) The by-laws of Serta, the rules and regulations of Serta
promulgated thereunder and the agreement, dated January 12, 1995, between
Sleepmaster and Serta, are the only instruments or agreements among Serta and
its stockholders to which Sleepmaster or any of its Affiliates are subject or
which bind Sleepmaster or any of its Affiliates.
2.31. Compliance with Labor and Employment Laws.
(a) Sleepmaster is in compliance with the Labor Contract and, in all
material respects, all applicable laws, regulations and administrative orders of
any country, state or municipality or of any subdivision thereof to which the
Company and Sleepmaster and the employment of labor or the use or occupancy of
properties of any part thereof are subject, including without limitation laws
respecting employment and employment practices, terms and conditions of
employment, workplace health and safety, plant closing, employment
discrimination and wages and hours other than failures to comply with applicable
laws, none of which would, singly or in the aggregate have a Material Adverse
Effect on the Business.
(b) There is no strike, labor dispute, slowdown or stoppage actually
pending, or, to the Company's knowledge, threatened, against or directly
affecting the Company or Sleepmaster.
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(c) To the knowledge of the Company, (i) no executive, key employee,
or group of employees has any plans to terminate employment with the Company or
Sleepmaster; (ii) neither the Company nor Sleepmaster has experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes; (iii) neither the Company nor Sleepmaster has committed any
unfair labor practice and (iv) there is no organizational effort presently being
made or threatened by or on behalf of any labor union with respect to employees
of the Company or Sleepmaster.
2.32. Employee Benefit Plans.
(a) Schedule 4.11 sets forth the name of (i) each of the "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) maintained currently or in the past
by the Company or Sleepmaster under which the Company or Sleepmaster has any
current or potential liability or under which any former or present employee of
the Company or Sleepmaster has any current or future rights to benefits (the
"ERISA Plans"), (ii) each nonqualified deferred compensation, bonus, incentive
or other retirement, plan, program or arrangement, and (iii) each fringe benefit
plan or program (collectively (i), (ii) and (iii) shall be referred to as the
"Plans"), copies of which have been previously delivered to the Investor. None
of the employee benefit plans set forth in Schedule 4.11 is a "pension plan" as
defined in Section 3(2) of ERISA.
(b) Neither the Company nor any trade or business (whether or not
incorporated) which are or have ever been under common control, or which are or
have been treated as a single employer, with the Company under Section 414(b),
(c), (m) or (o) of the Code, has maintained or contributed or ever been
obligated to contribute to any pension plan that is subject to Title IV of ERISA
(including a multiemployer pension plan).
(c) Each Plan (and related trusts, insurance contracts or other
funding vehicles) complies in form and operation with the applicable
requirements of law; and each ERISA Plan which is intended to be qualified under
Section 401 of the Code is so qualified, has received a favorable determination
letter from the IRS and was timely amended and filed with the IRS for a
favorable determination letter with respect to changes made by the Tax Reform
Act of 1986. All required reporting and disclosure obligations (including Form
5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions) with
respect to each ERISA Plan has been properly and timely filed with the
appropriate government agency or distributed to participants.
(d) With respect to each Plan, all contributions and premium
payments which are due (including all employer and employee contributions) have
been paid and all contributions, premium payments and uninsured welfare benefit
plan liabilities for all periods ending on the Closing Date are or will be
accrued for on the books and records of the Company as of the Closing Date.
(e) With respect to each Plan, (i) neither the Company nor
Sleepmaster has any actual or potential liability to the IRS or the Department
of Labor, (ii) there have been no prohibited transactions (as defined in Section
406 of ERISA in Section 4975 of the Code), (iii)
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no fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach
of fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of such Plan, and (iv) no Actions
with respect to the assets thereof are pending or threatened, and neither the
Company nor Sleepmaster has any knowledge of any facts which would give rise to
or could reasonably be expected to give rise to any such Actions.
(f) No welfare benefit plan (as defined in Section 3(1) of ERISA)
maintained by the Company provides post-employment benefits with respect to
current or former employees beyond termination of employment (other than
coverage mandated by Section 4980B of the Code ("COBRA")). Each of the Company
and Sleepmaster has complied in all material respects with COBRA.
(g) The Company has made available to the Investor true and complete
copies of (i) all documents governing the Plans, including, without limitation,
all amendments thereto which will become effective at a later date; (ii) all
summary plan descriptions and each Summary of Material Modifications relating to
the ERISA Plans; (iii) all employment manuals; (iv) insurance policies or
contracts with respect to each Plan; (v) financial statements with respect to
the ERISA Plans (to the extent applicable); (vi) the IRS favorable determination
letter with respect to each ERISA Plan (to the extent applicable); and (vii)
Form 5500 (including all schedules and attachments) with respect to each ERISA
Plan.
2.33. Environmental Matters. Except as set forth in Schedule 4.12:
(a) The operation of the business of the Company and Sleepmaster and
any real property owned, operated or leased by either are in compliance in all
material respects with all applicable Environmental Laws (as hereinafter
defined).
(b) (i) Each of the Company and Sleepmaster has in a timely manner
obtained and currently maintains all Environmental Permits (as hereinafter
defined) necessary for its operations and is in compliance with such
Environmental Permits, (ii) there are no legal proceedings pending nor, to the
Company's knowledge, threatened to modify or revoke such Environmental Permits,
and (iii) neither the Company nor Sleepmaster has received any notice to the
effect that there is lacking any Environmental Permit, or that it is in
violation of any Environmental Permit, required for the current use or operation
of any real property owned, operated or leased by the Company or Sleepmaster.
(c) Neither the Company nor Sleepmaster now utilizes, stores,
disposes of, treats, generates, transports, Releases or owns any Hazardous
Substance (as defined below).
(d) Neither the Company, Sleepmaster, nor any owner or occupant of
any property owned, operated or leased by the Company or Sleepmaster, has ever
utilized any property of the Company or Sleepmaster, or any portion thereof, in
violation of any Environmental Law.
(e) No Release (as defined below) of any Hazardous Substance has
occurred at, upon or under any property owned, operated or leased by the Company
or
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Sleepmaster, or at any facility or property at which Hazardous Substances
used or generated by the Company or Sleepmaster have come to be located, in an
amount which violates any Environmental Law or could reasonably be expected to
give rise to an obligation to remediate, or any other liability, under or
pursuant to any Environmental Law.
(f) There is not now, nor has there been in the past, on, in or
under any real property owned, leased or operated by the Company or Sleepmaster
(i) any underground storage tanks, above ground storage tanks, dikes or surface
impoundments, (ii) any asbestos-containing materials, (ii) any polychlorinated
biphenyls or (iv) any radioactive substances.
(g) Neither the Company nor Sleepmaster has received any notice of
outstanding writs, injunctions, decrees, orders, notices of violation or
judgments or any suits, claims, actions, proceedings or investigations pending
or, to the knowledge of the Company, threatened under or pursuant to any
Environmental Laws, including but not limited to any notice from any
Governmental Entity or private or public entity advising the Company or
Sleepmaster that either is, or is potentially, responsible for response costs
under the CERCLA (as defined in Section 4.12(j)) with respect to a Release or
threatened Release of Hazardous Substances.
(h) Neither the Company nor Sleepmaster has received any notice of
any violation of, or potential liability under, any Environmental Law relating
to the operation of the business or to any of the processes used or followed,
results obtained or products developed, made or sold by the Company including,
without limitation, under CERCLA, the Toxic Substances Control Act of 1976, as
amended, the Resource Conservation Recovery Act of 1976, as amended, the Clean
Air Act, as amended, the Federal Water Pollution Control Act, as amended, or the
Occupational Safety and Health Act of 1970, as amended.
(i) There are no Actions pending or threatened against the Company
or Sleepmaster alleging the violation of or imposing liability, or potential
liability, pursuant to any Environmental Law or Environmental Permit.
(j) For purposes of this Agreement, the following terms have the
following meanings: (i) "Environmental Laws" means any federal, state, local or
foreign law (including common law), statute, code, ordinance, rule, regulation
or other requirement relating to the environment, natural resources, or public
or employee health and safety as in effect as of the date of this Agreement and
includes, but is not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the
Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 33 U.S.C.
Section 2601 et seq., the Toxic Substances Control Act, 15 U.S.C.Section 2601 et
seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section
136 et seq., the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq. and
the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq., as such
laws have been amended or supplemented to the date hereof, and the regulations
promulgated pursuant thereto, and all analogous state or local statutes and all
common law relating to the pollution or protection of the environment; (ii)
"Environmental Permit" means any permit, approval, authorization, license,
variance, registration, or permission required under any applicable
Environmental Law; (iii) "Hazardous Substances" means any substance, material or
waste which is regulated by any Governmental
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Authority or the United States or other national government, including, without
limitation, any material, substance or waste which is defined as a "hazardous
waste," "hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste," "contaminant," "toxic waste" or "toxic
substance" under any provision of Environmental Law, which includes, but is not
limited to, petroleum, petroleum products, asbestos, urea formaldehyde and
polychlorinated biphenyls and (iv) "Release" means any release, spill, emission,
leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal,
discharge, dispersal, leaching, or migration on or into the indoor or outdoor
environment or into or out of any property.
2.34. Licenses, Permits and Authorizations. Each of the Company and
Sleepmaster holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of the
Business (the "Business Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals that would not,
individually or in the aggregate, have a Material Adverse Effect on the
Business. Each of the Company and Sleepmaster is in compliance with the terms of
the Business Permits, except where the failure so to comply would not have a
Material Adverse Effect on the Business. Except as disclosed in Schedule 4.13,
the business of Sleepmaster is not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for possible
violations that individually or in the aggregate do not, and, insofar as
reasonably can be foreseen, in the future will not, have a Material Adverse
Effect thereon. Except as set forth in Schedule 4.13, no investigation or review
by any Governmental Entity with respect to the Company or Sleepmaster is pending
or, to the knowledge of the Company, threatened, nor has any Governmental Entity
indicated an intention to conduct the same, other than, in each case, those the
outcome of which, as far as reasonably can be foreseen, in the future will not
have a Material Adverse Effect on the Business.
2.35. Taxes.
(a) Each of the Company and Sleepmaster has, at all times throughout
its existence, qualified for U.S. federal income tax purposes as a partnership
that is not a "publicly traded partnership" within the meaning of Code Section
7704.
(b) Except as set forth in Schedule 4.14, each of the Company and
Sleepmaster:
(i) has timely filed or will file when due all federal,
foreign, state and local Tax Returns, respectively, required to be
filed by or with respect to it and all such Tax Returns are correct
and complete in all material respects;
(ii) has paid in full, or made due and sufficient accrual in
the 1995 Balance Sheet for, all Taxes required by statute or other
applicable law to be due (or for which it may be liable) and Taxes
claimed to be due by each such jurisdiction and any interest or
penalties with respect thereto as of December 31, 1995; and
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(iii) with respect to any period for which Tax Returns have
not yet been filed, or for which Taxes are not yet due or owing, (x)
has made due and sufficient accruals for Taxes in the Interim
Financial Statements as adjusted for the passage of time in
accordance with GAAP, and (y) will make sufficient accruals for
Taxes in the Net Working Capital Estimate.
(c) Neither the Company nor Sleepmaster is a party to, and neither
has received any written notice of, any pending action or proceeding, nor, to
the Company's knowledge, is any such action or proceeding threatened by any
Governmental Entity, for the assessment or collection of any Taxes and no claim
for the assessment or collection of any Taxes has been asserted against the
Company or Sleepmaster. No Tax Return of the Company or Sleepmaster has been
audited. Neither the Company nor Sleepmaster has given or been requested to give
waivers or extensions of any statutes of limitations relating to the payment of
Taxes.
(d) Neither the Company nor Sleepmaster is the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by a Governmental Entity in a jurisdiction where the Company or Sleepmaster
does not file Tax Returns that the Company or Sleepmaster, as the case may be,
is subject to tax in that jurisdiction. Each of the Company and Sleepmaster has
withheld proper and accurate amounts from its employees, independent
contractors, creditors, members or other third parties in compliance in all
material respects with all withholding and similar provisions of any and all
applicable federal, foreign, state and local laws, statutes, codes, ordinances,
rules and regulations and paid such amounts to the appropriate Governmental
Entity. Each of the Company and Sleepmaster has filed proper and accurate
federal, foreign, state and local tax returns and estimates with respect to
employee income tax or other withholding with respect to any independent
contractors, creditors, members or other third party, social security taxes and
unemployment taxes for all years and periods (and portions thereof) for which
tax returns were due and any and all amounts shown on such tax returns to be due
and payable have been paid in full. All payments (including interest and
penalties) due or to become due with respect to employee income tax or other
withholding with respect to any independent contractors, creditors, members or
other third party, social security taxes and unemployment taxes for any period
ending prior to the Closing Date were either paid in full on or prior to the
Closing Date or accrued as a liability on the Financial Statements and in the
Net Working Capital Estimate.
(e) Each of the Company and Sleepmaster has made all required
estimated payments of Taxes sufficient in amount to avoid any underpayment
penalties.
(f) None of the Company Assets is an asset or property that any
Investor is or will be required to treat as being (i) owned by any other person
pursuant to the provisions of Section 168(f)(8) of the Code, or (ii) tax-exempt
use property within the meaning of Section 168(h)(1) of the Code. There is no
contract, agreement, plan or arrangement covering any person that, individually
or collectively, could give rise to the payment of any amount that would not be
deductible by the Company by reason of Section 280G of the Code. No election
under Section 338 has been made with respect to the Company or Sleepmaster. No
consent to the application of Section 341(f) of the Code (or any predecessor
provision) has been made or
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filed by or with respect to the Company, Sleepmaster or any of the Company
Assets. Neither the Company nor Sleepmaster is a party to, is bound by or has
any obligation under any tax sharing agreement or similar contract. Neither the
Company nor Sleepmaster has any liability for the Taxes of any other Person
under Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or a successor, by contract, operation of law or
otherwise. The Company has previously made available to the Investor true and
complete copies of each of the United States federal, state, local, and foreign
Tax Returns, for each of the three taxable years preceding the date hereof filed
by the Company or Sleepmaster. No closing agreement pursuant to Section 7121 of
the Code (or any predecessor provision) or any similar provision of any state,
local, or foreign law has been entered into by or with respect to the Company or
Sleepmaster. The 1995 Tax Return of the Company sets forth the respective tax
bases of the Company Assets.
(g) Each of the Company and Sleepmaster has elections in effect
under Code Section 754.
2.36. Sufficiency and Condition of Assets. Sleepmaster has, and on the
Closing Date will have, a normal operating supply (consistent with practices and
policies as of June 30, 1996) of Inventory, equipment and supplies. Each
tangible Company Asset of Sleepmaster has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it presently
is used.
2.37. Broker's or Finder's Fee. Except for amounts owed by Sleepmaster to
BHC under the letter agreement, dated March 14, 1996, neither the Company, any
of the Existing Members, B/S nor any of the Company's Affiliates has incurred
any liability to any broker, finder or agent or any other person or entity for
any fees or commissions with respect to the transactions contemplated by this
Agreement for which any Investor could become liable or obligated.
2.38. Undisclosed Liabilities.
(a) Neither the Company nor Sleepmaster has any liabilities (and, to
the Company's knowledge, there exists no basis for any present or future Action
against it giving rise to any liabilities), except for (i) liabilities set forth
in the 1995 Financial Statements or on the face of the Interim Financials
(rather than in any notes thereto); (ii) liabilities expressly set forth in the
leases, licenses, contracts or agreements set forth in any of Schedules 4.4(c),
4.4(d), 4.8, 4.9 and 4.11; or (iii) liabilities which have arisen after the date
of the Interim Financials in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law).
(b) Except as set forth in Schedule 4.17(b), as of the Closing Date
and immediately prior to the Release Date, neither the Company nor Sleepmaster
will be obligated with respect to any Debt other than the Existing Senior Loan
Facility, the Pennsauken Non-Competition Agreements and the Change of Control
Payments. After giving effect to the Closing of the transactions contemplated by
this Agreement, on the Release Date neither the Company nor Sleepmaster will be
obligated with respect to any Debt other than (i) the New
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Sleepmaster Debt, (ii) the Recapitalization Notes and (iii) $104,150 of the
amount remaining due and unpaid under the Pennsauken Non-Competition Agreements.
2.39. Notes and Accounts Receivable. All notes and accounts receivable of
Sleepmaster are reflected properly on its books and records and are valid
receivables subject to no setoffs or counterclaims, subject only to (i) the
reserve for bad debts set forth on the face of the Interim Financials (rather
than in any notes thereto) as adjusted for the passage of time through the
Release Date in accordance with the past custom and practice of the Company and
(ii) allowances for co-op advertising, other allowances and discounts to be
granted or taken in accordance with the past custom and practice of Sleepmaster.
2.40. Insurance. Schedule 4.19 sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which the Company or Sleepmaster has been a party, a named
insured, or otherwise the beneficiary of coverage at any time since its
inception:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number and the period of coverage; and
(d) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount of coverage.
Each of the Company and Sleepmaster has been covered since its inception by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. Schedule 4.19 describes
any self-insurance arrangements affecting the Company or Sleepmaster.
2.41. Product Warranty. Each product manufactured, sold or delivered by
Sleepmaster has been in conformity with all applicable contractual commitments
and all express and implied warranties, and neither the Company nor Sleepmaster
has any liability (and, to the Company's knowledge, there is no basis for any
present or future Action) for replacement or repair thereof or other damages in
connection therewith other than returns and claims which could lead to returns
of individual products or sets of its products in volumes consistent with the
return information that was used to compute "net shipments" as shown on the
Financial Statements. No product manufactured, sold or delivered by Sleepmaster
is subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease. Sleepmaster has delivered to the
Investor copies of its standard terms and conditions of sale (including
applicable guaranty, warranty and indemnity provisions).
2.42. Certain Business Relationships with the Company and its Affiliates.
Other than the employment agreements listed in Schedule 4.9, none of the
Company's nor
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Sleepmaster's members nor any of their respective Affiliates has been involved
in any business arrangement or relationship with the Company or Sleepmaster
within the past twelve months, which arrangement or relationship will not have
been terminated prior to or at the Closing. None of the Company's nor
Sleepmaster's members nor their respective Affiliates owns any asset, tangible
or intangible, which is used in the Business.
2.43. Disclosure. No representation or warranty by the Company or
Sleepmaster in this Agreement (including, without limitation, the Disclosure
Schedules) contains any untrue statement of a material fact or omits or will
omit to state any material fact necessary to make the statements herein or
therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE EXISTING MEMBERS AND B/S
Each of the Existing Members and B/S hereby represents and warrants,
severally and not jointly, to the Investor that the statements made in this
Article V are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date and as of the Release Date.
2.44. Organization and Authority.
(a) B/S and each of the Existing Members that is a corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. B/S and each of such corporate Existing
Members has all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. B/S and
each of such corporate Existing Members has taken all action as and in the
manner required by law, its certificate of incorporation and by-laws or
otherwise to authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby.
(b) Each of the Existing Members organized as a partnership is a
partnership duly organized, validly existing and in good standing under the laws
of the state under which it has been formed and has all power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Each such Existing Member has taken all action as, and in
the manner, required by law, its certificate of partnership and its partnership
agreement or otherwise to authorize the execution, delivery and performance of
this Agreement and the transactions contemplated hereby.
(c) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, violate (i) any
provisions of the certificate of incorporation or by-laws of B/S or any of the
corporate Existing Members, (ii) any provisions of the certificate of
partnership or partnership agreement of any Existing Members
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organized as a partnership, (iii) any material terms of any material contract or
commitment of any kind or character to which B/S or any of the Existing Members
is a party or by which any of them or their property may be bound, or (iv) any
law, regulation, rule, judgment or order applicable to B/S or any of the
Existing Members or their respective property.
(d) This Agreement constitutes the valid and binding obligation of
B/S and each of the Existing Members, enforceable in accordance with its terms
except to the extent that (i) such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights, and (ii) certain of the covenants contained
herein may not be specifically enforceable and courts may award money damages
rather than specific performance of contractual provisions involving matters
other than the payment of money.
2.45. Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority is required in connection with the
execution or delivery of this Agreement by B/S or any of the Existing Members
and the consummation of the transactions contemplated hereby.
2.46. Ownership of Membership Interests. Each Existing Member holds of
record and owns beneficially the Membership Interests of the Company (expressed
as a percentage of 100%) set forth next to his name on Exhibit A free and clear
of any restrictions on transfer (other than any restrictions under the
Securities Act of 1933, as amended (the "Securities Act"), and the applicable
securities laws of any state), claims, Taxes, liens, charges, encumbrances,
pledges, security interests, options, warrants, rights, contracts, calls,
commitments, equities and demands. No Existing Member is a party to any option,
warrant, right, contract, call, put or other agreement or commitment providing
for the disposition or acquisition of any Membership Interest of the Company or
Sleepmaster (other than this Agreement). No Existing Member is a party to any
voting trust, proxy or other agreement or understanding with respect to the
voting of any Membership Interest of the Company or Sleepmaster, other than the
Operating Agreement and the Sleepmaster Operating Agreement.
2.47. Investment Intent.
(a) B/S and each Existing Member is acquiring the Preferred
Interests, the Common Interests, the Recapitalization Notes and the Investor
Notes (collectively referred to as the "Recapitalization Securities") being
acquired by it under this Agreement solely for his or its own account, for
investment, and not with a view to any distribution thereof in violation of the
Securities Act, or the applicable state securities laws of any state.
(b) B/S and each of the Existing Members understands that the
Recapitalization Securities have not been registered under the Securities Act or
the securities laws of any state and must be held indefinitely unless
subsequently registered under the Securities Act and any applicable state
securities laws or unless an exemption from such registration becomes or is
available.
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(c) B/S and each of the Existing Members is financially able to hold
the Recapitalization Securities being acquired by it under this Agreement for
long-term investment and recognizes that there are substantial risks involved in
the ownership of the Recapitalization Securities.
(d) B/S and each of the Existing Members has such knowledge and
experience in financial and business matters that such Existing Member is
capable of evaluating the merits and risks of the prospective investment in the
Recapitalization Securities being acquired by it under this Agreement.
(e) B/S and each of the Existing Members is an "accredited
investor," as defined under Rule 501(a) promulgated under the Securities Act.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE INVESTOR
The Investor hereby represents and warrants to the Company and the
Existing Members that the statements made in this Article VI are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date and as of the Release Date.
2.48. Organization and Authority.
(a) The Investor is a limited liability company duly formed and
validly existing under the laws of the State of Delaware. The Investor has all
requisite power and authority to execute and deliver this Agreement and to make,
issue and deliver the Investor Notes and to consummate the transactions
contemplated hereby. The Investor has taken all action as and in the manner
required by law, its certificate of formation, its operating agreement or
otherwise to authorize the execution, delivery and performance of this Agreement
and the Investor Notes and the transactions contemplated hereby.
(b) The execution and delivery of this Agreement, and the issue and
delivery of the Investor Notes, do not, and the consummation of the transactions
contemplated hereby will not, violate (i) any provisions of the articles of
formation or operating agreement of the Investor, (ii) any material terms of any
material contract or commitment of any kind or character to which the Investor
is a party or by which it or its property may be bound, or (iii) any law,
regulation, rule, judgment or order applicable to the Investor or its respective
property. The Investor has no obligations other than created in connection with
the transactions contemplated by this Agreement, has not yet commenced business
or operations and, as of the Release Date, will have no Debt other than the
Investor Notes.
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(c) This Agreement and the Investor Notes each constitute the valid
and binding obligation of the Investor, enforceable in accordance with its
respective terms except to the extent that (i) such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights, and (ii) certain of the
covenants contained herein may not be specifically enforceable and courts may
award money damages rather than specific performance of contractual provisions
involving matters other than the payment of money.
2.49. Consents and Approvals of Governmental Authorities. Except as set
forth on Schedule 6.2, no consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority is
required in connection with the execution or delivery of this Agreement and the
consummation of the transactions contemplated hereby by the Investor, or the
issue or delivery of the Investor Notes by the Investor.
2.50. Investment Intent.
(a) The Investor is acquiring the Purchased Membership Interests and
the Recapitalization Notes for its own account, for investment, and not with a
view to any distribution thereof in violation of the Securities Act of 1933, as
amended (the "Securities Act"), or the applicable state securities laws of any
state.
(b) The Investor understands that neither the Purchased Membership
Interests nor the Recapitalization Notes have been registered under the
Securities Act or the securities laws of any state and must be held indefinitely
unless subsequently registered under the Securities Act and any applicable state
securities laws or unless an exemption from such registration becomes or is
available.
(c) The Investor is financially able to hold the Purchased
Membership Interests and the Recapitalization Notes for long-term investment and
recognizes that there are substantial risks involved in the ownership of the
Purchased Membership Interests and the Recapitalization Notes.
(d) The Investor has such knowledge and experience in financial and
business matters that such Investor is capable of evaluating the merits and
risks of the prospective investment in the Purchased Membership Interests and
the Recapitalization Notes.
(e) The Investor is an "accredited investor," as defined under Rule
501(a) promulgated under the Securities Act.
2.51. Sufficient Funds. Attached as Exhibits E and F are written
commitments which have been delivered to the Company in respect of debt
financing from First Source and Pacific. The written commitments attached have
been duly executed and delivered, remain in full force and effect and have not
been modified or amended.
2.52. Brokerage. The Investor is not a party to, nor is any Existing
Member or the Company in any way obligated to make any payment relating to, any
contract or outstanding
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claim for the payment of any broker's or finder's fee in connection with the
origin, negotiation, execution or performance of this Agreement with respect
to any broker dealt with or engaged by the Investor.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS
OF THE INVESTOR
The consummation by the Investor of the transactions contemplated hereby
is subject to the satisfaction or fulfillment of each of the following
conditions; provided, that the condition set forth in Section 7.5(a) shall be a
condition to be satisfied on or prior to the Release Date and not a condition to
be satisfied on or prior to the Closing Date.
2.53. Representations and Warranties True; Obligations Performed. The
representations and warranties of the Existing Members, the Company, Sleepmaster
and B/S, as applicable, contained herein, in the Exhibits and Schedules attached
hereto and in all certificates and other documents delivered by the Existing
Members, B/S, the Company or Sleepmaster to the Investor pursuant hereto or in
connection with the transactions contemplated hereby shall, in all material
respects, be true and accurate as of the date of this Agreement, as of the
Closing Date and as of the Release Date as though such representations and
warranties were made on each such date, except (a) for changes expressly
permitted or contemplated by this Agreement and (b) to the extent that any such
representations and warranties are made as of a specified date and as to such
representations and warranties the same shall be materially true and correct as
of the specified date. The Company shall have delivered a certificate, signed by
its President, dated the Closing Date, certifying to the satisfaction of the
foregoing conditions and the conditions set forth in Sections 7.2 through 7.13.
2.54. No Material Changes. Since June 30, 1996 the Business shall not
have suffered or become subject to changes of any kind or nature which either
individually or in the aggregate would have a Materially Adverse Effect on the
Business.
2.55. Performance. Each of the Company, Sleepmaster, B/S and each of the
Existing Members, as applicable, shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
2.56. Consents. All applicable waiting periods under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "H-S-R
Act"), shall have expired or early termination shall have been granted. All
filings with and consents from administrative, Governmental Entities, regulatory
and industry authorities and other third parties required to be obtained or
filed by the Company or Sleepmaster to consummate the transactions contemplated
hereby shall have been obtained by the Company or Sleepmaster, unless the
failure to obtain any such consent (other than with respect to the Essential
Contracts) or make any such filing would
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not have a Material Adverse Effect on the Business or the transactions
contemplated hereby, or except to the extent that making any such filing or
obtaining any such consent has been waived in writing by the Investor.
2.57. Essential Contracts.
(a) Serta and the Serta stockholders shall have consented to the
transactions contemplated hereby.
(b) Xxxxx shall have consented to the transactions contemplated
hereby and shall have provided (i) an estoppel certificate in accordance with
the provisions of Article 32 of the Linden Lease dated not earlier than two days
prior to Closing and (ii) a memorandum of the Linden Lease (or, if applicable,
an amendment to any existing memorandum of the Linden Lease) in recordable form
and otherwise in accordance with the provisions of Article 34 of the Linden
Lease. First Source shall have entered into a letter agreement regarding the
collateral assignment of the Linden Lease on terms and conditions reasonably
acceptable to First Source.
2.58. Environmental Matters.
The Company, or Sleepmaster, as applicable, shall have submitted to
the New Jersey Department of Environmental Protection and Energy ("DEPE") such
materials as shall be required to complete the Transfer of the Facility in
compliance with the New Jersey Industrial Site Recovery Act, and the Company, or
Sleepmaster, as applicable, shall have complied, at its sole cost and expense,
with all other obligations imposed upon it under that statute.
2.59. Affiliate Transactions. The consulting agreement, dated as of
January 2, 1995, between Sleepmaster and Holding Capital Group, Inc. shall have
been terminated.
2.60. Amended Operating Agreement. The Sleepmaster Operating Agreement
shall have been duly amended and restated (as so amended and restated, the
"Restated Sleepmaster Operating Agreement"):
(i) to provide for the substitution of _____________ as a manager of
the Company to replace Xxxxxxx X. Xxxxx; and
(ii) to make such other amendments and modifications to carry out
the transactions contemplated by this Agreement as the Investor, the
Company and the Existing Members shall reasonably agree.
2.61. Exercise of Warrant. The Warrant shall have been duly exercised or
cancelled by the holder thereof.
2.62. Resignation of Manager. Xxxxxxx X. Xxxxx shall have resigned as a
manager of each of the Company and Sleepmaster.
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2.63. Financing. The Investor, the Company and Sleepmaster shall have
received written commitments from First Source and Pacific to provide the New
Sleepmaster Debt sufficient to consummate the transactions contemplated herein
and provide working capital to the Company, all on terms satisfactory to the
Investor in its sole discretion.
2.64. Employment Agreements. The existing employment agreements between
Sleepmaster and the Employee Members shall have been terminated as of the
Release Date, and the Employee Members shall have entered into (a) employment
agreements (collectively, the "Employment Agreements") with the Company, each to
be dated as of the Release Date, in the respective forms of Exhibits G, H, I and
J; (b) option agreements (collectively, the "Option Agreements") with the
Company, each to be dated as of the Release Date, in the respective forms of
Exhibits K, L, M and N; and (c) the Securityholders Agreement (the
"Securityholders Agreement"), to be dated the Release Date, among the Employee
Members, the Investor and the Company, substantially in the form of Exhibit O.
2.65. No Proceedings. No Action shall be pending or threatened before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (a) prevent
consummation of any of the transactions contemplated by this Agreement, (b)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (c) affect adversely the right of the Company or
Sleepmaster, as the case shall be, to own the Company Assets and to operate the
Business (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect).
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY, SLEEPMASTER, B/S
AND THE EXISTING MEMBERS
The consummation by the Existing Members, B/S, the Company and Sleepmaster
of the transactions contemplated hereby is subject to the satisfaction or
fulfillment of each of the following conditions on or prior to the Closing Date
and the continued satisfaction and fulfillment as of the Release Date:
2.66. Representations and Warranties True; Obligations Performed . The
representations and warranties of the Investor contained herein and in all
certificates and other documents delivered by the Investor pursuant hereto or in
connection with the transactions contemplated hereby shall, in all material
respects, be true and accurate as of the date of this Agreement, as of the
Closing Date and as of the Release Date, except for changes expressly permitted
or contemplated by this Agreement and except to the extent that any such
representations and warranties are made as of a specified date and as to such
representations and warranties the same shall be materially true and correct as
of the specified date. The Investor shall have delivered a certificate, signed
by its managers, dated the Closing Date and the Release
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Date, as applicable, certifying to the satisfaction of the foregoing conditions
and the conditions set forth in Sections 8.2 through 8.7.
2.67. Performance. The Investor shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
2.68. Consents. All applicable waiting periods under the H-S-R Act shall
have expired or early termination shall have been granted. All filings with and
consents from administrative or Governmental Entities required to have been
obtained or filed by the Investor to consummate the transactions contemplated
hereby shall have been obtained by the Investor, unless the failure to obtain
any such consent (other than with respect to the Essential Contracts) or make
any such filing would not have a Material Adverse Effect on the transactions
contemplated hereby or except to the extent that making any such filing or
obtaining any such consent has been waived in writing by the Company.
2.69. Xxxxx Letter of Credit. Xxxxx shall have agreed to release the
letter of credit provided by NCC and held by it as security for the Company's
obligations under the Linden Lease in exchange for a letter of credit in an
equivalent amount provided by or for the account of First Source.
2.70. Environmental Matters. At the request of the Company, the Investor
shall have certified to DEPE in writing that the Facility will be used in
substantially the same manner as prior to the Closing Date.
2.71. Employment Agreements/Option Agreements. The Company shall have
executed and delivered the Employment Agreements and the Option Agreements to
each of the Employee Members.
2.72. No Proceedings. No Action shall be pending or threatened before any
court or quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (a) prevent consummation of any
of the transactions contemplated by this Agreement or (b) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation.
ARTICLE IX
DELIVERIES AT THE CLOSING;
RELEASE OF DELIVERIES
2.73. Deliveries by the Company, Sleepmaster, B/S and the Existing
Members.
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(a) At the Closing, the Company, Sleepmaster, B/S and the Existing
Members shall deliver into escrow the following, all of which shall be held in
escrow and thereafter released and delivered to the Investor on the Release Date
pursuant to Section 9.4:
(i) copies of all consents, authorizations, approvals,
notices, registrations and filings required by Sections 7.4 and 7.5
to be obtained by the Company (other than the Serta Consent);
(ii) the opinion of Xxxxxxxxxx & Xxxxx, a Professional
Corporation, counsel to the Company, substantially in the form of
Exhibit P;
(iii) the Restated Operating Agreement, duly executed by the
Employee Members;
(iv) the Restated Sleepmaster Operating Agreement;
(v) the Securityholders Agreement;
(vi) the Employment Agreements;
(vii) the Option Agreements;
(viii) the certificate referred to in Section 7.1;
(ix) a certificate of a manager of the Company, dated as of
the Closing Date, certifying as to (i) resolutions adopted by its
Board of Managers and its members, authorizing this Agreement and
the transactions contemplated hereby and incident thereto and (ii)
the incumbency and signatures of the managers; and
(x) such other documents or certificates as shall be
reasonably requested by the Investor or their counsel.
(b) At the Closing, the Company, or Sleepmaster, as the case shall
be, shall deliver into escrow all deliveries to be made by the Company or
Sleepmaster to First Source in connection with the New Senior Loan Facility and
all deliveries to be made to Pacific pursuant to the New Senior Subordinated
Notes, all of which shall be held in escrow and released to First Source and
Pacific on the Release Date.
(c) At the Closing, the Company will deliver into escrow the
Recapitalization Notes, duly executed by the Company and registered in the names
of the respective Existing Members to whom the Recapitalization Notes are to be
issued, to be held in escrow and thereafter released and delivered to the
Existing Members on the Release Date pursuant to Section 9.4.
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2.74. Deliveries by the Investor. At the Closing, the Investor shall
deliver into escrow the following, all of which shall be held in escrow and
thereafter released to the Existing Members (other than the agreement referred
to in (c) which shall be delivered to the Company) on the Release Date pursuant
to Section 9.4:
(a) the certificate referred to in Section 8.1;
(b) the opinion of Xxxxxxxx & Xxxxx, counsel to the Investor,
substantially in the form of Exhibit Q;
(c) the Restated Operating Agreement, executed by the Investor; and
(d) such other documents or certificates as shall be reasonably
requested by the Company, the Existing Members or their respective counsel.
2.75. Waiver of Condition Precedent. Upon the delivery at the Closing on
the Closing Date of each of the documents and other items referred to in Section
9.1 and the satisfaction and fulfillment of all of the conditions in Article
VII, the Investor will deliver to the Company and the Existing Members a
certificate, reasonably satisfactory in form and substance to the Company and
its counsel, that the condition set forth in Section 7.11 has been waived
unconditionally.
2.76. Closing Escrow. All documents and other items delivered pursuant to
Sections 9.1 and 9.2 shall be held in escrow jointly by counsel for the Company
and the Investor until the satisfaction of the following conditions:
(a) Sleepmaster shall have delivered the Serta Consent to the
Investor;
(b) the Company shall have delivered to the Investor a certificate
stating that the representations and warranties of the Existing Members
contained herein, in the Exhibits and Schedules attached hereto and in all
certificates and other documents delivered by the Existing Members or the
Company to the Investor pursuant hereto or in connection with the transactions
contemplated are, in all material respects, true and accurate as of the Release
Date as though such representations and warranties were made on such date,
except for changes expressly permitted or contemplated by this Agreement and to
the extent that any such representations and warranties are made as of a
specified date and as to such representations and warranties the same shall be
materially true and correct as of the specified date; and
(c) the Investor shall have delivered to counsel for the Company a
certificate stating that the representations and warranties of the Investor
contained herein and in all certificates and other documents delivered by the
Investor pursuant hereto or in connection with the transactions contemplated
are, in all material respects, true and accurate as of the Release Date, except
for changes expressly permitted or contemplated by this Agreement and except to
the extent that any such representations and warranties are made as of a
specified date and as to such representations and warranties the same shall be
materially true and correct as of the specified date.
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No provision of any of such documents shall be effective during the pendency of
the escrow. No Investor shall be, or shall be deemed to have become, a member of
the Company or Sleepmaster during the pendency of the escrow. Subject to the
provisions of Sections 10.3 and 10.4, the operations of the Company and
Sleepmaster shall be for the benefit of the Existing Members. If this Agreement
shall be terminated pursuant to its terms while the escrow is pending, all
documents and other items delivered pursuant to Sections 9.1 and 9.2 shall
promptly be returned to the delivering party and shall be of no further force or
effect.
2.77. Release. Upon delivery of the items referred to in clauses (a), (b)
and (c) of Section 9.4, the escrow shall be terminated and all payments required
by Sections 3.1 through 3.3(c) shall be made and all documents held in escrow
shall be released and delivered to the respective parties to whom they are
intended to be delivered; provided, that the Company shall have the right to
waive the delivery by the Investor of the certificate set forth in clause (c) of
Section 9.4 and the Investor shall have the right to waive the delivery by the
Company of the certificate set forth in clause (b) of Section 9.4; and provided,
further, that such waiver shall be in writing and delivered concurrently with,
in the case of the Investor, the certificate set forth in clause (c) of Section
9.4, and, in the case of the Company, the certificate referred to in clause (b)
of Section 9.4. The release of such documents and other items upon the delivery
of the items referred to in clauses (a), (b) and (c) of Section 9.4 (other than
such items the waiver of which has been made consistent with the provisions of
the foregoing sentence) shall be referred to as the "Release."
2.78. Name Change of Partnership. After the Release, the Company will
cause the Partnership to change its name, such that it does not contain the word
"Sleepmaster."
ARTICLE X
COVENANTS PENDING THE CLOSING
AND THE RELEASE
2.79. General. From the date of this Agreement through and including the
Release Date, each of the parties hereto will use its best efforts to (a) take
all action, (b) cooperate and (c) do all things reasonably necessary in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Articles VII and VIII, and including the delivery of the items set forth in
clauses (a), (b) and (c) of Section 9.4). In furtherance of the foregoing, the
Existing Members will cause the Company, and B/S and the Company will cause
Sleepmaster, to perform each of the obligations of the Company or Sleepmaster,
as the case shall be, as set forth in this Article X.
2.80. Provide Access to Information. From the date of this Agreement,
through and including the Release Date, (a) the Company and Sleepmaster shall
afford to the Investor, its attorneys, accountants, lenders and representatives
(the "Advisors") reasonable access during
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normal business hours and upon reasonable prior notice to one of the managers of
the Company, to the books and records of the Company, Sleepmaster and B/S in
order that the Investor and the Advisors may have full opportunity to make such
investigation thereof as they shall reasonably desire, and (b) the Company and
Sleepmaster shall provide to the Investor and the Advisors such additional
financial and operating data and other information as to their businesses, as
the Investor or the Advisors shall from time to time reasonably request.
2.81. Conduct Prior to Release Date. Except as otherwise contemplated by
this Agreement or permitted by the prior written consent of the Investor, each
of the Company and Sleepmaster shall from the date hereof through and including
the Release Date:
(a) conduct the business and operations of the Business only in the
Ordinary Course of Business, perform its obligations under all agreements
binding upon it and maintain all of its respective licenses in good standing;
(b) use its reasonable best efforts to continue in effect any
policies of insurance;
(c) use its reasonable best efforts to preserve their respective
business organizations, including their present workforces;
(d) use its reasonable best efforts to keep available the services
of the present managers and employees of the Business;
(e) use its reasonable best efforts to maintain and preserve the
good will of the suppliers, customers and others having business relations with
the Business; and
(f) consult with the Investor prior to any actual or proposed
conduct other than in the Ordinary Course of Business.
2.82. Prohibited Transactions Prior to Release Date. Except as otherwise
contemplated by this Agreement or permitted by the prior written consent of
Investor, from the date of this Agreement through and including the Release
Date, neither the Company nor Sleepmaster shall:
(a) become a party to any agreement which, if it existed on the date
hereof, would be required to be listed in the Disclosure Schedules unless (i)
either the Company or Sleepmaster enters into such agreement in the Ordinary
Course of Business; and (ii) before either the Company or Sleepmaster enters
into such agreement, it furnishes the Investor with a copy of such agreement or,
at the Investor's option, with a written notice briefly describing the nature of
such agreement and the terms thereof;
(b) amend the Operating Agreement or the Sleepmaster Operating
Agreement; or
(c) do or permit to occur any of the things referred to in Section
4.7.
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2.83. Confidentiality.
(a) Except as required by any court order or decree, regulatory
authorities, Governmental Entities or applicable law, the Investor (i) prior to
the Release shall, and shall cause its officers, directors and Advisors to hold
in strict confidence and not disclose to others for any reason whatsoever,
without the prior written consent of the Company, any non-public information
received by it from the Company in connection with the transactions contemplated
by the Agreement or the Exhibits hereto all in accordance with the letter dated
April 24, 1996, and (ii) will not use such information for any purpose in the
event that the Release does not occur under this Agreement.
(b) Except as required by any court order or decree, regulatory
authorities, Governmental Entities or applicable law, each Existing Member (i)
after the Release shall hold in strict confidence, and not disclose to others
for any reason whatsoever, without the prior written consent of the Company, any
non-public information concerning the conduct, affairs or operation of the
Business, and (ii) will not use any non-public information received by it from
the Investor for any purpose in the event the Release does not occur under this
Agreement.
2.84. Notices and Consents. Prior to the Release Date, the Company will
give any notices to third parties, and the Company will use its best efforts to
obtain any third party consents, that the Investor reasonably may request in
writing in connection with the matters referred to herein.
2.85. Notice of Developments. Prior to the Release Date, each party will
give prompt written notice to the other party of any material adverse
development causing a breach of any of its own representations and warranties in
Articles IV and V. No disclosure by any party pursuant to this Section 10.7,
however, shall be deemed to amend or supplement the Disclosure Schedules or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant, unless expressly consented to by the other.
2.86. No Affiliate Transactions. Prior to the Release Date, neither the
Company nor Sleepmaster shall incur any liability to any of its Affiliates,
other than pursuant to employment agreements set forth in Schedule 4.9.
2.87. Exclusivity. None of the Company, Sleepmaster or the Existing
Members, nor any of such entity's representatives, officers, directors, agents,
stockholders and Affiliates (all such persons and entities, the "Seller Group")
shall initiate, solicit, entertain, negotiate, accept or discuss, directly or
indirectly, any proposal or offer (an "Acquisition Proposal") to acquire all or
any significant part of the Business or the properties or Membership Interests
of the Company, Sleepmaster and/or any of their Affiliates, whether by merger,
purchase of stock, purchase of assets, tender offer or otherwise (a "Third Party
Acquisition"), or provide any non-public information to any third party in
connection with an Acquisition Proposal or enter into any agreement, arrangement
or understanding requiring the Existing Members, the Company or Sleepmaster to
abandon, terminate or fail to consummate the transactions contemplated hereby.
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Each of the Existing Members, the Company and Sleepmaster agrees to (i)
immediately notify the Investor if any member by the Seller Group receives any
indications of interest, requests for information or offers in respect of an
Acquisition Proposal, (ii) communicate to the Investor in reasonable detail the
terms of any such indication, request or proposal, and (iii) provide the
Investor with copies of all written communications relating to any such
indication, request or proposal.
ARTICLE XI
INDEMNIFICATION
2.88. Survival. Notwithstanding (a) the making of this Agreement, (b) any
examination made by or on behalf of the parties hereto and (c) the Closing or
the Release hereunder, (i) the representations and warranties contained in this
Agreement or any Disclosure Schedules with respect to such provisions shall
survive the Release until the date which is sixteen months after the Release
Date, except for (A) the representations and warranties set forth in Sections
4.1, 4.3, 4.4, 4.16, 4.21, 5.1, 5.2, 5.3 and 5.4, each of which will survive
forever, (B) the representations and warranties set forth in Section 4.14 which
will survive until six months following the applicable statute of limitations,
and (C) the representations and warranties set forth in Section 4.12 which will
survive for a period of three years after the Release Date, and (ii) the
covenants and agreements contained in this Agreement or in any other document
delivered pursuant to the provisions hereof or thereof required to be performed
on or after the Closing or the Release (unless noncompliance with those
covenants was waived in writing at the Closing or upon the Release) shall
survive until fully performed or fulfilled. No representations and warranties
other than those contained in the Agreement or any Disclosure Schedule shall
survive the Release or provide any basis for any cause of action or claim
against the Investor, the Company, Sleepmaster, B/S or the Existing Members, as
the case shall be, from and after the Release. Any claim for indemnification
with respect to any such matter which is not asserted by notice relating to such
claim within such specified period of survival may not be pursued and is hereby
irrevocably waived after the termination of such period. Any claim for an
Indemnifiable Loss (as defined in Section 11.2) asserted within such period of
survival as herein provided will be timely made for purposes hereof.
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2.89. Limitations on Liability.
(a) For purposes of this Agreement, (i) "Indemnity Payment" means
any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement, (iv)
"Indemnifiable Losses" means any and all damages, losses, liabilities,
obligations, costs and expenses actually incurred or suffered, and any and all
claims, demands or suits (by any person or entity, including without limitation
any Governmental Entity), including without limitation the costs and expenses of
any and all Actions, demands, assessments, judgments, settlements and
compromises relating thereto and including reasonable attorneys' fees and
expenses in connection therewith, after giving effect to the receipt of all
actual insurance proceeds and the realization of any tax savings and (v) "Third
Party Claim" means any Action made or brought by any Person which is not a party
to this Agreement or an Affiliate of a party to this Agreement.
(b) For purposes of this Article XI, any qualification based on
materiality or on Material Adverse Effect set forth in Sections 4.1 through 4.22
shall be disregarded, including, without limitation, in determining whether a
breach of any such representation or warranty has occurred and the extent of the
Indemnifiable Losses resulting therefrom.
(c) Notwithstanding any other provision hereof or of any applicable
Law:
(i) no Indemnitee will be entitled to make a claim against an
Indemnifying Party under Sections 11.3(a) or 11.3(d), in respect of
any breach of warranty or representation by the Indemnifying Party,
unless such claim exceeds $10,000 of Indemnifiable Losses, in which
event the Indemnitee will be entitled to make a claim against the
Indemnifying Party in the full amount of such claim;
(ii) no Indemnifying Party that is an Existing Member shall
have any obligation to indemnify any other Person for any amount
which, when aggregated with all Indemnifiable Losses theretofore
paid by such Existing Member, exceeds the sum of the allocable
portion of the Net Redemption Price and the allocable portion of the
Investor's Purchase Price paid to such Existing Member under this
Agreement; and
(iii) B/S shall not have any obligation to indemnify any other
Person for any amount in excess of the sum of the B/S Purchase Price
and the portion of the Sleepmaster Distribution payable to B/S under
this Agreement.
(d) If any claim for an Indemnifiable Loss is for, or arises out of,
a breach of the representations and warranties contained in Sections 4.5 through
4.13, Sections 4.15, 4.17(a), 4.19, 4.20 or 4.22, the Indemnitee will be
entitled to make a claim against the Indemnifying Party only if all
Indemnifiable Losses for or arising out of such representations and
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warranties, taken in the aggregate, exceed $500,000 (the "Indemnification
Threshold") and then to the full amount of such claims, subject to Section
11.2(c). The maximum aggregate liability of the Indemnifying Parties with
respect to such representations and warranties shall be $6,500,000 (the
"Indemnification Cap"); provided, that following the sixteen-month survival
period set forth in Section 12.1, the Indemnification Cap with respect to
Section 4.12 shall be reduced to $2,000,000.
(e) Notwithstanding Section 11.2(d), but subject to Section 11.2(c),
any claim for any Indemnifiable Loss for or arising out of a breach of the
representations and warranties contained in Sections 4.1, 4.3, 4.4, 4.14, 4.16,
4.17(b), 4.21, 5.1, 5.2, 5.3 or 5.4 shall not be subject to the Indemnification
Threshold and shall not be subject to the Indemnification Cap.
(f) Notwithstanding Section 11.2(d), but subject to Section 11.2(c),
any claim for any Indemnifiable Loss for or arising out of a breach of the
representations and warranties contained in Section 4.2 or Section 4.18 shall
not be subject to the Indemnification Threshold but shall be subject to the
Indemnification Cap on an aggregate basis taking into account all amounts paid
or payable for Indemnifiable Losses under Section 11.2(d).
(g) If and to the extent that any Indemnitee collects insurance
proceeds for an Indemnifiable Loss after the Indemnifying Party has reimbursed
or paid such Indemnifiable Loss, the Indemnitee shall pay over any such proceeds
to the Indemnifying Party or Parties pro rata to the amounts received; provided,
that in no event shall the Indemnitee be required to pay the Indemnifying Party
or Parties more than the amount received with respect to such Indemnifiable
Loss.
(h) If and to the extent that any Indemnifiable Loss incurred by the
Investor, the Company or Sleepmaster or an Investor Indemnitee, or any of them,
relates to, results from or arises out of any (i) breach of warranty or
representation made by the Existing Members in this Agreement or (ii)
nonfulfillment of any agreement or covenant on the part of the Existing Members
prior to the Release, then the Investor, the Company, and Sleepmaster and the
Investor Indemnitee shall be entitled to one, and only one, full recovery for
such Indemnifiable Loss on a joint and several basis from the Existing Members
on a joint and several basis, and the amount of the Indemnifiable Loss shall be
determined by reference to the Indemnifiable Loss incurred or suffered by the
Company, Sleepmaster or such Investor Indemnitee, as the case may be.
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2.90. Indemnification.
(a) Subject to Sections 11.1 and 11.2, following the Release Date,
B/S and the Existing Members will jointly and severally indemnify, defend and
hold harmless the Investor, the Company, Sleepmaster, their respective
Affiliates and any directors, officers, partners, employees, agents and
representatives of the Investor, the Company, Sleepmaster or their respective
Affiliates (each an "Investor Indemnitee"), from and against any and all
Indemnifiable Losses to the extent relating to, resulting from or arising out of
any (i) breach of warranty or representation made by the Existing Members, the
Company, Sleepmaster or B/S in Article IV of this Agreement or (ii)
nonfulfillment of any agreement or covenant on the part of the Company or
Sleepmaster prior to the Release under the terms of this Agreement or on the
part of the Company or Sleepmaster under this Agreement, but intended to be
performed after the Release.
(b) Subject to Sections 11.1 and 11.2, following the Release Date,
each of the Existing Members will, severally and not jointly, indemnify, defend
and hold harmless the Investor, the Company and Sleepmaster and their respective
Affiliates and any directors, officers, partners, employees, agents and
representatives of the Investor, the Company and Sleepmaster and their
respective Affiliates, from and against any and all Indemnifiable Losses to the
extent relating to, resulting from or arising out of any breach of warranty or
representation made by such Existing Member in Article V of this Agreement.
(c) Subject to Sections 11.1 and 11.2, following the Release Date,
each of the Existing Members will, severally and not jointly, indemnify, (i)
defend and hold harmless each other Existing Member and its Affiliates and any
directors, officers, partners, employees, agents and representatives of such
other Existing Member and its Affiliates, from and against any and all
Indemnifiable Losses to the extent relating to, resulting from or arising out of
any breach of warranty or representation made by such Existing Member in Article
V of this Agreement and (ii) contribute to any indemnification payments made by
any other Existing Member pursuant to Section 11.3(a) in proportion to the
Membership Interest of the Company (expressed as a percent of 100%) owned by
such Existing Member as of the Closing Date such that such Existing Member bears
its pro rata share of the indemnification payment so made.
(d) Subject to Sections 11.1 and 11.2, following the Release Date,
the Investor will and, with respect to clause (ii) below, the Company and
Sleepmaster will, indemnify, defend and hold harmless B/S and the Existing
Members and their respective Affiliates and their respective members, managers,
employees, agents or representatives, from and against any and all Indemnifiable
Losses to the extent relating to, resulting from or arising out of any (i)
breach of warranty or representation made by the Investor in Article VI of this
Agreement or (ii) nonfulfillment of any agreement or covenant on the part of the
Investor under the terms of this Agreement or on the part of the Company under
this Agreement, but intended to be performed after the Closing.
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2.91. Defense of Claims.
(a) Subject to Section 11.4(f), if any Indemnitee receives notice of
assertion or commencement of any Third Party Claim against such Indemnitee with
respect to which an Indemnifying Party is obligated to provide indemnification
under this Agreement, the Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof in compliance with the notice
provisions of Section 11.4(i), but in any event not later than 30 calendar days
after receipt of such notice of such Third Party Claim. Such notice (the "Third
Party Claim Notice") will describe the Third Party Claim in reasonable detail,
will include copies of all material written evidence thereof and will indicate
the estimated amount, if reasonably practicable, of the Indemnifiable Loss that
has been or may be sustained by the Indemnitee. The Indemnifying Party shall
have 14 days from its receipt of a Third Party Claim Notice (the "Third Party
Claim Notice Period") to notify Indemnitee (i) whether the Indemnifying Party
disputes the indemnitee's right of indemnification with respect to such Third
Party Claim, and (ii) if the Indemnifying Party does not dispute such right of
indemnification, whether or not it desires to defend the Indemnitee against such
Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnitee within the
Third Party Claim Notice Period that (i) the Indemnifying Party does not dispute
the Indemnitee's right of indemnification and (ii) the Indemnifying Party
desires to defend against such Third Party Claim and, if the stated amount of
such Third Party Claim, together with all other previously resolved claims and
pending claims for indemnification hereunder, exceeds the Indemnification
Threshold, but is less than the Indemnification Cap, then the Indemnifying Party
shall have the right to assume and control the defense of such Third Party Claim
by appropriate proceedings with counsel reasonably acceptable to Indemnitee, at
the Indemnifying Party's sole cost and expense; provided that such rights shall
adhere and last only so long as (A) prior to assuming such defense, the
Indemnifying Party notifies the Indemnitee in writing within 30 days after the
Indemnitee has given notice of the Third Party claim that the Indemnifying Party
will indemnify the Indemnitee from and against the entirety of any adverse
consequences the Indemnitee may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the Indemnifying
Party provides the Indemnitee with evidence acceptable to the Indemnitee that
the Indemnifying Party will have the financial resources to defend against the
Third Party Claim and fulfill its indemnification obligations hereunder, (C) the
Third Party Claim involves only money damages and does not seek an injunction or
other equitable relief, (D) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of the Indemnitee,
likely to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnitee, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently and
further provided that nothing in this proviso shall permit the Indemnification
Cap (as described in and qualified by Sections 11.2(a) through 11.2(h)) to be
exceeded. The Indemnitee may participate in, but not control, any such defense
or settlement, at its sole cost and expense.
(c) If the Indemnifying Party (i) disputes the Indemnitee's right of
indemnification with respect to a Third Party Claim, (ii) does not dispute such
right of indemnification but fails to promptly assume and prosecute the defense
of such Third Party Claim, (iii) does not dispute such right of indemnification
but a conflict or potential conflict
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exists between the Indemnifying Party and the Indemnitee or (iv) is not entitled
to assume defense of such Third Party Claim under Section 11.4(b), then the
Indemnitee shall be entitled to assume and control the defense of such Third
Party Claim with counsel reasonably acceptable to the Indemnifying Party (if any
of the Investor, the Company or Sleepmaster is an Indemnitee, the Existing
Members hereby agree that Xxxxxxxx & Xxxxx is acceptable for the purpose
hereof). If the Indemnifying Party does not assume the defense of a Third Party
Claim for any reason, it may still participate in, but not control, the defense
of such Third Party Claim at the Indemnifying Party's sole cost and expense.
(d) The party responsible for the defense of any Third Party Claim
(the "Responsible Party") shall, to the extent reasonably requested by the other
party, keep such other party informed as to the status of any third Party Claim
for which such party is not the Responsible Party, including, without
limitation, all settlement negotiations and offers. With respect to a Third
Party Claim for which the Indemnifying Party is the Responsible Party, the
Indemnitee shall make available to the Indemnifying Party and its
representatives all books and records of the Indemnitees relating to such Third
Party Claim and shall render to the Indemnifying Party such assistance and
access to records and the representatives of the Indemnitee as the Indemnifying
Party and its representatives may reasonably request, except that the Indemnitee
shall not be required to make available to the Indemnifying Party and its
representatives any books, records, documents or other information that the
Indemnitee reasonably determines to be confidential or subject to
attorney-client privilege unless and until the Indemnifying Party shall have
entered into such agreements as the Indemnitee reasonably deems to be necessary
in light of all surrounding circumstances (including, without limitation, the
Indemnifying Party's need for information in connection with the investigation
or defense of a Third Party Claim) to protect such confidentiality or privilege.
(e) Neither the Indemnifying Party, on the one hand, nor the
Indemnitee, on the other hand, shall enter into any settlement of any Third
Party Claim subject to indemnification under this Agreement without the prior
written consent of the other party, which consent shall not be unreasonably
withheld. The Responsible Party shall promptly notify the other party of each
settlement offer (including whether or not the Responsible Party is willing to
accept the proposed settlement offer) with respect to a Third Party Claim. Such
other party agrees to notify the Responsible Party with reasonable promptness
whether or not such party is willing to accept the proposed settlement offer.
Subject to Section 11.4(g), if an Indemnitee fails to consent to any settlement
offer of a Third Party Claim (whether or not the Indemnitee is the Responsible
Party with respect to such Third Party Claim), the Indemnitee may continue to
contest or defend such Third Party Claim and, in such event, the maximum
liability of the Indemnifying Party with respect to such Third Party Claim
(including the reasonable costs and expenses of contesting or defending such
Third Party Claim incurred after the Indemnitee fails to consent to such
settlement offer) shall not exceed the full amount of such settlement offer,
plus the reasonable costs and expenses of contesting or defending such Third
Party Claim to the extent incurred before the Indemnitee failed to consent to
such settlement offer. If the Indemnifying Party fails to consent to any
settlement offer of a Third Party Claim that does not exceed the Indemnification
Cap (whether or not the Indemnifying Party is the Responsible Party with respect
to such Third Party Claim), the Indemnifying Party may continue to contest or
defend such Third Party Claim and, in such event, the Indemnifying Party shall
be liable to the
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Indemnitee for the amount of the Indemnification Loss ultimately recovered
against Indemnitee as a result of such Third Party Claim notwithstanding Section
11.2(d).
(f) A failure to give timely notice or to include any specified
information in any notice as provided in Section 11.4(a) will not affect the
rights or obligations of any party hereunder except and only to the extent that,
as a result of such failure, any party which was entitled to receive such notice
was deprived of its right to recover any payment under its applicable insurance
coverage or was otherwise damaged as a result of such failure.
(g) If any of the conditions in Section 11.4(b) is or becomes
unsatisfied, (i) the Indemnitee may defend against, and consent to the entry of
any judgment or enter into any settlement with respect to, the Third Party Claim
in any manner it may deem appropriate (and the Indemnitee need not consult with,
or obtain any consent from, any Indemnifying Party in connection therewith),
(ii) the Indemnifying Parties will reimburse the Indemnitee promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the Indemnifying Parties
will remain responsible for any adverse consequences the Indemnitee may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Article XI. No
provision of this Section shall render any Indemnitee liable for any amount in
excess of the liability to which it would be subject but for the provisions of
this Section 11.4(g).
(h) The Indemnifying Party will have a period of 30 calendar days
within which to respond in writing to any claim by an Indemnitee on account of
an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct
Claim"). If the Indemnifying Party does not so respond within such 30 calendar
day period, the Indemnifying Party will be deemed to have rejected such claim,
in which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article XI.
(i) For all purposes of this Section 11.4 and Section 11.5, notices
to the Existing Members shall be sufficient if given in the manner and at the
address set forth in Section 13.3 to the Representative of the Existing Members.
Any party or parties to this Agreement shall have the right to rely upon any
notices sent by, and all determinations made by, the representative of the other
party or parties acting pursuant to this Section.
2.92. Certain Payments to the Investor. Notwithstanding any other
provision of this Agreement, the Investor, the Company, Sleepmaster and any
Investor Indemnitee shall first satisfy the amount of any Indemnifiable Loss
suffered by the Investor, the Company or Sleepmaster, or any Investor
Indemnitee, by offset against the outstanding principal amount of the Investor
Notes exercised pro rata among the holders thereof, on a dollar-for-dollar basis
equal to the Indemnifiable Loss so suffered, before claiming for or obtaining
any additional payment for an Indemnifiable Loss.
2.93. Remedies Cumulative. The rights of indemnification set forth in
this Article XI do not displace, but are in addition to, any other legal
recourse available to the injured party including claims of fraud; provided,
that, if and to the extent that the Investor, the
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Company or Sleepmaster asserts any claim of fraud (whether under common law or
under federal or state securities laws) against any Existing Member, all claims
by the Investor, the Company and Sleepmaster arising out of the same alleged act
or omission by the Existing Member shall be merged into a single claim;
provided, that the party asserting such claim shall have the sole right to
select the forum and the theory of recovery for such claim.
ARTICLE XII
TERMINATION
2.94. Termination. At any time before the Release, this Agreement may be
terminated:
(i) by the mutual written consent of the parties;
(ii) by the Company, Sleepmaster or the Existing Members if there
has been a material misrepresentation, breach of warranty or breach of any
covenant or agreement contained herein by the Investor which is not cured
within twenty business days after the Investor has been notified of the
intent of the Company or the Existing Members to terminate this Agreement
pursuant to this clause (ii);
(iii) by the Investor, if there has been a material
misrepresentation, breach of warranty or breach of any covenant or
agreement contained herein by the Company or the Existing Members which is
not cured within twenty business days after the Company has been notified
of the Investor's intent to terminate this Agreement pursuant to this
clause (iii);
(iv) by the Company, Sleepmaster or the Existing Members if any
condition set forth in Article VIII has not been complied with or
performed at or before the Release and such non-compliance or
non-performance shall not have been cured or eliminated by the earlier of
(A) the date which is three Business Days after Sleepmaster obtains the
Serta Consent and (B) November 15, 1996 (the "Termination Date"); or
(v) by the Investor if any condition set forth in Article VII has
not been complied with or performed at or before the Release and such
non-compliance or non-performance shall not have been cured or eliminated
by the Termination Date.
2.95. Effect of Termination. In the event that this Agreement is
terminated pursuant to Section 12.1, all obligations of the parties (except for
Sections 10.5 and 13.10 and this Article XII shall terminate and each party will
return or destroy (and, if applicable, provide an affidavit of destruction duly
signed by such destroying party or an attorney thereof affirming such
destruction) all papers, documents, financial statements and other data
furnished to it by or
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on behalf of the other party (including any copies made by such first party),
and will maintain the confidentiality of all such information; provided, that
such termination shall not constitute a waiver by any party of any claim it may
have for damages caused by reason of a breach by the other party of a covenant
or agreement contained herein.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
2.96. Public Announcements. Prior to the Release Date, no party to this
Agreement will issue any press releases or otherwise make any public statements
with respect to this Agreement or the transactions contemplated hereby without
obtaining the prior written consent of the other parties, except as may be
required by law (in which case the disclosing party will advise the other
parties prior to making the disclosure). On or after the Release Date, the
Investor, the Existing Members and the Company shall cooperate to issue a
mutually agreeable press release.
2.97. Rights of Third Parties. Except as permitted pursuant to Section
13.4, nothing in this Agreement shall establish any enforceable rights, legal or
equitable, in any Person other than the parties hereto, including any employee
or member of the Company or Sleepmaster or any beneficiary of such employee. Any
claim, including claims for benefits, asserted by or on behalf of any person
with respect to such person's being employed by the Company or Sleepmaster shall
be governed solely by applicable employment policies and employee benefit plans
that the Company or Sleepmaster shall adopt on or after the Release Date,
construed in accordance with the applicable federal and state law.
2.98. Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be sufficiently given if delivered in
person, if mailed by certified mail, return receipt requested, postage prepaid,
if delivered by confirmed telefax or if sent by a nationally recognized
overnight courier, delivery prepaid, addressed as follows:
(a) if to the Company, to:
Sleepmaster Holdings L.L.C.
c/o Sleepmaster L.L.C.
0000 Xxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000
Attn: Manager
Fax No.: (000) 000-0000
with a copy to:
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Xxxxxxxxxx & Xxxxx, a Professional
Corporation
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn:: Xxxxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
or such other person or address as the Company may furnish to the Existing
Members and the Investor in writing.
(b) if to Sleepmaster, to:
Sleepmaster L.L.C.
0000 Xxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000
Attn:: Manager
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxxxxx & Xxxxx, a Professional
Corporation
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn:: Xxxxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
or such other person or address as Sleepmaster may furnish to the Existing
Members and the Investor in writing.
(c) if to the Existing Members, to the Representative of the
Existing Members at his address set forth in the Operating Agreement.
with a copy to:
Xxxxxxxxxx & Xxxxx, a Professional
Corporation
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn:: Xxxxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
or such other person or address as the Representative of the Existing Members
may furnish to the Investor and the Company in writing.
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(d) if to the Investor, to:
Sleep Investor L.L.C.
c/o Citicorp Venture Capital, Ltd.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Att.: Xx. Xxxx X. Xxxxx
Fax No. (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxx X. Xxxxx, Esq.
Fax No. (000) 000-0000
or such other person or address as the Investor shall furnish the Company and
the Existing Members in writing.
All such written notices and communications delivered as aforesaid shall
be deemed given for purposes of this Agreement on the day such notice or
communication is received if delivered personally or by telefax, or, if
delivered by certified mail, as aforesaid, on the date that is four business
days after deposit in the mail or, if delivered by nationally recognized
overnight courier, two days after it has been so sent.
2.99. Parties in Interest. This Agreement will be binding upon, inure to
the benefit of and be enforceable by, the respective successors and permitted
assigns of the parties hereto but this Agreement shall not be assigned by any
party without the prior written consent of the other party; provided, that (i)
the Investor may or, in connection with the Closing, the Company or Sleepmaster
may, assign any or all of their respective rights and interests hereunder to one
or more of their sources of financing for collateral purposes only, (ii) the
Investor may assign any or all of its rights and interests hereunder to one or
more of its Affiliates, (iii) the Investor may designate one or more of its
Affiliates to perform its obligations hereunder and (iv) the Company may assign
any or all of its rights and interests hereunder to any subsequent purchaser of
the Business (in the situations described in clauses (i), (ii) or (iii) of this
proviso, the assigning party nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
2.100. Entire Agreement; Amendment; Waiver. This Agreement and the
agreements and documents referred to herein or delivered pursuant hereto contain
the entire understanding of the parties hereto with respect to its subject
matter. There are no representations, promises, warranties, covenants or
undertakings other than as expressly set forth herein or therein. This Agreement
supersedes all prior agreements and understandings between the parties hereto
with respect to its subject matter. This Agreement may be amended or modified
only by a written instrument duly executed by the parties hereto, and any
condition to a
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party's obligations hereunder may only be waived in writing by such party. No
waiver by any party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
2.101. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
2.102. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but one
agreement.
2.103. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ITS PRINCIPLES OF CONFLICTS OF LAW.
2.104. Severability. In the event that any provision, or part thereof, of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions, or parts
thereof, shall not in any way be affected or impaired thereby.
2.105. Expenses. Except as otherwise provided herein, each party shall be
responsible for its own legal fees and other costs and expenses incurred in
connection with this Agreement and the negotiation and consummation of the
transactions contemplated hereby. If required, the Investor shall pay the filing
fee under the H-S-R Act.
2.106. Incorporation of Exhibits and Schedules. All references contained
in this Agreement to Exhibits and Schedules shall, unless otherwise expressly
stated, refer to the Exhibits and Schedules attached hereto. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
2.107. Specific Performance. Each of the parties acknowledges and agrees
that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
2.108. Submission to Jurisdiction. Each of the parties submits to the
jurisdiction of any state or federal court sitting in New York, New York, in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring
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any action or proceeding arising out of or relating to this Agreement in any
other court. Each of the parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other party with respect
thereto.
2.109. Waiver of Jury Trial. Each of the parties waives any right to a
trial by jury with respect to any litigation which arises out of, or which is
related to, the transactions contemplated by this Agreement.
2.110. Time is of the Essence. Each of the parties agrees that time is of
the essence with respect to every date, every action and every delivery set
forth herein.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SLEEPMASTER HOLDINGS L.L.C.
By:
Name: Xxxxxxx Xxxxxxxxxx
Title: Manager
By:
Name: Xxxxx X. Xxxxxxx
Title: Manager
By:
Name: Xxxxxxx X. Xxxxx
Title: Manager
SLEEPMASTER L.L.C.
By:
Name: Xxxxxxx Xxxxxxxxxx
Title: Manager
By:
Name: Xxxxx X. Xxxxxxx
Title: Manager
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By:
Name: Xxxxxxx X. Xxxxx
Title: Manager
XXXXX/XXXXXXXXXX HOLDINGS, INC.
By:
Name: Xxxxxxx Xxxxxxxxxx
Title: President
EXISTING MEMBERS:
Xxxxxxx Xxxxxxxxxx
Xxxxx X. Xxxxxxx
Xxxxxxx XxXxxx
Xxxxxxx Xxxxxx
Xxxxxx X. Wit
XXXXX INVESTMENTS II, L.L.C.
By:
Name:________________________________
Title:
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Xxxxxxx X. Xxxxx
XXXXXXX X. XXXXX, VIP PLUS PROFIT
SHARING PLAN
By:
Name: Xxxxxxx X. Xxxxx
Title:
Xxxxxx X. Xxxxx
Xxxx X. Xxxxxx
Xxxx Xxxxxx
JESSAND CORP. PROFIT SHARING PLAN
AND TRUST
By:
Name: Xxxxx X. Xxxxxxx
Title: Trustee
Xxxx Xxxxxxx
PANORAMA HOLDINGS, L.L.C.
By:
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Name: Xxxxx X. Xxxxxx
Title: Manager
Xxxxxx Xxxxxxx
HOLDING CAPITAL MANAGEMENT CORP.
By:
Name: Xxxxx X. Xxxxxxx
Title: President
Xxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx
XX XXXXXXXX 1989 TRUST
By:
Name: Xxxxxx Xxxxxxxx
Title: Trustee
Xxxx X. XxXxxxx
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XXXXXX, XXXXXX ALTERNATIVE STRATEGIES
L.P.
By:
Name: Xxxxx X. Xxxxxxxxx
Title: General Partner
Xxxxxx X. Xxxxxxx
Xxxxxxx Xxxxxxxxx
Xxxxxx Xxxx
WKM PARTNERS
By:
Name: Xxxxx Xxxx
Title:
[Only if the Warrant has been Exercised]
NATIONSBANK COMMERCIAL CREDIT CORP.
By:
Name:
Title:
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INVESTOR:
SLEEP INVESTOR L.L.C.
By:
Name:
Title: Manager
61
