AMENDMENT NO. 5 TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AND AMENDMENT NO. 1 TO PLEDGE AGREEMENT
THIS AMENDMENT NO. 5 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AND AMENDMENT NO. 1 TO PLEDGE AGREEMENT (this "Amendment"), dated as of December
30, 1998 is entered into between Trace International Holdings, Inc. (the
"Borrower" or the "Company") and The Bank of Nova Scotia (including its
successors and assigns, the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to the Second Amended and Restated Credit
Agreement dated as of December 24, 1997 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
entered into between the Borrower and the Lender, the Lender extended
Commitments to make Loans to the Borrower; and
WHEREAS, the Borrower has requested, and the Lender has agreed to,
an amendment to the Credit Agreement and to the Pledge Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Use of Defined Terms; Rules of Usage. Unless otherwise
defined or the context otherwise requires, terms for which meanings are provided
in the Credit Agreement shall, when capitalized, have such meanings when used in
this Amendment.
ARTICLE II
AMENDMENT TO CREDIT AGREEMENT
SECTION 2.1. Amendment to Article I of the Credit Agreement
(Definitions).
(i) Article I is hereby amended by adding the following definitions in
their appropriate alphabetical place:
"'Demand Note' shall mean that certain Demand Note dated as of
December 1, 1998, between Trace Foam Sub, Inc. and the Lender.";
"'Restricted Junior Payment' means (a) any dividend or distribution,
direct or indirect, on account of any Equity Interests in the Borrower now or
hereafter outstanding, (b) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
Equity Interests in the Borrower now or hereafter outstanding, (c) any payment
or prepayment of principal of, premium, if any, or interest, fees or other
charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to, any subordinated Indebtedness, and (d) any payment made to redeem,
purchase, repurchase or retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire Equity Interests in the Borrower
now or hereafter outstanding;
"'Trace Foam Sub Guaranty' shall mean that certain Guaranty by Trace
Foam Sub in favor of the Lender, dated December 30, 1998, which guarantees the
Indebtedness of the Borrower under the Other Loan Agreement.".
(ii) The definition of "Loan Documents" is hereby amended by adding the
following terms immediately after the words "the Contract Assignment Agreement"
therein:
", the Demand Note and the Trace Foam Sub Guaranty".
SECTION 2.2. Amendment to Article II of the Credit Agreement
(Amounts and Terms of the Loan).
Clause (f) of Section 2.1 is hereby amended and restated in its
entirety so that it reads as follows:
"(f) Repayment of the Loans. The Borrower shall repay in full the
outstanding principal amount of the Term A Loan, Term B Loan, Term C Loan
and Term D Loan on January 31, 1999."
SECTION 2.3. Amendment to Article IX to the Credit Agreement
(Negative Covenants).
(i) Section 9.1 is hereby amended by (a) deleting the word "and" at
the end of clause (viii), (b) deleting the "." and substituting "; and" at the
end of clause (ix) and (c) adding the following clause (x) after clause (ix):
"(x) Indebtedness of the Borrower and Trace Foam Sub, Inc.
under the Demand Note and the Trace Foam Sub Guaranty."
(ii) clause (vi) of Section 9.2 is hereby amended by adding the
phrase at the end thereof:
"and the Demand Note."
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(iii) Section 9.4 is hereby amended by adding the following sentence
at the end thereof:
"Notwithstanding the foregoing, the Borrower and Trace Foam Sub,
Inc. may enter into and perform all obligations under the Demand Note and the
Trace Foam Sub Guaranty."
(iv) Article IX is hereby amended by adding the following as Section
9.9:
"9.9. Restricted Junior Payments. The Borrower shall not
declare or make any Restricted Junior Payment."
ARTICLE III
AMENDMENT TO PLEDGE AGREEMENT
SECTION 3.1. Amendment to Article I of the Pledge Agreement
(Definitions).
(a) Article I is hereby amended by adding the following definitions
in their appropriate alphabetical place:
"CHF Guaranty" means the Guaranty of the Borrower dated as of
February 24, 1995 in favor of The Bank of Nova Scotia.
"CHF Note" means that promissory note of CHF Holdings, Inc.
dated November 25, 1996, as amended, payable to the order of the Borrower.
(b) (i) The definition of CHF Guarantee Collateral is hereby amended
and restated to read as follows:
"CHF Guarantee Collateral" means 969,696 shares of UAG Common
Stock and the Trace Foam Sub Shares."
(ii) The definition of "Dividends" is hereby amended by adding the
phrase "and other cash payments (whether of principal, interest or otherwise)"
after the phrase "and cash distributions" therein.
(iii) The definition of "Pledged Property" is hereby amended by
adding the parenthetical "(including, without limitation, the CHF Note)" after
the phrase "promissory notes" in the third line thereof.
SECTION 3.2. Amendment to Article III of the Pledge Agreement.
Section 3.1.3 of the Pledge Agreement is hereby amended by adding the following
sentence "The CHF Note is owned by the Pledgor free and clear of all Liens." at
the end thereof.
SECTION 3.3. Amendment to Article IV of the Pledge Agreement.
Section 4.2 of the Pledge Agreement is amended by
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amending and restating the parenthetical in the first sentence thereof to read
"(and all other items constituting Collateral)."
ARTICLE IV
EFFECTIVENESS
SECTION 4.1. Conditions to Effectiveness. This Amendment shall
become effective as of the date hereof (the "Effective Date"), subject to the
execution and delivery of (i) this Amendment by the Borrower and the Lender,
(ii) an amendment to the Other Loan Agreement of even date herewith in the form
attached hereto as Exhibit A, (iii) the Trace Foam Sub Guaranty substantially in
the form attached as Exhibit B and (iv) a letter agreement between the Borrower
and the Lender substantially in the form attached hereto as Exhibit C.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Amendment, the
Borrower hereby reaffirms, except as set forth in Annex A hereto, as of the date
hereof, the representations and warranties contained in Article VI of the Credit
Agreement.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Ratification of and References to the Credit Agreement.
This Amendment shall be deemed to be an amendment to the Credit Agreement and
the Pledge Agreement, respectively, and the Credit Agreement and the Pledge
Agreement, respectively, as amended hereby, are each hereby ratified, approved
and confirmed in each and every respect. All references to the Credit Agreement
and the Pledge Agreement, respectively, in any other document, instrument,
agreement or writing shall hereafter be deemed to refer to the Credit Agreement
and the Pledge Agreement, respectively as amended hereby.
SECTION 6.2. Headings. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provisions hereof.
SECTION 6.3. Execution in Counterparts. This Amendment may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
SECTION 6.4. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL
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LAWS OF THE STATE OF NEW YORK WITHOUT REGARD To NEW YORK CHOICE OF LAWS
PRINCIPLES.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
TRACE INTERNATIONAL HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
----------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: Senior Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Xxxxx Xxxxx
----------------------------------
Name: Xxxxx Xxxxx
Title: Senior Relationship Manager
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Exhibit A
Schedule 6.1 - H
Schedule 6.1-H is supplemented by adding the following:
under a new caption "Trace Foam Sub, Inc."
Demand Note, dated as of December 1, 1998, in favor of Lender.
Exhibit A to Amendment No. 5
Page - 1
Exhibit A
Schedule 6.1 - I
Schedule 6.1-I is supplemented to include the information
contained in the following two pages:
Exhibit A to Amendment No. 5
Page - 2
Litigation and Legal Proceedings
Stockholder Litigation
Beginning on or about March 17, 1998, six actions (collectively the
"Stockholder Litigation") were filed in the Court of Chancery of the State of
Delaware, New Castle County, (the "Court") by stockholders of Foamex
International. The Stockholder Litigation, purportedly brought as class actions
on behalf of all stockholders of Foamex International, named Foamex
International, certain of its directors, certain of its officers and Trace as
defendants alleging that they had breached their fiduciary duties to the
plaintiffs and the other stockholders of Foamex International unaffiliated with
Trace in connection with the original proposal of Trace to acquire the publicly
traded outstanding common stock of Foamex International for $17.00 per share.
The complaints sought, among other things, class certification, a declaration
that the defendants have breached their fiduciary duties to the class,
preliminary and permanent injunctions barring implementation of the proposed
transaction, rescission of the transaction if consummated, unspecified
compensatory damages, and costs and attorneys' fees. A stipulation and order
consolidating these six actions under the caption In re Foamex International
Inc. Shareholders Litigation Consolidated Action, No. 16259NC was entered by the
Court on May 28, 1998.
The parties to the Stockholder Litigation entered into a Memorandum
of Understanding, dated June 25, 1998 (the "Memorandum of Understanding") to
settle the Stockholder Litigation, subject to, among other things, execution of
a definitive stipulation of settlement between the parties and approval by the
Court of filing notice to the stockholders of Foamex International of a hearing.
The Memorandum of Understanding provided that as a result of, among other
things, the Stockholder Litigation and negotiations among counsel for the
parties to the Memorandum of Understanding, a special meeting of stockholders
would be held to vote upon and approve the merger agreement which provided,
among other things, for the shares ("Public Shares") owned by stockholders by
Foamex International unaffiliated with Trace and its subsidiaries (the "Public
Stockholders") to be converted into the right to receive $18.75 in cash, without
interest. The Memorandum of Understanding also acknowledged that the terms of
the prior merger agreement, dated June 25, 1998, among Trace, a wholly owned
subsidiary of Trace ("Merger Sub") and Foamex International (the "Old Merger
Agreement") had been significantly improved over the terms originally proposed
by Trace on March 16, 1998, and Foamex International and the individual director
and officer defendants acknowledged that the filing and prosecution of the
Stockholder Litigation was a factor they took into account in giving fair
consideration to and entering into the Old Merger Agreement and
Exhibit A to Amendment No. 5
Page - 3
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Trace acknowledged that it took into account the desirability of satisfactorily
addressing the claims asserted in the Stockholder Litigation in agreeing to the
increased consideration to be paid to the stockholders of Foamex International
unaffiliated with Trace and its subsidiaries pursuant to the Old Merger
Agreement.
The Memorandum of Understanding also provided for certification of a
class, for settlement purposes only, consisting of the Public Stockholders, the
dismissal of the Stockholder Litigation with prejudice and the release by the
plaintiffs and all members of the class of all claims and causes of action that
were or could have been asserted against Trace, Foamex International and the
individual defendants in the Stockholder Litigation or that arise out of the
matters alleged by plaintiffs. Following the completion of the confirmatory
discovery which was provided for in the Memorandum of Understanding on September
9, 1998, the parties entered into a definitive Stipulation of Settlement and the
Court set a hearing to consider whether the settlement should be approved for
October 27, 1998 (the "Settlement Hearing"). In connection with the proposed
settlement, the plaintiffs intended to apply for an award of attorney's fees and
litigation expenses in an amount not to exceed $925,000, and the defendants
agreed not to oppose this application. Additionally, Foamex International agreed
to pay the cost, if any, of sending notice of the settlement to the Public
Stockholders. On September 24, 1998, a Notice of Pendency of Class Action,
Proposed Settlement of Class Action and Settlement Hearing was mailed to the
members of the settlement class. On October 20, 1998, the parties to the
Stockholder Litigation requested that the Court cancel the Settlement Hearing in
light of the announcement made by Trace on October 16, 1998, that it had been
unable to obtain the necessary financing for the contemplated acquisition by
Trace of Foamex International common stock at a price of $18.75 per share which
was the subject matter of the proposed settlement. This request was approved by
the Court on October 21, 1998, and Foamex International issued a press release
on October 21, 1998 announcing that the Court had canceled the settlement
hearing.
On November 10, 1998, counsel for certain of the defendants in the
Stockholder Litigation gave notice pursuant to the Stipulation of Settlement
that such defendants were withdrawing from the Stipulation of Settlement in
light of the notice given by Trace to Foamex and the special committee of the
Board of Directors on November 5, 1998 whereby Trace terminated the Old Merger
Agreement on the grounds that the financing condition in the Old Merger
Agreement was incapable of being satisfied.
On November 12, 1998, the plaintiffs in the Stockholder Litigation
filed an Amended Class Action Complaint (the "Amended Complaint"). The Amended
Complaint named Foamex International, Trace, Merger Sub, Xx. Xxxxxxxx X. Xxxxx,
Xx. Xxxxxx Xxxxxx, Xx. Xxxxxx Xxxxxxx, Xx. Xxxx Xxxxxx and Xx. Xxxxxxx Xxxxxxxx
as
Exhibit A to Amendment No. 5
Page - 4
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defendants, alleging that they breached their fiduciary duties to plaintiffs and
the other Public Stockholders in connection with the Merger, that the proposal
to acquire the Public Shares for $12.00 per share lacked entire fairness, that
the individual defendants violated 8 Del. Code ss.251 in approving the Merger
Agreement, and that Trace and Merger Sub breached the Stipulation of Settlement.
On December 2, 1998, plaintiffs served a motion for a preliminary injunction,
seeking an Order to preliminarily enjoin the defendants from proceeding with,
consummating or otherwise effecting the merger contemplated by the Merger
Agreement.
The defendants have denied, and continue to deny, that they have
committed or have threatened to commit any violation of law or breaches of duty
to plaintiffs or the purported class or any breach of the Stipulation of
Settlement. The defendants intend to vigorously defend the Stockholder
Litigation. If the Stockholder Litigation is adversely determined, it could have
a material adverse effect on Foamex International and Trace.
In addition, on or about November 18, 1998, a putative class action
was filed in the United States District Court for the Eastern District of New
York on behalf of all persons who purchased common stock of Foamex International
between March 16, 1998 and October 19, 1998, naming Trace as defendant and
alleging that Trace breached a contract between the putative class members and
Trace. Neither Foamex International nor any of the individual directors of
Foamex International are named as defendants in this litigation.
Exhibit A to Amendment No. 5
Page - 5
Exhibit A
Schedule 6.1 - W
The following information shall be deemed to qualify the
representation contained in Schedule 6.1(w) of the Credit Agreement, even though
no reference to a Schedule 6.1 - W is contained therein.
1. Entering into and performing its obligation under the Trace Foam
Sub Guaranty.
2. Entering into and performing its obligation under the Demand
Note.
Exhibit A to Amendment No. 5
Page - 6
[EXHIBIT B]
TRACE FOAM SUB GUARANTY
This TRACE FOAM SUB GUARANTY (as amended, amended and restated,
supplemented or otherwise modified from time to time, this "Guaranty"), dated as
of December 30, 1998, is made by Trace Foam Sub, Inc., a Delaware corporation
(the "Guarantor" or "TSFI") in favor of The Bank of Nova Scotia (the "Lender")
for the benefit of the Lender.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to that certain Margin Loan Credit Agreement,
dated as of August 15, 1997 (as amended, amended and restated, supplemented or
modified from time to time, the "Credit Agreement") is entered into among, Trace
International Holdings, Inc. (the "Borrower" and "TIHI") and The Bank of Nova
Scotia (the "Lender). The Lender has extended Loans to the Borrower;
WHEREAS, the Borrower has requested and the Lender has agreed to
extend the Maturity Date of such Loans;
WHEREAS, as a condition precedent to extending the Maturity Date of
the Loans under the Credit Agreement, the Guarantor is required to execute and
deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery
and performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute
this Guaranty inasmuch as the Guarantor has and will continue to derive
substantial direct and direct benefits from the Loans made to the Borrower by
the Lender pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lender to extend the
final Maturity Date of the Loans to the Borrower pursuant to the Credit
Agreement, the Guarantor agrees, for the benefit of the Lender, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
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"Borrower" is defined in the first recital.
"Credit Agreement" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit
Agreement) of the Borrower arising under or in connection with the Credit
Agreement or any other Loan Document.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Guaranty, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of the Borrower under the Credit
Agreement, the Notes and the other Loan Documents to which it is a party
now or hereafter existing, whether for principal, interest, fees, expenses
or otherwise (including all such amounts which would become due but for
the operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code, II U.S.C. ss.362(a), and the operation of Sections
502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless the Lender and each holder of a
Note for any and all costs and expenses (including reasonable attorney's
fees and expenses) incurred by the Lender or such holder, as the case may
be, in enforcing any rights under this Guaranty;
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the Guarantor specifically agrees that it shall not be necessary or required
that the Lender or any holder of any Note exercise any right, assert any claim
or demand or enforce any remedy whatsoever against the Borrower (or any other
Person) before or as a condition to the obligations of the Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in
the event of the dissolution or insolvency of the
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Borrower or the Guarantor, or the, inability or failure of the Borrower or the
Guarantor to pay debts as they become due, or an assignment by the Borrower or
the Guarantor for the benefit of creditors, or the commencement of any case or
proceeding in respect of the Borrower or the Guarantor under any bankruptcy,
insolvency or similar laws, and if such event shall occur at a time when any of
the Obligations of the Borrower may not then be due and payable, the Guarantor
agrees that it will pay to the Lender forthwith the full amount which would be
payable hereunder by the Guarantor if all such Obligations were then due and
payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of the
Borrower have been paid in full in cash and all obligations of the Guarantor
hereunder shall have been paid in full in cash. The Guarantor guarantees that
the Obligations of the Borrower will be paid strictly in accordance with the
terms of the Credit Agreement and each other Loan Document under which they
arise, regardless of any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of the Lender or any
holder of any Note with respect thereto. The liability of the Guarantor under
this Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of the Lender or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Borrower or any other Person (including any other
guarantor (including the Guarantor)) under the provisions of the
Credit Agreement, any Note, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor (including the Guarantor) of, or collateral securing, any
Obligations of the Borrower;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower or any other
Obligor, or any other extension, compromise or renewal of any Obligation
of the Borrower;
(d) any reduction, limitation, impairment or termination of any
Obligations of the Borrower for any reason, including any claim o waiver,
release, surrender,
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alteration or compromise, and shall not be subject to (and the Guarantor
hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Obligations of the Borrower or otherwise;
(e) any amendment to, rescission, waiver, or other modification of,
or any consent to departure from, any of the terms of the Credit
Agreement, any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of,
or consent to departure from, any other guaranty, held by the Lender or
any holder of any Note securing any of the Obligations of the Borrower; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the Borrower,
any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Obligations is
rescinded or must otherwise be restored by the Lender or any holder of any Note,
upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise,
all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Borrower and this Guaranty and any requirement that the
Lender or any holder of any Note protect, secure, perfect or insure any security
interest or Lien, or any property subject thereto, or exhaust any right or take
any action against the Borrower or any other Person (including any other
guarantor) or entity or any collateral securing the Obligations of the Borrower.
SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees
that it will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of all Obligations of the Borrower. Any
amount paid to the Guarantor on account of any such subrogation rights prior to
the payment in full in cash of all Obligations of the Borrower shall be held in
trust for the benefit of the Lender and each holder of a Note and shall
immediately be paid to the Lender for the benefit of the Lender and each holder
of a Note and credited and applied against the Obligations the Borrower, whether
matured or unmatured, in accordance with the terms of the Credit Agreement;
provided, however, that if
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(a) the Guarantor has made payment to the Lender and each holder of
a Note of all or any part of the Obligations of the Borrower, and
(b) all Obligations of the Borrower have been paid in full in cash,
the Lender and each holder of a Note agrees that, at the Guarantor's request,
the Lender, on its own behalf and that of the holders of the Notes, will execute
and deliver to the Guarantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Guarantor of an interest in the Obligations of the Borrower resulting from
such payment by the Guarantor. In furtherance of the foregoing, for so long as
any Obligations or Loans remain outstanding, the Guarantor shall refrain from
taking any action or commencing any proceeding against the Borrower (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to the Lender or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of
Notes, etc. This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees
and assigns; and
(b) inure to the benefit of and be enforceable by the Lender.
Without limiting the generality of the foregoing clause (b), the Lender may
assign or otherwise transfer (in whole or in part) any Note or Loan held by it
to any other Person or entity, and such other Person or entity shall thereupon
become vested with all rights and benefits in respect thereof granted to the
Lender under any Loan Document (including this Guaranty) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to the
provisions of Article XI of the Credit Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Guarantor hereby
represents and warrants unto the Lender as set forth in this Article III
acknowledging that the Lender is relying thereon without independent inquiry.
SECTION 3.1.1. Corporate Existence; Compliance with Law. The
Guarantor (i) is a corporation duly organized, validly existing and in good
standing under the laws of the state of
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Delaware; (ii) has the requisite corporate power and authority and the legal
right to own, pledge, mortgage or otherwise encumber its properties and to
conduct its business as now and heretofore conducted; (iii) is in compliance
with its Constituent Documents; and (iv) is in compliance with all material
Requirements of Law.
SECTION 3.1.2. Corporate Power; Authorization. The execution and
delivery by the Guarantor of the Loan Documents to which it is a party and all
instruments and documents to be delivered by the Guarantor thereunder, and the
performance of its obligations thereunder: (i) are within the Guarantor's
corporate power; (ii) have been duly authorized by all necessary or proper
corporate action; (iii) are not in contravention of any provision of the
Guarantor's Constituent Documents; (iv) will not violate any law or regulation,
or any order or decree of any court or Governmental Authority; (v) will not
conflict with or result in the breach or termination of, constitute a default
under (with or without the giving of notice, the lapse of time or both) or a
tortious interference with or accelerate any performance required by, any
material indenture, mortgage, deed of trust, lease, agreement or other
instrument to which the Guarantor is a party or by which the Guarantor or any of
its property is bound; (vi) will not result in the creation or imposition of any
Lien upon any of the property of the Guarantor, other than Liens created
pursuant to the terms of the Loan Documents; and (vii) do not require the
consent or approval of any Governmental Authority, or any other Person which has
not been obtained.
SECTION 3.1.3. No Adverse Condition. No action has been taken by any
competent authority which restrains, prevents or imposes material adverse
conditions upon, or seeks to restrain, prevent or impose material adverse
conditions upon, the consummation of any of the transactions contemplated by the
Loan Documents.
SECTION 3.1.4. Enforceability. The obligations of the Guarantor
under this Guaranty are enforceable against the Guarantor in accordance with
their terms.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. Covenants. The Guarantor covenants and agrees that the
Guarantor will perform the obligations set forth in this Article IV until all
Obligations of the Borrower have been paid in full in cash and all obligations
of the Guarantor hereunder shall have been paid in full in cash. The Guarantor
shall comply with the following covenants unless the Lender shall otherwise give
its prior written consent thereto.
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SECTION 4.1.1. Sale of Assets; Liens. The Guarantor shall not (A)
sell, assign, transfer, lease, convey or otherwise dispose of any Property,
whether now owned or hereafter acquired, or any income or profits therefrom, or
enter into any agreement to do so or (B) directly or indirectly create, incur,
assume or permit to exist any Lien on or with respect to any of its Property
other than those outstanding on the date hereof.
SECTION 4.1.2. Conduct of Business. The Guarantor shall not engage
in any business other than the ownership of shares of Foamex International.
SECTION 4.1.3. Transactions with Affiliates. The Guarantor shall not
directly or indirectly enter into any transactions (including, without
limitations, the purchase, sale, lease or exchange of any property or the
rendering of any service), with any holder or holders of more than five percent
(5%) of any class of Equity Interests in the Guarantor or with any of the
Guarantor's Affiliates on terms that are less favorable to it than terms that
could be obtained in an arm's length transaction with an unrelated party at that
time.
SECTION 4.1.4. Indebtedness. Neither the Guarantor nor any of its
Subsidiaries shall directly or indirectly create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except Indebtedness in respect of this Guaranty, the Demand Note
dated as of December 4, 1998, or the Obligations and the DLJ Loan Commitment
Agreement, dated as of December 14, 1993, between the Guarantor and DLJ Funding,
Inc. and the Prospectus Sale Borrower's Agreement, dated as of February 21,
1995, executed by Trace Foam Sub, Inc. in favor of Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation.
SECTION 4.1.5. Restriction on Fundamental Changes. The Guarantor
shall not enter into any merger or consolidation, or liquidate, wind-up or
dissolve (or suffer any liquidation or dissolution), purchase or otherwise
acquire, in one transaction or series of transactions, all or substantially all
of the Equity Interests in, or other evidence of beneficial ownership of, or the
business, property or assets of, any Person.
SECTION 4.1.6. Investments. The Guarantor shall not directly or
indirectly make or own any Investment, except (i) Investments in cash and Cash
Equivalents and (ii) Investments held by the Guarantor set forth on Schedule I
hereto.
SECTION 4.1.7. Constituent Documents. Neither the Guarantor nor any
of its Subsidiaries shall amend, modify or otherwise change any of the terms or
provisions in any of its Constituent Documents as in effect on the date hereof
other than amendments or modifications deemed immaterial by the Lender.
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SECTION 4.1.8. Loan Documents. The Guarantor shall not amend,
supplement or otherwise modify any of the terms or provisions in any of the Loan
Documents to which it is a party other than amendments, supplements or
modifications deemed immaterial by the Lender.
ARTICLE V
SUBORDINATION
The Guarantor hereby agrees that any indebtedness of the Borrower
now or hereafter owing to the Guarantor (the "Guarantor Subordinated Debt") is
hereby subordinated to all of the Obligations as defined in the Credit
Agreement, whether heretofore, now or hereafter created. In addition, the
Guarantor Subordinated Debt is subordinated on the following terms: The
Guarantor Subordinated Debt shall not be paid in whole or in part except as
otherwise permitted under the terms of the Credit Agreement. The Guarantor will
not accept any payment of or on account of any Guarantor Subordinated Debt at
any time in contravention of the foregoing. The Guarantor agrees to file all
claims against the Borrower in any bankruptcy or other proceeding in which the
filing of claims is required by law in respect of any Guarantor Subordinated
Debt, and the Lender shall be entitled to all of the Guarantor's rights
thereunder. If for any reason the Guarantor fails to file such claim at least
thirty (30) days prior to the last date on which such claim should be filed, the
Lender, as the Guarantor's attorney-in-fact, is hereby authorized to do so in
the Guarantor's name or, in the Lender's discretion, to assign such claim to and
cause proof of claim to be filed in the name of the Lender or its nominee. In
all such cases, whether in administration, bankruptcy or otherwise, the person
or persons authorized to pay such claim shall pay to the Lender the full amount
payable on the claim in the proceeding, and, to the full extent necessary for
that purpose, the Guarantor hereby assigns to the Lender all the Guarantor's
rights to any payments or distributions to which the Guarantor otherwise would
be entitled. If the amount so paid is greater than the Guarantor's liability
hereunder, the Lender will pay the excess amount to the party entitled thereto.
In addition, the Guarantor hereby appoints the Lender as its attorney-in-fact to
exercise all of the Guarantor's voting rights with respect to the Guarantor
Subordinated Debt in connection with any bankruptcy proceeding or any plan for
the reorganization of the Borrower.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Loan Document. This Guaranty is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed,
8
administered and applied in accordance with the terms and provisions thereof,
including Article XI thereof.
SECTION 6.2. Binding on Successors, Transferees and Assigns;
Assignment. In addition to, and not in limitation of, Section 2.7 hereof, this
Guaranty shall be binding upon the Guarantor and the Guarantor's successors,
transferees and assigns and shall inure to the benefit of and be enforceable by
the Lender and each holder of a Note and their respective successors,
transferees and assigns (to the full extent provided pursuant to Section 2.7
hereof); provided, however, that the Guarantor may not assign any of its
obligations hereunder without the prior written consent of the Lender.
SECTION 6.3. Amendments, etc. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Lender (on its own behalf) and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 6.4. Notices. All notices and other communications provided
for hereunder shall be in writing and may be personally served, telecopied,
telexed or sent by courier service or United States certified mail and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of a telecopy or telex or four (4) Business Days after deposit in the
United States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of the Guarantor shall be the address specified on the
signature page hereof, or at such other address as may be designated by the
Guarantor in a written notice to the Lender.
SECTION 6.5. No Waiver; Remedies. In addition to, and not in
limitation of, Section 2.3 hereof and Section 2.5 hereof, no failure on the part
of the Lender or any holder of a Note to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 6.6. Captions. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 6.7. Setoff. In addition to, and not in limitation of, any
rights of the Lender or any holder of a Note under applicable law, the Lender
and each such holder shall, upon the occurrence of any Default described in
either Section 10.1(f) or Section 10.1(g) of the Credit Agreement or with the
consent of the Lender, any Event of Default, have the right to appropriate
9
and apply to the payment of the obligations of the Guarantor owing to it
hereunder, whether or not then due, and the Guarantor hereby grants to the
Lender and each such holder a continuing security interest in, any and all
balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with the Lender, or such holder or any agent or bailee for
the Lender or such holder; provided, however, that any such appropriation and
application shall be subject to the provisions of Section 11.4 of the Credit
Agreement.
SECTION 6.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 6.9. Certain Consents and Waivers of the Guarantor.
SECTION 6.9.1. Personal Jurisdiction. (i) THE GUARANTOR IRREVOCABLY
AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT TO WHICH THE GUARANTOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT AND THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE GUARANTOR AGREES THAT A FINAL JUDGMENT ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE GUARANTOR WAIVES IN ALL
DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING
THE DISPUTE.
(ii) THE GUARANTOR AGREES THAT THE LENDER SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE LENDER, TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR
OF THE LENDER. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE LENDER MAY COMMENCE A PROCEEDING DESCRIBED IN
THIS SECTION.
10
SECTION 6.9.2. Service of Process. THE GUARANTOR IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE GUARANTOR'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE (5) FIVE DAYS AFTER SUCH MAILING. THE
GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR
PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT TO WHICH IT
IS A PARTY IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF
ANY OTHER JURISDICTION.
SECTION 6.10. Governing Law, Entire Agreement, etc. THIS GUARANTY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 6.11. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE LENDER OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THE CREDIT
AGREEMENT.
SECTION 6.12. Counterparts. This Guaranty may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
11
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
TRACE FOAM SUB, INC.
By
-------------------------------------
Name:
Title:
Notice address:
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxx
Telecopier No.: 000-000-0000
12
SCHEDULE I
to
Trace Foam Sub, Inc. Guaranty
1. The Prospectus Sale Borrower's Agreement, dated as of February 21, 1995,
executed by Trace Foam Sub, Inc. in favor of Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation (the "Loan").
Trace Foam Sub, Inc. has pledged 7,000,247 shares of Foamex
International Inc. common stock and, as of October 30, 1998, the
outstanding principal and accrued interest owed under the Loan was
$33,934,582.48.
[EXHIBIT C]
December 30, 1998
VIA FACSIMILE
-------------
Trace International Holdings, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxx
Xx. Xxxxx:
Reference is made to (i) the Second Amended and Restated Credit Agreement,
dated as of December 24, 1997 (the "Credit Agreement"), between Trace
International Holdings, Inc. (the "Borrower") and The Bank of Nova Scotia (the
"Lender"), (ii) the Margin Loan Credit Agreement (the "Margin Agreement"), dated
August 15, 1997, between the Borrower and the Lender and (iii) the Demand Note,
dated December 1, 1998 (the "Demand Note") between Trace Foam Sub, Inc. ("TFSI")
and the Lender. Unless otherwise defined, terms used herein have the meanings
provided in the Credit Agreement, the Margin Agreement or Demand Note, as the
case may be.
The Borrower and TFSI, respectively, have requested, and the Lender is
willing, to amend (i) the Credit Agreement and Margin Agreement to extend the
maturity of the Loans thereunder through January 31, 1999 and (ii) Section 2 of
the Demand Note to extend the Final Payment Date through January 31, 1999.
As consideration for such amendments, the Borrower hereby agrees to, on or
prior to January 6, 1999, (i) cause Xxxxxxxx X. Xxxxx to execute and deliver
(subject to any contractual restrictions affecting the ability of Xxxxxxxx X.
Xxxxx to execute and deliver) to the Lender: (a) the Xxxxx Pledge Agreement and
(b) the Xxxxx Guaranty (collectively, the "Necessary Documents"), both in form
and substance satisfactory to the Lender, (ii) deliver the CHF Note to the
Lender and (iii) deliver an opinion of Borrower's counsel, Xxxxxxx Xxxx &
Xxxxxxxxx, in form, substance and scope satisfactory to the Lender and its
counsel.
This letter agreement constitutes a Loan Document under each of the Credit
Agreement and the Margin Agreement, and therefore, the failure to comply with
the terms of this letter agreement on or prior to January 6, 1999, shall
constitute an Event of Default under each of the Credit Agreement and the Margin
Agreement.
Except as modified pursuant to this letter, all terms and provisions of
the Credit Agreement, the Margin Agreement and the Demand Note shall continue in
full force and effect.
This letter may be executed by the parties hereto in several counterparts,
each of which shall be deemed to be an original and all of which shall
constitute together but one and the same agreement.
Very truly yours,
THE BANK OF NOVA SCOTIA
By:
--------------------------------------
Name: Xxxxx Xxxxx
Title: Senior Relationship Manager
Agreed to this 30th day of December, 1998
TRACE INTERNATIONAL HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
Acknowledged, agreed and accepted:
TRACE FOAM SUB, INC.
By:
--------------------------------------
Name:
Title:
2
