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EXHIBIT 10.2
SLEEPMASTER L.L.C. (a New Jersey limited liability company)
SLEEPMASTER FINANCE CORPORATION (a Delaware corporation)
▇▇▇▇ MANUFACTURING COMPANY (a Pennsylvania corporation)
PALM BEACH BEDDING COMPANY (a Florida corporation)
LOWER ROAD ASSOCIATES, LLC (a New Jersey limited liability
company)
$115,000,000
11% Senior Subordinated Notes due 2009
PURCHASE AGREEMENT
Dated: May 12, 1999
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TABLE OF CONTENTS
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PURCHASE AGREEMENT ........................................................................................................ 1
SECTION 1. Representations and Warranties ........................................................................ 3
(a) Representations and Warranties by the Issuers and the Guarantors .................................... 3
(i) Similar Offerings .......................................................................... 3
(ii) Offering Memorandum ....................................................................... 4
(iii) Independent Accountants .................................................................. 4
(iv) Financial Statements ...................................................................... 4
(v) No Material Adverse Change in Business ..................................................... 5
(vi) Good Standing of the Company .............................................................. 6
(vii) Good Standing of Finance Corp. .......................................................... 6
(viii) Good Standing of Subsidiaries ........................................................... 6
(ix) Good Standing of Holdings ................................................................ 7
(x) Capitalization ............................................................................. 7
(xi) Authorization of Agreements ............................................................... 8
(xii) Authorization of the Indenture ........................................................... 9
(xiii) Authorization of the Securities and the Guarantees ...................................... 9
(xiv) Authorization of the Credit Agreement .................................................... 9
(xv) Authorization of the Acquisition Agreement ............................................... 10
(xvi) Description of the Securities, the Guarantees and the Indenture .......................... 10
(xvii) Absence of Defaults and Conflicts ....................................................... 10
(xviii) Absence of Labor Disputes .............................................................. 11
(xix) Absence of Proceedings ................................................................... 12
(xx) Possession of Intellectual Property ....................................................... 12
(xxi) Absence of Further Requirements .......................................................... 13
(xxii) Possession of Licenses and Permits ...................................................... 13
(xxiii) Title to Property ...................................................................... 14
(xxiv) Tax Returns ............................................................................. 14
(xxv) Insurance ................................................................................ 15
(xxvi) Solvency ................................................................................ 15
(xxvii) Stabilization or Manipulation .......................................................... 14
(xxviii) Related Party Transactions ............................................................ 15
(xxix) Suppliers ............................................................................... 16
(xxx) Environmental Laws ....................................................................... 16
(xxxi) Registration Rights .................................................................... 16
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(xxxii) Accounting Controls .................................................................... 17
(xxxiii) Investment Company Act ............................................................... 17
(xxxiv) Rule 144A Eligibility .................................................................. 17
(xxxv) No General Solicitation ................................................................ 17
(xxxvi) No Registration Required .............................................................. 17
(xxxvii) No Directed Selling Efforts .......................................................... 17
(xxxviii) PORTAL .............................................................................. 18
(xxxix) Year 2000 Disclosures ................................................................. 18
(b) Officer's Certificates .............................................................................. 18
SECTION 2. Sale and Delivery to Initial Purchasers; Closing ............................................................... 18
(a) Securities and Guarantees .................................................................................... 18
(b) Payment ...................................................................................................... 19
(c) Qualified Institutional Buyer ................................................................................ 19
(d) Denominations; Registration .................................................................................. 20
SECTION 3. Covenants of the Issuers and the Guarantors .................................................................... 20
(a) Offering Memorandum .......................................................................................... 20
(b) Notice and Effect of Material Events ......................................................................... 20
(c) Amendment to Offering Memorandum and Supplements ............................................................. 20
(d) Qualification of Securities and Guarantees for Offer and Sale ............................................... 21
(e) Integration .................................................................................................. 21
(f) Rating of Securities ......................................................................................... 21
(g) Rule 144A Information ........................................................................................ 21
(h) Restriction on Resales ....................................................................................... 21
(i) Use of Proceeds .............................................................................................. 22
(j) Restriction on Sale of Securities ............................................................................ 22
(k) DTC Clearance ................................................................................................ 22
(l) Legends ...................................................................................................... 22
(m) Interim Financial Statements ................................................................................. 22
(n) Periodic Reports ............................................................................................. 22
SECTION 4. Payment of Expenses ............................................................................................ 23
(a) Expenses 23
(b) Termination of Agreement ..................................................................................... 23
SECTION 5. Conditions of Initial Purchasers' Obligations .................................................................. 23
(a) Opinions of Counsel for the Issuers and the Guarantors ....................................................... 24
(b) Opinion of Counsel for the Initial Purchasers ................................................................ 24
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(c) Officers' Certificate ........................................................................................ 24
(d) Accountant's Comfort Letter and Consent ...................................................................... 25
(e) Bring-down Comfort Letter .................................................................................... 25
(f) Maintenance of Rating ........................................................................................ 25
(g) PORTAL ....................................................................................................... 25
(h) Chief Financial Officer's Certificate ........................................................................ 25
(i) Registration Rights Agreement, Indenture and Pledge and Escrow Agreement ..................................... 25
(j) Credit Agreement ............................................................................................. 26
(k) Preferred Membership Interests ............................................................................... 26
(l) Additional Documents ......................................................................................... 26
(m) Termination of Agreement ..................................................................................... 26
SECTION 6. Indemnification ....................................................................................... 27
(a) Indemnification of Initial Purchasers ............................................................... 27
(b) Indemnification of Issuers, Guarantors, and Directors ............................................... 28
(c) Actions against Parties; Notification ............................................................... 28
(d) Settlement without Consent if Failure to Reimburse .................................................. 29
SECTION 7. Contribution .......................................................................................... 29
SECTION 8. Representations, Warranties and Agreements to Survive Delivery ........................................ 30
SECTION 9. Termination of Agreement .............................................................................. 31
(a) Termination; General ................................................................................ 31
(b) Liabilities ......................................................................................... 31
SECTION 10. Default by One or More of the Initial Purchasers ..................................................... 31
SECTION 11. Notices .............................................................................................. 32
SECTION 12. Parties .............................................................................................. 32
SECTION 13. Governing Law and Time ............................................................................... 33
SECTION 14. Effect of Headings ............................................................................................ 33
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Schedule A--Initial Purchasers
Schedule B--Guarantors
Schedule C--Securities
Exhibit A--Form of Opinions
Exhibit B--Form of Comfort Letter
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$115,000,000
SLEEPMASTER L.L.C. (a New Jersey limited liability company)
SLEEPMASTER FINANCE CORPORATION (a Delaware corporation)
▇▇▇▇ MANUFACTURING COMPANY (a Pennsylvania corporation)
PALM BEACH BEDDING COMPANY (a Florida corporation)
LOWER ROAD ASSOCIATES, LLC (a New Jersey limited liability
company)
PURCHASE AGREEMENT
May 12, 1999
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
First Union Capital Markets Corp.
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
Sleepmaster L.L.C., a New Jersey limited liability company (the
"Company"), Sleepmaster Finance Corporation, a Delaware corporation ("Finance
Corp." and, together with the Company, the "Issuers"), and each of the
Guarantors listed on Schedule B hereto (the "Guarantors") confirm their
respective agreements with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ &
▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇") and each of the other Initial Purchasers
named in Schedule A hereto (collectively, the "Initial Purchasers," which term
shall also include any initial purchaser substituted as hereinafter provided in
Section 10 hereof), for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇ is acting as representative (in such
capacity, the "Representative"), with respect to (i) the issue and sale by the
Issuers, jointly and severally, and the purchase by the Initial Purchasers,
acting severally and not jointly, of
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the respective principal amounts set forth in said Schedule A of $115,000,000
aggregate principal amount of the Issuers' Senior Subordinated Notes due 2009
(the "Securities") and (ii) the issue and sale by the Guarantors and the
purchase by the Initial Purchasers, acting severally and not jointly, of the
senior subordinated guarantees (the "Guarantees") of the Issuers' obligations
under the Securities. The Securities and the Guarantees are to be issued
pursuant to an indenture dated as of May 18, 1999 (the "Indenture") among the
Issuers, the Guarantors and United States Trust Company of New York, as trustee
(the "Trustee"). Securities and Guarantees issued in book-entry form will be
issued to Cede & Co. as nominee of The Depository Trust Company ("DTC") pursuant
to a letter agreement, to be dated as of or prior to the Closing Time (as
defined in Section 2(b)) (the "DTC Agreement"), among the Issuers, the Trustee
and DTC.
The Issuers and the Guarantors understand that the Initial Purchasers
propose to make an offering of the Securities and the Guarantees on the terms
and in the manner set forth herein and agree that the Initial Purchasers may
resell, subject to the conditions set forth herein, all or a portion of the
Securities and the Guarantees to purchasers ("Subsequent Purchasers") at any
time after the date of this Agreement. The Securities and the Guarantees are to
be offered and sold through the Initial Purchasers without being registered
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon
exemptions therefrom. Pursuant to the terms of the Securities, the Guarantees
and the Indenture, investors that acquire Securities and Guarantees may only
resell or otherwise transfer such Securities and Guarantees if such Securities
and Guarantees are hereafter registered under the 1933 Act or if an exemption
from the registration requirements of the 1933 Act is available (including the
exemption afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S")
of the rules and regulations promulgated under the 1933 Act by the Securities
and Exchange Commission (the "Commission")).
The Issuers and the Guarantors have prepared and delivered to each
Initial Purchaser copies of a preliminary offering memorandum dated April 30,
1999 (the "Preliminary Offering Memorandum") and have prepared and will deliver
to each Initial Purchaser, on the date hereof or the next succeeding day, copies
of a final offering memorandum dated May 12, 1999 (the "Final Offering
Memorandum"), each to be used by such Initial Purchaser in connection with its
solicitation of purchases of, or offering of, the Securities and the Guarantees.
"Offering Memorandum" means, with respect to any date or time referred to in
this Agreement, the most recent offering memorandum (whether the Preliminary
Offering Memorandum or the Final Offering Memorandum, or any amendment or
supplement to either such document), including exhibits thereto, which has been
prepared and delivered by the Issuers and the Guarantors to the Initial
Purchasers in connection with their solicitation of purchases of, or offering
of, the Securities and the Guarantees.
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Simultaneously with the consummation of the offer and sale of the
Securities and the Guarantees, (1) the Issuers and the Guarantors will enter
into a credit agreement (the "Credit Agreement") with First Union National Bank,
as agent, and (2) the Company will consummate the acquisition of substantially
all of the assets of Star Bedding Products (1986) Limited (the "Star
Acquisition") pursuant to an asset purchase agreement, dated as of April 8, 1999
(the "Acquisition Agreement"), with Star Bedding Products Limited.
If the Star Acquisition is not consummated simultaneously with the
offer and sale of the Securities and the Guarantees (the "Offering"), then
pending consummation of the Star Acquisition, $15.4 million of the net proceeds
(the "Escrow Funds") from the sale of the Securities will be held by the Trustee
in an escrow and pledge account (the "Escrow and Pledge Account") pursuant to a
Pledge and Escrow Agreement among the Company, Finance Corp. and the Trustee
(the "Pledge and Escrow Agreement"). The Escrow Funds will be required to be
invested in Cash Equivalents (as defined in the Pledge and Escrow Agreement).
The Company and Finance Corp. will be permitted to obtain release of the Escrow
Funds in accordance with the Pledge and Escrow Agreement upon consummation of
the Star Acquisition. Upon the earlier to occur of (i) termination of the
Acquisition Agreement and (ii) 60 days after the Issue Date (as defined in the
Offering Memorandum), if the Escrow Funds have not been released by that time,
$15 million aggregate principal amount of the outstanding Securities will be
subject to a Special Mandatory Redemption (as defined in the Offering
Memorandum) upon seven days' prior written notice to the Holders with the Escrow
Funds at a redemption price equal to 101% of the principal amount plus accrued
and unpaid interest, if any, to the date of redemption.
The holders of the Securities and the Guarantees will be entitled to
the benefits of the registration rights agreement to be dated as of the Closing
Time (the "Registration Rights Agreement"), among the Issuers, the Guarantors
and the Initial Purchasers, pursuant to which the Issuers and the Guarantors
will agree to file a registration statement with the Commission registering the
Exchange Securities (as defined in the Registration Rights Agreement) under the
1933 Act.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Issuers and the Guarantors.
Each of the Issuers and each of the Guarantors, jointly and severally, represent
and warrant to each Initial Purchaser as of the date hereof and as of the
Closing Time referred to in Section 2(b) hereof, and agree with each Initial
Purchaser as follows:
(i) Similar Offerings. The Issuers and the Guarantors have
not, directly or indirectly, solicited any offer to buy or offered to
sell, and will not, directly or indirectly, solicit any offer to buy or
offer to sell, in the United States or to any United States citizen or
resident, any security which is or would be integrated with
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the sale of the Securities and the Guarantees in a manner that would
require the Securities or the Guarantees to be registered under the
1933 Act.
(ii) Offering Memorandum. The Offering Memorandum does not,
and at the Closing Time will not, include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, that this
representation, warranty and agreement shall not apply to statements in
or omissions from the Offering Memorandum made in reliance upon and in
conformity with information furnished to the Issuers and the Guarantors
in writing by any Initial Purchaser through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for
use in the Offering Memorandum.
(iii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Offering Memorandum are independent certified public accountants with
respect to the Issuers, the Guarantors and their respective
subsidiaries within the meaning of Regulation S-X under the 1933 Act.
(iv) Financial Statements. The financial statements of the
Company, together with the related schedules and notes, included in the
Offering Memorandum present fairly the financial position of the
Company and its consolidated subsidiaries at the dates indicated and
the statements of income, changes in members' equity and cash flows of
the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity
with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
financial statements of Palm Beach Bedding Company ("Palm Beach"),
together with the related schedules and notes, included in the Offering
Memorandum present fairly the financial position of Palm Beach and its
consolidated subsidiaries at the dates indicated and the statements of
income, changes in shareholders' equity and cash flows of Palm Beach
and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with United
States GAAP applied on a consistent basis throughout the periods
involved. The financial statements of ▇▇▇▇ Manufacturing Company
("▇▇▇▇"), together with the related schedules and notes, included in
the Offering Memorandum present fairly the financial position of ▇▇▇▇
and its consolidated subsidiaries at the dates indicated and the
statements of income, changes in shareholders' equity and cash flows of
▇▇▇▇ and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with United
States GAAP applied on a consistent basis throughout the periods
involved. The financial statements of Star, together with the related
schedules and notes, included in the
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Offering Memorandum present fairly the financial position of Star and
its consolidated subsidiaries at the dates indicated and the statements
of income, changes in shareholders' equity and cash flows of Star and
its consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with United States GAAP
applied on a consistent basis throughout the periods involved. The
selected financial data and the summary financial information included
in the Offering Memorandum present fairly the information shown therein
and have been compiled on a basis consistent with that of the audited
financial statements included in the Offering Memorandum. The pro forma
financial statements of the Company and its subsidiaries and the
related notes thereto, and the other pro forma financial information
included in the Offering Memorandum, present fairly the information
shown therein, have been prepared in accordance with the Commission's
rules and guidelines with respect to pro forma financial statements
included in a registration statement under the 1933 Act and have been
properly compiled on the bases described therein, and the assumptions
used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions and
circumstances referred to therein. The financial statements included in
the Offering Memorandum are the only financial statements which would
be required by Regulation S-X to be included in the Offering Memorandum
if the Offering Memorandum was a registration statement on Form S-1.
The selected financial information included in the Offering Memorandum
for the years ending and as of December 31, 1995 and December 31, 1994
have been derived from the Company's 1995 and 1994 financial statements
and were prepared in accordance with United States GAAP and the
requirements of Regulation S-X under the Securities Act.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Offering
Memorandum, except as otherwise stated therein or contemplated thereby,
(A) there has been no material adverse change in the condition
(financial or otherwise), earnings, business affairs or business
prospects of Sleepmaster Holdings L.L.C., a New Jersey limited
liability company ("Holdings"), the Issuers and their respective
Subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business (a "Material Adverse Effect"), (B)
there have been no transactions entered into by either of the Issuers,
any of their respective Subsidiaries or Holdings, other than those in
the ordinary course of business, which are material with respect to the
Issuers and their Subsidiaries considered as one enterprise, and (C)
there has been no dividend or distribution of any kind declared, paid
or made by either Issuer or Holdings on any class of its capital stock
or other equity interest.
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(vi) Good Standing of the Company. The Company has been duly
formed and is validly existing as a limited liability company in good
standing under the laws of the State of New Jersey and has power and
authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum and to enter into and
perform its obligations under this Agreement, the Registration Rights
Agreement, the Indenture, the Securities, the Exchange Securities, the
Credit Agreement, the Acquisition Agreement, the Pledge and Escrow
Agreement (if the Star Acquisition is not consummated simultaneously
with the Offering) and the DTC Agreement and to enter into and
consummate all the transactions in connection therewith as contemplated
in the Offering Memorandum; and the Company is duly qualified as a
foreign limited liability company to transact business and is in good
standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse Effect.
(vii) Good Standing of Finance Corp. Finance Corp. has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware and has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum and to
enter into and perform its obligations under this Agreement, the
Registration Rights Agreement, the Indenture, the Securities, the
Exchange Securities, the Credit Agreement, the Pledge and Escrow
Agreement (if the Star Acquisition is not consummated simultaneously
with the Offering) and the DTC Agreement and to enter into and
consummate all the transactions in connection therewith as contemplated
in the Offering Memorandum.
(viii) Good Standing of Subsidiaries. Each subsidiary of the
Company or of Finance Corp. (each a "Subsidiary" and collectively the
"Subsidiaries") has been duly organized or formed and is validly
existing as a corporation or limited liability company in good standing
under the laws of the jurisdiction of its incorporation or existence,
has power and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum and is
duly qualified as a foreign corporation or limited liability company to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect; except as otherwise disclosed in the Offering
Memorandum, all of the issued and outstanding capital stock or
membership interests (or other equity interests) of each Subsidiary has
been duly authorized and validly issued, is fully paid and
non-assessable and is
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owned by the Company or Finance Corp., directly or through the
Subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock or membership interests (or other equity
interests) of the Subsidiaries was issued in violation of any
preemptive or similar rights arising by operation of law, or under the
charter, by-laws or other charter documents of any Subsidiary or under
any agreement to which any of the Issuers or any Subsidiary is a party.
All of the Subsidiaries of the Company are listed on Schedule B
attached hereto.
(ix) Good Standing of Holdings. Membership interests in the
Company are 99.9% owned by Holdings and 0.1% owned by Sleep Investor
LLC, a Delaware limited liability company ("Investor"). Holdings has
been duly formed and is validly existing as a limited liability company
in good standing under the laws of the State of New Jersey and has
power and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum; and
Holdings is duly qualified as a foreign limited liability company to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a material adverse effect with respect to Holdings.
(x) Capitalization. The authorized, issued and outstanding
membership interests of the Company were at the date indicated in the
Offering Memorandum as set forth in the financial statements, including
the schedules and notes, included in the Offering Memorandum. The
issued and outstanding membership interests of the Company have been
duly authorized and validly issued and are fully paid and
non-assessable; and none of the outstanding membership interests of the
Company were issued in violation of the preemptive or other similar
rights of any equity holder of the Company arising by operation of law,
under the charter, by-laws, certificate of formation, limited liability
company agreement or other organizational documents of the Company,
under any agreement to which the Company or any of the Subsidiaries is
a party or otherwise. The issued and outstanding capital stock of
Finance Corp. has been duly authorized and validly issued and are fully
paid and non-assessable; all of the capital stock of Finance Corp. is
owned by the Company; and none of the outstanding shares of capital
stock of Finance Corp. were issued in violation of the preemptive or
other similar rights of any securityholder of Finance Corp. arising by
operation of law, under the charter, by-laws or other organizational
documents of Finance Corp., under any agreement to which Finance Corp.
or any of the Subsidiaries is a party or otherwise. The authorized,
issued and outstanding membership interests of
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Holdings were at the date indicated in the Offering Memorandum as set
forth in the Offering Memorandum. The issued and outstanding membership
interests of Holdings have been duly authorized and validly issued and
are fully paid and non-assessable; and none of the outstanding
membership interests of Holdings were issued in violation of the
preemptive or other similar rights of any equity holder of Holdings
arising by operation of law, under the charter, by-laws, certificate of
formation, limited liability company agreement or other organizational
documents of Holdings, under any agreement to which Holdings or any of
its subsidiaries is a party or otherwise. The authorized, issued and
outstanding membership interests of Investor were at the date indicated
in the Offering Memorandum as set forth in the Offering Memorandum.
(xi) Authorization of Agreements. This Agreement and the
Registration Rights Agreement have each been duly authorized by each of
the Issuers and each of the Guarantors. The DTC Agreement has been duly
authorized by each of the Issuers. This Agreement has been, and as of
the Closing Time the Registration Rights Agreement will have been, duly
executed and delivered by each of the Issuers and each of the
Guarantors. Upon the execution and delivery thereof by the Issuers and
each of the Guarantors, the Registration Rights Agreement will
constitute the valid and binding obligation of each of the Issuers and
each of the Guarantors, enforceable against each of the Issuers and
each of the Guarantors in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws relating to or affecting
enforcement of creditors' rights generally or by general principles of
equity. As of the Closing Time, the DTC Agreement will have been duly
executed and delivered by each of the Issuers and will constitute the
valid and binding obligation of each of the Issuers, enforceable
against the Issuers in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization or
other similar laws relating to or affecting enforcement of creditors'
rights generally or by general principles of equity.
If the Star Acquisition is not consummated simultaneously with
the Offering, (x) as of the Closing Time, the Pledge and Escrow
Agreement will have been duly authorized, executed and delivered by the
Company and Finance Corp. and will constitute the valid and binding
obligation of each of the Company and Finance Corp., enforceable
against the Company and Finance Corp., as the case may be, in
accordance with its terms, and (y) at the time of the deposit of the
Escrow Funds into the Escrow and Pledge Account (as defined in the
Pledge and Escrow Agreement), the pledge of the Collateral (as defined
in the Pledge and Escrow Agreement) securing the payment of the Secured
Obligations (as defined in the Pledge and Escrow Agreement) for the
benefit of the Trustee and the
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Holders of the Securities will constitute a first priority perfected
security interest in such Collateral, enforceable in accordance with
the Uniform Commercial Code as in effect on the date hereof in the
State of New York (the "UCC") against the Company, Finance Corp.,
Holdings and all creditors of the Company, Finance Corp. or Holdings
and any persons purporting to purchase any of the Collateral from the
Company, Finance Corp. or Holdings.
(xii) Authorization of the Indenture. The Indenture has been
duly authorized by each of the Issuers and each of the Guarantors and,
at the Closing Time, will have been duly executed and delivered by each
of the Issuers and each of the Guarantors and will constitute a valid
and binding agreement of each of the Issuers and each of the
Guarantors, enforceable against each of the Issuers and each of the
Guarantors in accordance with its terms.
(xiii) Authorization of the Securities and the Guarantees. The
Securities have been duly authorized by each of the Issuers and, at the
Closing Time, will have been duly executed and delivered by each of the
Issuers and, when authenticated in the manner provided for in the
Indenture, will constitute valid and binding obligations of each of the
Issuers, enforceable against each of the Issuers in accordance with
their terms, and will be in the form contemplated by, and entitled to
the benefits of, the Indenture. The Guarantees have been duly
authorized by the Guarantors and, at the Closing Time, will have been
duly executed and delivered by the Guarantors and, when authenticated
in the manner provided for in the Indenture, will constitute valid and
binding obligations of the Guarantors, enforceable against the
Guarantors in accordance with their terms, and will be in the form
contemplated by, and entitled to the benefits of, the Indenture. The
Exchange Securities have been duly authorized by each of the Issuers
and each of the Guarantors and, when executed and authenticated and
issued and delivered by each of the Issuers and each of the Guarantors
in exchange for the Securities and the Guarantees pursuant to the
Exchange Offer (as defined in the Registration Rights Agreement), will
constitute valid and binding obligations of each of the Issuers and
each of the Guarantors, enforceable against each of the Issuers and
each of the Guarantors in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws relating to or affecting
enforcement of creditors' rights generally or by general principles of
equity.
(xiv) Authorization of the Credit Agreement. The Credit
Agreement has been duly authorized by each of the Issuers and the
Guarantors and, at the Closing Time, will have been duly executed and
delivered by each of the Issuers and each of the Guarantors and will
constitute a valid and binding obligation of each of the Issuers and
each of the Guarantors, enforceable against each of the Issuers and
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each of the Guarantors in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws relating to or affecting
enforcement of creditors' rights generally or by general principles of
equity.
(xv) Authorization of the Acquisition Agreement. The
Acquisition Agreement has been duly authorized, executed and delivered
by each of the parties thereto and constitutes a valid and binding
obligation of the parties thereto, enforceable against the parties
thereto in accordance with its terms. The representations and
warranties included in the Acquisition Agreement are true and correct
as of the date hereof and will be true and correct as of the Closing
Time. The Company and the Guarantors have no reason to believe that any
of the covenants included in the Acquisition Agreement have been
breached or that the conditions to closing included in the Acquisition
Agreement have not been or will not be satisfied prior to the Closing
Time.
(xvi) Description of the Securities, the Guarantees and the
Indenture. The Securities, the Guarantees, the Indenture, the
Registration Rights Agreement, the Pledge and Escrow Agreement (if the
Star Acquisition is not consummated simultaneously with the Offering)
and the Credit Agreement will conform in all material respects to the
respective statements relating thereto contained in the Offering
Memorandum and will be in substantially the respective forms previously
delivered to the Initial Purchasers. The Exchange Securities will
conform in all material respects to the statements relating thereto
contained in the Offering Memorandum and the Registration Statement at
the time it becomes effective. There are no contracts or documents
which are required to be described in a registration statement on Form
S-1 under the 1933 Act which have not been described in the Offering
Memorandum.
(xvii) Absence of Defaults and Conflicts. Neither of the
Issuers nor any of the Subsidiaries is in violation of its charter,
by-laws, certificate of formation, limited liability company agreement
or other organizational documents or in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, license,
loan or credit agreement, note, lease or other agreement or instrument
to which Holdings, either of the Issuers or any of the Subsidiaries is
a party or by which any of them may be bound, or to which any of the
property or assets of Holdings, the Issuers or any of the Subsidiaries
is subject (collectively, "Agreements and Instruments") or has violated
or is in violation of any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
the Issuers
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or any of the Subsidiaries or any of their assets or properties, except
in each case for such defaults or violations that would not result in a
Material Adverse Effect.
The execution, delivery and performance of this Agreement, the
Registration Rights Agreement, the Indenture, the DTC Agreement, the
Credit Agreement, the Acquisition Agreement, the Pledge and Escrow
Agreement (if the Star Acquisition is not consummated simultaneously
with the Offering), the Securities, the Guarantees, the Exchange
Securities and any other agreement or instrument entered into or issued
or to be entered into or issued by either of the Issuers or any of the
Guarantors in connection with the transactions contemplated hereby or
thereby or in the Offering Memorandum or in connection with the
consummation of the transactions contemplated herein and in the
Offering Memorandum (including the issuance and sale of the Securities
and the Guarantees and the use of the proceeds from the sale of the
Securities and the Guarantees as described in the Offering Memorandum
under the caption "Use of Proceeds") and compliance by the Issuers and
the Guarantors with their respective obligations hereunder have been
duly authorized by all necessary corporate or member action and do not
and will not, whether with or without the giving of notice or passage
of time or both, conflict with or constitute a breach of, or default or
a Repayment Event (as defined below) under, or (other than as
contemplated by the Credit Agreement and, if the Star Acquisition is
not consummated simultaneously with the Offering, the Pledge and Escrow
Agreement) result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of either of the Issuers or any
of the Subsidiaries pursuant to, the Agreements and Instruments, nor
will such action result in any violation of the provisions of the
charter, by-laws, certificate of formation or limited liability company
agreement or other organizational documents of either Issuer or any of
the Subsidiaries or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
either Issuer or any of the Subsidiaries or any of their assets or
properties. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or
a portion of such indebtedness by either Issuer or any of the
Subsidiaries.
(xviii) Absence of Labor Disputes. No labor dispute with the
employees of either Issuer or any of the Subsidiaries exists or, to the
knowledge of the Issuers and the Guarantors, is imminent, and the
Issuers and the Guarantors are not aware of any existing or imminent
labor disturbance by the employees of any of their or any of the
Subsidiaries' principal suppliers, manufacturers, customers or
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contractors, which, in either case, would reasonably be expected to
result in a Material Adverse Effect.
(xix) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation, in each case before or by any
court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Issuers or any Guarantor, threatened,
against or affecting Holdings, the Issuers or any of the Subsidiaries
which, singly or in the aggregate, might reasonably be expected to
result in a Material Adverse Effect, or which, singly or in the
aggregate, might reasonably be expected to materially and adversely
affect the properties or assets of the Issuers or any of the
Subsidiaries or the consummation of this Agreement or the performance
by either Issuer or any of the Guarantors of their respective
obligations hereunder or under the Securities, the Guarantees, the
Exchange Securities, the Registration Rights Agreement, the Indenture,
the Credit Agreement, the Pledge and Escrow Agreement (if the Star
Acquisition is not consummated simultaneously with the Offering) or the
Acquisition Agreement. The aggregate of all pending legal or
governmental proceedings to which Holdings, either Issuer or any of the
Subsidiaries is a party or of which any of their respective property or
assets is the subject which are not described in the Offering
Memorandum, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.
(xx) Possession of Intellectual Property. The Issuers and the
Subsidiaries own, possess or license, or can acquire on reasonable
terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither Issuer nor
any of the Subsidiaries has received any notice or is otherwise aware
of any infringement of or conflict with asserted rights of others with
respect to any Intellectual Property (including Intellectual Property
which is licensed) or of any facts or circumstances which would render
any Intellectual Property invalid or inadequate to protect the interest
of the Issuers or any of the Subsidiaries therein, and which
infringement or conflict or invalidity or inadequacy, singly or in the
aggregate, would reasonably be expected to result in a Material Adverse
Effect. All of the agreements pursuant to which the Company, Finance
Corp. or any of its Subsidiaries license Intellectual Property from
third parties (the "License Agreements") have been duly authorized,
executed and delivered by the Company, Finance Corp. or such Subsidiary
and (assuming due authorization, execution and delivery by the other
parties thereto) constitute valid and binding agreements of the
Company, Finance Corp. or such Subsidiary, enforceable against the
Company, Finance Corp. or such Subsidiary in
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accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law). Neither
the Company, Finance Corp. nor any of the Subsidiaries is in violation
or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any such License
Agreement, nor has the Company, Finance Corp. or any of the
Subsidiaries received notice from any third party that the Company,
Finance Corp. or any of the Subsidiaries is in violation or in default
in the performance or observance of any obligation, agreement, covenant
or condition contained in any such License Agreement, except for any
violation or default which, singly or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect.
(xxi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by either Issuer or
any of the Guarantors of their respective obligations hereunder, in
connection with the offering, issuance or sale of the Securities and
the Guarantees hereunder or the consummation of the transactions
contemplated by or for the due execution, delivery or performance of
this Agreement, the Registration Rights Agreement, the Indenture, the
DTC Agreement, the Credit Agreement, the Acquisition Agreement, the
Pledge and Escrow Agreement (if the Star Acquisition is not consummated
simultaneously with the Offering), the Securities, the Guarantees, the
Exchange Securities or any other agreement or instrument entered into
or issued or to be entered into or issued by either Issuer or any of
the Subsidiaries in connection with the consummation of the
transactions contemplated herein and in the Offering Memorandum
(including the issuance and sale of the Securities and the Guarantees
and the use of the proceeds from the sale of the Securities and the
Guarantees as described in the Offering Memorandum under the caption
"Use of Proceeds"), except such as have been already obtained or as may
be required under state securities laws.
(xxii) Possession of Licenses and Permits. The Issuers and the
Subsidiaries possess all governmental permits, licenses, approvals,
consents, certificates and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state,
local or foreign regulatory agencies or bodies necessary to conduct the
business now operated by them respectively; the Issuers and the
Subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses and with the rules and regulations of the
regulatory authorities and governing bodies having jurisdiction with
respect thereto, except where the failure so to comply would not,
singly or in the
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aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and none of the Issuers or any of the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses, nor are
there, to the knowledge of either Issuer or any Guarantor, pending or
threatened actions, suits, claims or proceedings against either Issuer
or any Subsidiary before any court, governmental agency or body or
otherwise that would reasonably be expected to limit, revoke, cancel,
suspend or cause not to be renewed any Governmental License, in each
case, which, singly or in the aggregate, would result in a Material
Adverse Effect.
(xxiii) Title to Property. The Issuers and the Subsidiaries
have good and marketable title to all real property owned by the
Issuers and the Subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Offering Memorandum or (b)
do not, singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Issuers or any of the Subsidiaries; and all of
the leases and subleases material to the business of the Issuers and
the Subsidiaries, considered as one enterprise, and under which the
Issuers or any of the Subsidiaries holds properties described in the
Offering Memorandum, are in full force and effect, and neither of the
Issuers nor any of the Subsidiaries has any notice of any material
claim of any sort that has been asserted by anyone adverse to the
rights of either Issuer or any of the Subsidiaries under any of the
leases or subleases mentioned above, or affecting or questioning the
rights of either Issuer or any Subsidiary to the continued possession
of the leased or subleased premises under any such lease or sublease.
(xxiv) Tax Returns. All United States federal income tax
returns of the Issuers and the Subsidiaries required by law to be filed
have been filed and all taxes shown by such returns or otherwise
assessed, which are due and payable, have been paid, except assessments
against which appeals have been or will be promptly taken and as to
which adequate reserves have been provided. The Issuers and the
Subsidiaries have filed all other tax returns that are required to have
been filed by them pursuant to applicable foreign, federal, state,
local or other law except insofar as the failure to file such returns
would not result in a Material Adverse Effect, and have paid all taxes
due pursuant to such returns or pursuant to any assessment received by
the Issuers and the Subsidiaries, except for such taxes, if any, as are
being contested in good faith and by appropriate proceedings and as to
which adequate reserves have been provided. The charges, accruals and
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21
reserves on the books of the Issuers in respect of all federal, state,
local and foreign tax liabilities of the Issuers and each Subsidiary
for any years not finally determined are adequate to meet any
assessments or re-assessments for additional income tax for any years
not finally determined, except to the extent of any inadequacy that
would not result in a Material Adverse Effect.
(xxv) Insurance. The Issuers and the Subsidiaries carry or are
entitled to the benefits of insurance, with financially sound and
reputable insurers, in such amounts, containing such deductibles and
covering such risks as is generally maintained by companies of
established repute engaged in the same or similar business, and all
such insurance is in full force and effect.
(xxvi) Solvency. The Company and each of the Guarantors is,
and immediately after the Closing will be, Solvent. As used herein, the
term "Solvent" means, with respect to the Company and each Guarantor,
as the case may be, on a particular date, that on such date (A) the
fair market value of the assets of the Company or such Guarantor is
greater than the total amount of liabilities (including contingent
liabilities) of the Company or such Guarantor, (B) the present fair
salable value of the assets of the Company or such Guarantor is greater
than the amount that will be required to pay the probable liabilities
of the Company or such Guarantor on its debts as they become absolute
and mature, (C) the Company or such Guarantor is able to realize upon
its assets and pay its debts and other liabilities, including
contingent obligations, as they mature, and (D) the Company or such
Guarantor does not have unreasonably small capital.
(xxvii) Stabilization or Manipulation. Neither of the Issuers
nor any Guarantor nor any of their respective officers, directors or
controlling persons has taken, directly or indirectly, any action
designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of either Issuer or any
Guarantor in order to facilitate the sale or resale of the Securities
or the Guarantees. The Issuers and the Guarantors have not distributed
and, prior to the later to occur of (i) the Closing Time and (ii)
completion of the distribution of the Securities and the Guarantees,
will not distribute any offering material in connection with the
offering and sale of the Securities and the Guarantees other than the
Offering Memorandum or other materials, if any, permitted by the 1933
Act and approved by the Representative.
(xxviii) Related Party Transactions. No relationship, direct
or indirect, exists between or among any of Holdings, the Issuers, the
Guarantors or any affiliate of Holdings, the Issuers or any Guarantor,
on the one hand, and any director, officer, stockholder, customer or
supplier of any of them, on the other
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hand, which is required by the 1933 Act or by the rules and regulations
enacted thereunder to be described in a registration statement on Form
S-1 which is not so described or is not described as required in the
Offering Memorandum.
(xxix) Suppliers. No supplier of merchandise to either Issuer
or any of the Subsidiaries has ceased shipments of merchandise to
either Issuer or any of the Subsidiaries, other than in the normal and
ordinary course of business consistent with past practices, which
cessation would not result in a Material Adverse Effect.
(xxx) Environmental Laws. Except such matters as would not,
singly or in the aggregate, result in a Material Adverse Effect, (A)
neither of the Issuers nor any of the Subsidiaries is in violation of
any federal, state, local or foreign statute, law, rule, regulation,
ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products or
nuclear or radioactive material (collectively, "Hazardous Materials")
or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials
(collectively, "Environmental Laws"), (B) the Issuers and the
Subsidiaries have all permits, licenses, authorizations and approvals
currently required for their respective businesses under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against either of the Issuers or any
of the Subsidiaries and (D) there are no events, facts or circumstances
that might reasonably be expected to form the basis of any liability or
obligation of the Issuers or any of the Subsidiaries, including,
without limitation, any order, decree, plan or agreement requiring
clean-up or remediation, or any action, suit or proceeding by any
private party or governmental body or agency, against or affecting
either Issuer or any of the Subsidiaries relating to any Hazardous
Materials or Environmental Laws.
(xxxi) Registration Rights. There are no holders of securities
(debt or equity) of Holdings, either Issuer or any Guarantor, or
holders of rights (including, without limitation, preemptive rights),
warrants or options to obtain securities of Holdings, either Issuer or
any Guarantor, who in connection with the issuance, sale and delivery
of the Securities, the Guarantees and the Exchange Securities, if any,
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and the execution, delivery and performance of this Agreement and the
Registration Rights Agreement, have the right to request either Issuer
or any Guarantor to register securities held by them under the ▇▇▇▇
▇▇▇.
(xxxii) Accounting Controls. The Company and its consolidated
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific
authorization; (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(xxxiii) Investment Company Act. The Company, Finance Corp.
and each of the Guarantors is not, and upon the issuance and sale of
the Securities and the Guarantees as herein contemplated and the
application of the net proceeds therefrom as described in the Offering
Memorandum will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xxxiv) Rule 144A Eligibility. The Securities and the
Guarantees are eligible for resale pursuant to Rule 144A and will not
be, at the Closing Time, of the same class as securities listed on a
national securities exchange registered under Section 6 of the 1934
Act, or quoted in a U.S. automated interdealer quotation system.
(xxxv) No General Solicitation. None of the Company, Finance
Corp. or the Guarantors, or any person acting on any of their behalf
(other than the Initial Purchasers, as to whom the Issuers and the
Guarantors make no representation), has engaged or will engage, in
connection with the offering of the Securities and the Guarantees, in
any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the 1933 Act.
(xxxvi) No Registration Required. Assuming the accuracy of the
Initial Purchasers' representations, warranties and agreements set
forth in Section 2(c) hereof, it is not necessary in connection with
the offer, sale and delivery of the Securities and the Guarantees to
the Initial Purchasers and to each Subsequent Purchaser in the manner
contemplated by this Agreement and the Offering Memorandum to register
the Securities and the Guarantees under the 1933 Act or
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to qualify the Indenture under the Trust Indenture Act of 1939, as
amended (the "1939 Act").
(xxxvii) No Directed Selling Efforts. With respect to those
Securities and Guarantees sold in reliance on Regulation S, (A) none of
the Issuers, the Guarantors, any of their respective affiliates (as
used in Regulation S) or any person acting on their behalf (other than
the Initial Purchasers, as to whom the Issuers and the Guarantors make
no representation) has engaged or will engage in any directed selling
efforts within the meaning of Regulation S and (B) each of the Issuers,
the Guarantors, any of their respective affiliates (as used in
Regulation S) and any person acting on their behalf (other than the
Initial Purchasers, as to whom the Issuers and the Guarantors make no
representation) has complied and will comply with the offering
restrictions requirement of Regulation S.
(xxxviii) PORTAL. There are no securities of either Issuer or
any of the Guarantors which are of the same class as the Securities or
the Guarantees that are listed on a national securities exchange
registered under Section 6 of the 1934 Act, or quoted in a United
States automated inter dealer quotation system. The Issuers and the
Guarantors have been advised by the National Association of Securities
Dealers, Inc. PORTAL Market that the Securities and the Guarantees will
be designated PORTAL eligible securities in accordance with the rules
and regulations of the National Association of Securities Dealers, Inc.
(xxxix) Year 2000 Disclosures. All disclosure regarding year
2000 compliance that is required to be described in a registration
statement on Form S-1 under the 1933 Act and the 1933 Act Regulations
(including disclosures required by SEC Release No. 33-7558 (July 29,
1998) and SEC Release No. 33-7609 (November 9, 1998)) has been included
in the Offering Memorandum. Neither the Issuers or the Guarantors nor
any of the Subsidiaries will incur material operating expenses or costs
to ensure that its information systems will be year 2000 compliant,
other than as disclosed in the Offering Memorandum.
(b) Officer's Certificates. Any certificate signed by any officer of
either Issuer, any of the Guarantors or any of the Subsidiaries delivered to the
Initial Purchasers or to counsel for the Initial Purchasers shall be deemed a
representation and warranty by either Issuer, any of the Guarantors or any of
the Subsidiaries to each Initial Purchaser as to the matters covered thereby.
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
(a) Securities and Guarantees. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the
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Issuers and the Guarantors agree to sell to each Initial Purchaser, severally
and not jointly, and each Initial Purchaser, severally and not jointly, agrees
to purchase from the Issuers and the Guarantors, at the price set forth in
Schedule C, the aggregate principal amount of Securities (including the
Guarantees) set forth in Schedule A opposite the name of such Initial Purchaser,
plus any additional principal amount of Securities (including the Guarantees)
which such Initial Purchaser may become obligated to purchase pursuant to the
provisions of Section 10 hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities and the Guarantees shall be made at the office
of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such
other place as shall be agreed upon by the Representative, the Issuers and the
Guarantors at 9:00 A.M. (New York Time) on the fourth business day after the
date hereof (unless postponed in accordance with the provisions of Section 10),
or such other time not later than ten business days after such date as shall be
agreed upon by the Representative, the Issuers and the Guarantors (such time and
date of payment and delivery being herein called the "Closing Time").
Payment shall be made to the Issuers and the Guarantors by wire
transfer of immediately available funds to a bank account designated by the
Issuers and the Guarantors, against delivery to the respective accounts of the
Initial Purchasers of certificates for the Securities and the Guarantees to be
purchased by them. It is understood that each Initial Purchaser has authorized
the Representative, for its account, to accept delivery of, receipt for, and
make payment of the purchase price for, the Securities and the Guarantees which
it has agreed to purchase. ▇▇▇▇▇▇▇ ▇▇▇▇▇, individually and not as representative
of the Initial Purchasers, may (but shall not be obligated to) make payment of
the purchase price for the Securities and the Guarantees to be purchased by any
Initial Purchaser whose funds have not been received by the Closing Time, but
such payment shall not relieve such Initial Purchaser from its obligations
hereunder. The certificates representing the Securities and the Guarantees shall
be registered in the name of Cede & Co. pursuant to the DTC Agreement, or
physical certificates representing the Securities and the Guarantees shall be
registered in the names and denominations requested by the Initial Purchasers,
and in either case shall be made available for examination and packaging by the
Initial Purchasers in The City of New York not later than 9:00 A.M. on the last
business day prior to the Closing Time.
(c) Qualified Institutional Buyer. Each Initial Purchaser severally and
not jointly represents and warrants to, and agrees with, the Issuers and each of
the Guarantors that it (i) is a "qualified institutional buyer" within the
meaning of Rule 144A under the 1933 Act (a "Qualified Institutional Buyer") and
an "accredited investor" within the meaning of Rule 501(a) under the 1933 Act
(an "Accredited Investor"), (ii) has not and will not solicit offers for, or
offer or sell, Securities (or Guarantees) by means of any
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general solicitation or general advertising within the meaning of Rule 502(c)
under Regulation D under the 1933 Act and (iii) will offer and sell the
Securities and Guarantees only to (a) persons who it reasonably believes are
Qualified Institutional Buyers or (b) non-U.S. persons pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S.
(d) Denominations; Registration. Certificates for the Securities
(including the Guarantees) shall be in such denominations ($1,000 or integral
multiples thereof) and registered in such names as the Representative may
request in writing at least one full business day before the Closing Time.
SECTION 3. Covenants of the Issuers and the Guarantors. The Issuers and
the Guarantors, jointly and severally, covenant with each Initial Purchaser as
follows:
(a) Offering Memorandum. The Issuers and the Guarantors, as promptly as
possible, will furnish to each Initial Purchaser, without charge, such number of
copies of the Preliminary Offering Memorandum, the Final Offering Memorandum and
any amendments and supplements thereto and documents incorporated by reference
therein as such Initial Purchaser may reasonably request.
(b) Notice and Effect of Material Events. The Issuers and the
Guarantors will promptly notify each Initial Purchaser, and confirm such notice
in writing, of (x) any filing made by any Issuer or any Guarantor of information
relating to the offering of the Securities and the Guarantees with any
securities exchange or any other regulatory body in the United States or any
other jurisdiction, and (y) prior to the completion of the placement of the
Securities and the Guarantees by the Initial Purchasers, any material changes in
or affecting the earnings, business affairs or business prospects of the Issuers
and the Subsidiaries, considered as one enterprise, which (i) make any statement
in the Offering Memorandum or any document incorporated by reference in the
Offering Memorandum false or misleading or (ii) are not disclosed in the
Offering Memorandum. In such event or if during such time any event shall occur
or condition shall exist as a result of which it is necessary, in the opinion of
the Issuers and the Guarantors, their counsel, the Initial Purchasers or counsel
for the Initial Purchasers, to amend or supplement the Final Offering Memorandum
in order that the Final Offering Memorandum not include any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances then
existing, the Issuers and the Guarantors will forthwith amend or supplement the
Final Offering Memorandum by preparing and furnishing to each Initial Purchaser
an amendment or amendments of, or a supplement or supplements to, the Final
Offering Memorandum (in form and substance satisfactory in the reasonable
opinion of counsel for the Initial Purchasers) so that, as so amended or
supplemented, the Final Offering Memorandum will not include an untrue statement
of a material fact or omit to
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state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a Subsequent
Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Issuers and
the Guarantors will advise each Initial Purchaser promptly of any proposal to
amend or supplement the Offering Memorandum and will not effect such amendment
or supplement without the consent of the Initial Purchasers. Neither the consent
of the Initial Purchasers to, nor the Initial Purchaser's delivery of, any such
amendment or supplement, shall constitute a waiver of any of the conditions set
forth in Section 5 hereof.
(d) Qualification of Securities and Guarantees for Offer and Sale. The
Issuers and the Guarantors will use their best efforts to register or qualify
the Securities and the Guarantees for offering and sale under the applicable
securities laws of such jurisdictions as the Representative may reasonably
designate and will maintain such qualifications in effect as long as required
for the sale of the Securities and the Guarantees; provided, however, that the
Issuers and the Guarantors shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject.
(e) Integration. The Issuers and the Guarantors agree that they will
not and will cause their affiliates not to make any offer or sale of securities
of either Issuer or any Guarantor of any class if, as a result of the doctrine
of "integration" referred to in Rule 502 under the 1933 Act, such offer or sale
could be deemed to render invalid (for the purpose of (i) the sale of the
Securities and the Guarantees by the Issuers and the Guarantors to the Initial
Purchasers, (ii) the resale of the Securities and the Guarantees by the Initial
Purchasers to Subsequent Purchasers or (iii) the resale of the Securities and
the Guarantees by such Subsequent Purchasers to others) the exemption from the
registration requirements of the 1933 Act provided by Section 4(2) thereof or by
Rule 144A or by Regulation S thereunder or otherwise.
(f) Rating of Securities. The Issuers and the Guarantors shall take all
reasonable action necessary to enable Standard & Poor's Corporation ("S&P"), and
▇▇▇▇▇'▇ Investors Service, Inc. ("Moody's"), to provide their respective credit
ratings of the Securities and the Guarantees.
(g) Rule 144A Information. The Issuers and the Guarantors agree that,
in order to render the Securities and the Guarantees eligible for resale
pursuant to Rule 144A under the 1933 Act, while any of the Securities and the
Guarantees remain outstanding, they will make available, upon request, to any
holder of Securities and Guarantees or
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prospective purchasers of Securities and Guarantees the information specified in
Rule 144A(d)(4), unless the Issuers and the Guarantors furnish information to
the Commission pursuant to Section 13 or 15(d) of the 1934 Act (such
information, whether made available to holders or prospective purchasers or
furnished to the Commission, is hereinafter referred to as "Additional
Information").
(h) Restriction on Resales. Until such time as the Issuers and the
Guarantors have consummated an Exchange Offer (as defined in the Registration
Rights Agreement), during the period of two years after the original issuance of
the Securities and the Guarantees, the Issuers and the Guarantors will not, and
will cause their "affiliates" (as such term is defined in Rule 144(a)(1) under
the ▇▇▇▇ ▇▇▇) not to, resell any Securities and Guarantees which are "restricted
securities" (as such term is defined under Rule 144(a)(3) under the ▇▇▇▇ ▇▇▇)
that have been reacquired by any of them and shall immediately upon any purchase
of any such Securities and Guarantees submit such Securities and Guarantees to
the Trustee for cancellation.
(i) Use of Proceeds. The Issuers and the Guarantors will use the net
proceeds received by them from the sale of the Securities and the Guarantees in
the manner specified in the Offering Memorandum under "Use of Proceeds." If the
Star Acquisition is not consummated simultaneously with the Offering, then
pending consummation of the Star Acquisition, the Escrow Funds (which consist of
$15.4 million of the net proceeds from the sale of the Securities) will be held
by the Trustee in the Escrow and Pledge Account pursuant to the Pledge and
Escrow Agreement. The Company and Finance Corp. will release the Escrow Funds in
accordance with the Pledge and Escrow Agreement only upon consummation of the
Star Acquisition.
(j) Restriction on Sale of Securities. During a period of 180 days from
the date of the Offering Memorandum, the Issuers and the Guarantors will not,
without the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇, directly or indirectly,
issue, sell, offer to sell, grant any option for the sale of, or otherwise
dispose of, or file a registration statement with respect to, any debt
securities or securities convertible into or exchangeable or exercisable for
debt securities of Holdings, either Issuer or any Guarantor or guarantees of any
such securities (other than the Securities, the Guarantees and the Exchange
Securities).
(k) DTC Clearance. The Issuers and the Guarantors will use all
reasonable efforts in cooperation with the Initial Purchasers to permit the
Securities and the Guarantees to be eligible for clearance and settlement
through DTC.
(l) Legends. Each certificate for a Security (including the Guarantee)
will bear the legend contained in "Notice to Investors" in the Offering
Memorandum for the time period and upon the other terms stated in the Offering
Memorandum.
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(m) Interim Financial Statements. Prior to the Closing Time, the
Issuers shall furnish to the Initial Purchasers copies of any unaudited interim
financial statements of the Issuers, promptly after they have been completed,
for any periods subsequent to the periods covered by the financial statements
appearing in the Offering Memorandum.
(n) Periodic Reports. For a period of five years after the Closing
Time, the Issuers and the Guarantors will furnish to the Initial Purchasers
copies of all annual reports, quarterly reports and current reports filed with
the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may
be designated by the Commission, and such other documents, reports and
information as shall be furnished by the Issuers and the Guarantors generally to
the holders of the Securities and the Guarantees or to security holders of its
publicly issued securities generally.
SECTION 4. Payment of Expenses.
(a) Expenses. The Issuers and the Guarantors, jointly and severally,
will pay all expenses incident to the performance of their respective
obligations under this Agreement, including (i) the preparation, printing and
any filing of the Offering Memorandum and the Registration Statement (including
financial statements and any schedules or exhibits) and of each amendment or
supplement thereto, including the preliminary prospectuses and the prospectus to
be contained in the Registration Statement, (ii) the preparation, printing and
delivery to the Initial Purchasers of this Agreement, the Registration Rights
Agreement, the Indenture and such other documents as may be required in
connection with the offering, purchase, sale and delivery of the Securities and
the Guarantees, (iii) the preparation, issuance and delivery of the certificates
for the Securities and the Guarantees to the Initial Purchasers, including any
charges of DTC in connection therewith, (iv) the fees and disbursements of the
Issuers' and the Guarantors' counsel, accountants and other advisors, (v) the
qualification of the Securities and the Guarantees under securities laws in
accordance with the provisions of Section 3(d) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Initial Purchasers in
connection therewith and in connection with the preparation of the Blue Sky
Survey or any supplement thereto (which fees and disbursements shall not exceed
$15,000), (vi) the fees and expenses of the Trustee, including the fees and
disbursements of counsel for the Trustee in connection with the Indenture, the
Securities and the Guarantees and (vii) any fees payable in connection with the
rating of the Securities and the Guarantees and the listing of the Securities
and the Guarantees with the Private Offerings, Resales and Trading Through
Automated Linkages ("PORTAL") market.
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(b) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section 9(a)(i)
or 9(a)(ii) hereof, the Issuers and the Guarantors, jointly and severally, shall
reimburse the Initial Purchasers for all of their out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Initial
Purchasers.
SECTION 5. Conditions of Initial Purchasers' Obligations. The
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Issuers and the Guarantors
contained in Section 1 hereof or in certificates of any officer of the Issuers
or any of the Subsidiaries, to the performance by the Issuers and the Guarantors
of their covenants and other obligations hereunder, and to the following further
conditions:
(a) Opinion of Counsel for the Issuers and the Guarantors. At the
Closing Time, the Initial Purchasers shall have received the favorable opinion,
dated as of the Closing Time, of (1) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel for the Issuers
and the Guarantors, (2) ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, New Jersey counsel for the Issuers and
the Guarantors, (3) Barley, Snyder, ▇▇▇▇▇ & ▇▇▇▇▇, LLC, Pennsylvania counsel for
the Issuers and the Guarantors, (4) ▇▇▇▇▇▇▇▇▇ Traurig, P.A., Florida counsel for
the Issuers and the Guarantors and (5) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Stirling Scales,
Canadian counsel for the Issuers and the Guarantors, in each case in form and
substance satisfactory to counsel for the Initial Purchasers, together with
signed or reproduced copies of such letters for each of the other Initial
Purchasers to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the Initial Purchasers may reasonably request.
(b) Opinion of Counsel for the Initial Purchasers. At the Closing Time,
the Initial Purchasers shall have received the favorable opinion, dated as of
the Closing Time, of Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the
Initial Purchasers, together with signed or reproduced copies of such letter for
each of the other Initial Purchasers, with respect to certain matters set forth
in paragraphs (1), (3), (4), (5), (6), (7), (8), (12) (solely as to the
information in the Offering Memorandum under "Description of the Notes") and the
second paragraph following paragraph (18) of Exhibit A-1 hereto. In giving such
opinion such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York and the federal law of
the United States and the General Corporation Law of the State of Delaware, upon
the opinions of counsel satisfactory to the Representative, including counsel of
the Issuers. Such counsel may also state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Issuers, the Guarantors and the Subsidiaries and
certificates of public officials.
(c) Officers' Certificate. At the Closing Time, (i) the Offering
Memorandum, as it may then be amended or supplemented, shall not contain an
untrue statement of a
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material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) there shall not
have been, since the respective dates as of which information is given in the
Offering Memorandum, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Issuers and
of the Subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business; (iii) the Issuers and the Guarantors shall have
complied with all agreements and satisfied all conditions on their part to be
performed or satisfied at or prior to the Closing Time; and (iv) the
representations and warranties of the Issuers and the Guarantors in Section 1
shall be accurate and true and correct as though expressly made at and as of the
Closing Time. At the Closing Time, the Initial Purchasers shall have received a
certificate of the Chief Executive Officer of the Issuers and the Chief
Financial Officer of the Issuers, and equivalent officials of each Guarantor,
dated as of the Closing Time, to such effect.
(d) Accountant's Comfort Letter.. At the time of the execution of this
Agreement, the Initial Purchasers shall have received from
PricewaterhouseCoopers LLP a letter dated such date, in form and substance
satisfactory to the Representative or to counsel for the Initial Purchasers,
together with signed or reproduced copies of such letter for each of the other
Initial Purchasers, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to Initial Purchasers with respect to
the financial statements and certain financial information contained in the
Offering Memorandum and in the form of Exhibit B attached hereto. At the time of
the execution of this Agreement, the Company shall have received from
PricewaterhouseCoopers LLP a report on their review of the pro forma financial
information included in the Offering Memorandum substantially in the form of
Exhibit B of the Statement on Standards for Attestation Engagements No. 1,
Reporting on Pro Forma Financial Information (AT Section 300.04), in form and
substance satisfactory to the Initial Purchasers.
(e) Bring-down Comfort Letter. At the Closing Time, the Initial
Purchasers shall have received from PricewaterhouseCoopers LLP a letter, dated
as of the Closing Time, to the effect that they reaffirm the statements made in
the letter furnished pursuant to subsection (d) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to the Closing Time.
(f) Maintenance of Rating. At the Closing Time, the Securities and the
Guarantees shall be rated at least B3 by Moody's and B- by S&P, and the Issuers
and the Guarantors shall have delivered to the Representative a letter dated the
Closing Time, from each such rating agency, or other evidence satisfactory to
the Representative, confirming that the Securities and the Guarantees have such
ratings; and since the date of this Agreement, there shall not have occurred a
downgrading in the rating assigned to the Securities and the Guarantees or any
Issuer's or Guarantor's other debt securities by any nationally recognized
securities rating agency, and no such securities rating agency shall
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have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of the Securities and the Guarantees or any of
either Issuer's and any Guarantor's other debt securities.
(g) PORTAL. At the Closing Time, the Securities and the Guarantees
shall have been designated for trading on PORTAL.
(h) Chief Financial Officer's Certificate. At the Closing Time, the
Initial Purchasers shall have received a certificate of the principal financial
officer of the Issuers and the Guarantors as to certain agreed upon accounting
matters.
(i) Registration Rights Agreement, Indenture and Pledge and Escrow
Agreement. Each of the Issuers and each of the Guarantors shall have duly
authorized, executed and delivered the Registration Rights Agreement, the
Indenture and, if the Star Acquisition is not consummated simultaneously with
the Offering, as of the Closing Time, the Pledge and Escrow Agreement will have
been duly authorized, executed and delivered to the Initial Purchasers in a form
and substance satisfactory to the Representative and counsel to the Initial
Purchasers. If the Star Acquisition is not consummated simultaneously with the
Offering, (x) the Company and Finance Corp. shall have deposited $15.4 million
of the net proceeds of the sale of the Securities in the Escrow and Pledge
Account, (b) the Company and Finance Corp. shall have taken all steps necessary
to establish escrow and pledge arrangements in form and substance satisfactory
to the Representative and (c) the Company and Finance Corp. shall have provided
to the Trustee written instructions to invest the Escrow Funds in Cash
Equivalents (as defined in the Pledge and Escrow Agreement).
(j) Credit Agreement. At the Closing Time and upon consummation of
transactions contemplated hereby, the Issuers and the Guarantors shall have
received the Credit Agreement, in substantially the form previously delivered to
the Initial Purchasers and as described in the Offering Memorandum, executed by
all of the parties thereto, and the Credit Agreement shall be in full force and
effect, enforceable against the Issuers and each of the Guarantors in accordance
with its terms. At the Closing Time, the Issuers and the Guarantors shall have
terminated or amended the Letter of Credit and Reimbursement Agreement, dated as
of April 1, 1996, by and between Palm Beach Bedding Company and First Union
National Bank of Florida, as amended on March 3, 1998, to permit Palm Beach
Bedding Company to guarantee the Securities.
(k) Preferred Membership Interests. At the Closing Time, the Issuers
and the Guarantors shall have received all required consents and approvals to
change the respective Scheduled Redemption Dates of the preferred membership
interests of each of the Company, Investors and Holdings to November 14, 2009.
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(l) Additional Documents. At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents and opinions as they
may require (including any consents under any agreements to which either Issuer
or any Guarantor is a party) for the purpose of enabling them to pass upon the
issuance and sale of the Securities and the Guarantees as herein contemplated,
or in order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein contained; and
all proceedings taken by the Issuers and the Guarantors in connection with the
issuance and sale of the Securities and the Guarantees as herein contemplated
shall be satisfactory in form and substance to the Initial Purchasers and
counsel for the Initial Purchasers.
(m) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representative by notice to the Issuers at
any time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6 and 7 shall survive any such termination and remain in
full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Initial Purchasers. Each of the Issuers and each
of the Guarantors, jointly and severally, agree to indemnify and hold harmless
each Initial Purchaser and each person, if any, who controls any Initial
Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Preliminary Offering Memorandum or the Final Offering Memorandum (or
any amendment or supplement thereto (including any document
incorporated by reference into the Preliminary Offering Memorandum or
Final Offering Memorandum)), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(d) below) any such settlement is effected
with the written consent of the Issuers; and
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(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by ▇▇▇▇▇▇▇
▇▇▇▇▇), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Issuers or the
Guarantors by any Initial Purchaser through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for use in
the Offering Memorandum (or any amendment thereto).
(b) Indemnification of Issuers, Guarantors, and Directors. Each Initial
Purchaser severally agrees to indemnify and hold harmless the Issuers, the
Guarantors and their directors (or, in the case of a limited liability company,
advisors), each officer of the Issuers and Guarantors who would have been
required to sign a registration statement on Form S-1 if the Offering Memorandum
was a registration statement on Form S-1, and each person, if any, who controls
the Issuers or the Guarantors within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Offering Memorandum in
reliance upon and in conformity with written information furnished to the
Issuers or the Guarantors by such Initial Purchaser through ▇▇▇▇▇▇▇ ▇▇▇▇▇
expressly for use in the Offering Memorandum.
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by ▇▇▇▇▇▇▇ ▇▇▇▇▇, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Issuers. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties
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be liable for fees and expenses of more than one counsel (in addition to any
local counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuers and the
Guarantors on the one hand and the Initial Purchasers on the other hand from the
offering of the Securities and the Guarantees pursuant to this Agreement or (ii)
if the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuers and
the Guarantors on the one hand and of the Initial Purchasers on the other hand
in connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
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The relative benefits received by the Issuers and the Guarantors on the
one hand and the Initial Purchasers on the other hand in connection with the
offering of the Securities and the Guarantees pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities and the Guarantees pursuant to this
Agreement (before deducting expenses) received by the Issuers and the Guarantors
and the total underwriting discount received by the Initial Purchasers, bear to
the aggregate initial offering price of the Securities and the Guarantees.
The relative fault of the Issuers and the Guarantors on the one hand
and the Initial Purchasers on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Issuers or the Guarantors, or by the Initial
Purchasers, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Issuers, the Guarantors and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities (including the Guarantees) underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which such Initial Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each director or
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advisor of either Issuer and each Guarantor, each officer of the Issuers and
Guarantors who would have been required to sign a registration statement on Form
S-1 if the Offering Memorandum was a registration statement on Form S-1, and
each person, if any, who controls either Issuer and each Guarantor within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as the Issuers and each Guarantor. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 7 are
several in proportion to the principal amount of Securities (including the
Guarantees) set forth opposite their respective names in Schedule A hereto and
not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of either Issuer or any of the
Subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any Initial
Purchaser or controlling person, or by or on behalf of either Issuer or any
Guarantor, and shall survive delivery of the Securities (including the
Guarantees) to the Initial Purchasers.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representative may terminate this
Agreement, by notice to the Issuers and the Guarantors, at any time at or prior
to the Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Offering Memorandum, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Issuers and
the Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there shall have occurred a downgrading
in the rating assigned to the Securities or the Guarantees or either Issuer's or
any Guarantor's other debt securities by any nationally recognized securities
rating agency, or if such securities rating agency shall have publicly announced
that it has under surveillance or review, with possible negative implications,
its rating of the Securities, the Guarantees or any Issuer's or Guarantor's
other debt securities or guarantees of debt securities, or (iii) if there has
occurred any material adverse change in the financial markets in the United
States or the international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Representative, impracticable to market the Securities or
the Guarantees or to enforce contracts for the sale of the Securities or the
Guarantees, or (iv) if trading in any securities of either Issuer or any
Guarantor has been suspended or limited by the Commission or the NASDAQ National
Market System, or if trading
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generally on the American Stock Exchange or the New York Stock Exchange or in
the NASDAQ National Market System has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
governmental authority, or (v) if a banking moratorium has been declared by
either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6 and 7 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Initial Purchasers. If one or
more of the Initial Purchasers shall fail at Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the Representative shall have the right, but not the
obligation, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting Initial Purchasers, or any other initial purchasers, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the
Representative shall not have completed such arrangements within such 24-hour
period, then
(a) if the number of Defaulted Securities does not exceed 10%
of the aggregate principal amount of the Securities to be purchased
hereunder, each of the non-defaulting Initial Purchasers shall be
obligated, severally and not jointly, to purchase the full amount
thereof in the proportions that their respective obligations hereunder
bear to the obligations of all non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Securities exceeds 10% of the
aggregate principal amount of the Securities to be purchased hereunder,
this Agreement shall terminate without liability on the part of any
non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Representative, the Issuers or the Guarantors
shall have the right to postpone the Closing Time for a period not exceeding
seven days in order to effect any required changes in the Offering Memorandum or
in any other documents or arrangements. As used herein, the term "Initial
Purchaser" includes any person substituted for an Initial Purchaser under this
Section 10.
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SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Representatives at ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, attention of High Yield Capital
Markets, with a copy to Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇▇▇▇ ▇▇▇▇ Jacob, Esq.; notices
to the Issuers or the Guarantors shall be directed to them at c/o Sleepmaster
L.L.C., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, attention of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Citicorp
Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, attention of ▇▇▇▇▇
▇▇▇▇, Esq.
SECTION 12. Parties. This Agreement shall inure to the benefit of and
be binding upon the Initial Purchasers, the Issuers and the Guarantors and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Initial Purchasers, the Issuers and the Guarantors and their respective
successors and the controlling persons and officers and directors referred to in
Sections 6 and 7 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the Initial
Purchasers, the Issuers and the Guarantors and their respective successors, and
said controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Securities and Guarantees from any Initial Purchaser shall be
deemed to be a successor by reason merely of such purchase.
SECTION 13. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY HEREIN REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuers and the Guarantors a
counterpart hereof, whereupon this instrument, along with all counterparts, will
become a binding agreement among the Initial Purchasers, the Issuers and the
Guarantors in accordance with its terms.
Very Truly Yours,
SLEEPMASTER L.L.C.
By
----------------------------------
Name:
Title:
SLEEPMASTER FINANCE CORPORATION
By
----------------------------------
Name:
Title:
▇▇▇▇ MANUFACTURING COMPANY
By
----------------------------------
Name:
Title:
PALM BEACH BEDDING COMPANY
By
----------------------------------
Name:
Title:
LOWER ROAD ASSOCIATES, LLC
By
----------------------------------
Name:
Title:
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41
CONFIRMED AND ACCEPTED, as of the date first above written:
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
FIRST UNION CAPITAL MARKETS CORP.
By: ▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By
---------------------------------------
Authorized Signatory
For itself and the other Initial Purchasers named in Schedule A hereto.
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SCHEDULE A
Principal Amount
Name of Initial Purchaser of Securities
------------------------- -------------
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated .......... $
First Union Capital Markets Corp............................. $
Total: $115,000,000
============
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SCHEDULE B
Guarantors
NAME STATE OF INCORPORATION
---- ----------------------
Palm Beach Bedding Company Florida
▇▇▇▇ Manufacturing Company Pennsylvania
Lower Road Associates, LLC New Jersey
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44
SCHEDULE C
SLEEPMASTER, L.L.C.
SLEEPMASTER CORPORATION
$115,000,000 Senior Subordinated Notes due 2009
1. The initial offering price of the Securities (including the
Guarantees) shall be 100% of the principal amount thereof, plus accrued
interest, if any, from the date of issuance.
2. The purchase price to be paid by the Initial Purchasers for the
Securities and the Guarantees shall be 97% of the principal amount thereof.
3. The interest rate on the Securities shall be 11% per annum.
4. The interest payment dates of the Securities shall be May 15 and
November 15 of each year, commencing November 15, 1999.
5. The Securities and the Guarantees will be subject to redemption at
any time on or after May 15, 2004, at the option of the Issuers and the
Guarantors, at the following redemption prices (expressed as percentages of the
principal amount), if redeemed during the 12-month period beginning May 15 of
the years indicated below:
Redemption
Year Price
---- -----
2004 105.500%
2005 103.667%
2006 101.833%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
6. In addition, at any time prior to May 15, 2002, the Issuers and the
Guarantors, at their option, may use the net proceeds of one or more Public
Equity Offerings (as defined in the Offering Memorandum) to redeem up to an
aggregate of 35% of the aggregate principal amount of the Securities and the
Guarantees issued under the
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45
Indenture at a redemption price equal to 111% of the aggregate principal amount
of the Securities and the Guarantees redeemed, plus accrued and unpaid interest
thereon, if any, to the redemption date. At least 65% of the aggregate principal
amount of the Securities and the Guarantees must remain outstanding immediately
after the occurrence of such redemption.
7. The Securities may be redeemed at any time prior to May 15, 2004, at
the option of the Issuers, in whole and not in part, within 60 days after a
Change in Control, on not less than 30 nor more than 60 days' prior notice to
each holder of Securities to be redeemed, in amounts of $1,000 or an integral
multiple of $1,000, at a redemption price equal to the sum of (1) 100% of the
principal amount thereof plus (2) accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on relevant record
dates to receive interest due on an interest payment date) plus (3) the
Applicable Premium, if any. In no event will the redemption price of the
Securities be less than 105.5% (the redemption price for the Securities on May
15, 2004) of the principal amount of the Securities, plus accrued interest to
the applicable redemption date.
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46
Exhibit A
FORM OF OPINION OF ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ TO
BE DELIVERED PURSUANT TO SECTION 5(a)
May 18, 1999
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
First Union Capital Markets Corp.
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
World Financial Center
North Tower
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We are issuing this letter in our capacity as special counsel for
Sleepmaster L.L.C. (the "Company"), Sleepmaster Finance Corporation ("Finance
Corp." and, together with the Company, the "Issuers"), ▇▇▇▇ Manufacturing
Company ("▇▇▇▇"), Palm Beach Bedding Company ("Palm Beach") and Lower Road
Associates, LLC ("Lower Road" and, together with ▇▇▇▇ and Palm Beach, the
"Guarantors") in response to the requirement in Section 5(b) of the Purchase
Agreement dated May 12, 1999 (the "Purchase Agreement") among the Issuers, the
Guarantors and the initial purchasers named in Schedule A thereto (the "Initial
Purchasers"). Every term which is defined or given a special meaning in the
Purchase Agreement and which is not given a different meaning in this letter has
the same meaning whenever it is used in this letter as the meaning it is given
in the Purchase Agreement.
In connection with the preparation of this letter, we have among other
things read:
(a) the preliminary offering memorandum of the Issuers, dated
April 30, 1999 and the final offering memorandum of the
Issuers, dated May 12, 1999 (the "Offering Memorandum");
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47
(b) an executed copy of the Purchase Agreement;
(c) an executed copy of the Registration Rights Agreement, dated
as of the date hereof, among the Issuers, the Guarantors and
the Initial Purchasers;
(d) an executed copy of the Indenture, dated as of the date
hereof, among the Issuers, the Guarantors and United States
Trust Company of New York, as trustee (the "Trustee");
(e) a global note of the Issuers in the amount of $115,000,000,
dated the date hereof (the "Securities");
(f) guarantees by the Guarantors, dated the date hereof, of the
Issuers' obligations under the Securities (the "Guarantees");
(g) the Letter of Representations among the Issuers, the Trustee
and The Depository Trust Company;
(h) the credit agreement, dated the date hereof, among the
Issuers, the Guarantors and _____________, as agent;
(i) resolutions dated May __, 1999 of each of the Company, Finance
Corp., Palm Beach, ▇▇▇▇ and Lower Road; and
(j) Copies of all certificates and other documents delivered today
at the closing of the purchase and sale of the Securities and
the Guarantees under the Purchase Agreement.
Subject to the assumptions, qualifications and limitations which are
identified in this letter, we advise you that:
1. Finance Corp. is a corporation existing and in good standing under the
General Corporation Law of the State of Delaware. Finance Corp. is
qualified to do business and is in good standing in each jurisdiction
listed on Schedule A hereto.
2. Finance Corp. has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Offering Memorandum and to enter into and perform its obligations under
the Purchase Agreement, the Registration Rights Agreement, the
Indenture, the Securities, the Guarantees, the Exchange Securities [if
the Star Acquisition is not consummated simultaneously
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48
with the Offering, include the following - , the Pledge and Escrow
Agreement,] and the DTC Agreement.
3. All of the shares of issued and outstanding capital stock of Finance
Corp. have been duly authorized and validly issued. None of the
outstanding shares of capital stock of Finance Corp. was issued in
violation of preemptive rights under the terms of the statute under
which Finance Corp. is incorporated, under Finance Corp.'s Certificate
of Incorporation or by-laws or under any contractual provision of which
we have knowledge. To our knowledge, Finance Corp. is owned by
Sleepmaster Holdings L.L.C., directly or indirectly, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity, other than pursuant to the Credit Agreement.
3. Finance Corp. has duly authorized, executed and delivered the Purchase
Agreement.
4. Finance Corp. has duly authorized, executed and delivered the
Registration Rights Agreement. The Registration Rights Agreement
constitutes the valid and binding obligation of the Company, Finance
Corp. and each of the Guarantors, enforceable against the Company,
Finance Corp. and each of the Guarantors in accordance with its terms.
5. Finance Corp. has authorized, executed and delivered the Indenture.
Assuming the due authorization, execution and delivery thereof by the
Trustee, the Indenture constitutes a valid and binding agreement of the
Company, Finance Corp. and each of the Guarantors, enforceable against
the Company, Finance Corp. and each of the Guarantors in accordance
with its terms.
6. Finance Corp. has authorized, executed and delivered the DTC Agreement.
The DTC Agreement constitutes the valid and binding obligation of the
Company and Finance Corp., enforceable against the Company and Finance
Corp. in accordance with its terms.
7. The Securities are in the form contemplated by the Indenture and have
been duly authorized, executed and delivered by Finance Corp. When
authenticated by the Trustee in the manner provided in the Indenture
(assuming the due authorization, execution and delivery of the
Indenture by the Trustee), the Securities will constitute valid and
binding obligations of the Company and Finance Corp., enforceable
against the Company and Finance Corp. in accordance with their terms.
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8. The Guarantees are in the form contemplated by the Indenture. When the
Securities are authenticated by the Trustee in the manner provided in
the Indenture (assuming the due authorization, execution and delivery
of the Indenture by the Trustee), the Guarantees will constitute valid
and binding obligations of each of the Guarantors, enforceable against
each of the Guarantors in accordance with their terms.
9. The Exchange Securities have been duly authorized by Finance Corp. When
the Exchange Securities are executed and authenticated and issued and
delivered by the Company, Finance Corp. and each of the Guarantors in
exchange for the Securities and the Guarantees pursuant to the Exchange
Offer, the Exchange Securities will constitute valid and binding
obligations of the Company, Finance Corp. and each of the Guarantors,
enforceable against the Company, Finance Corp. and each of the
Guarantors in accordance with their terms.
9. The Securities, the Guarantees and the Indenture conform in all
material respects to the descriptions thereof contained in the Offering
Memorandum.
10. There is no legal or governmental proceeding that is pending or, to our
knowledge, threatened against the Company or any of its subsidiaries
that would be required by Item 103 of Regulation S-K to be described in
the Offering Memorandum if the Offering Memorandum was a registration
statement on Form S-1 but that is not so described or that might
reasonably be expected to materially adversely effect the consummation
of the transactions contemplated in the Purchase Agreement and the
Offering Memorandum. We have no knowledge about any contract to which
the Company or any of its subsidiaries is a party or to which any of
its property is subject that would be required to be described in the
Offering Memorandum if the Offering Memorandum was a registration
statement on Form S-1 but that is not so described.
11. The information in the Offering Memorandum under "Exchange Offer;
Registration Rights," "Description of the Notes," and "Certain U.S.
Federal Income Tax Considerations," to the extent that it constitutes
matters of law, summaries of legal matters, or legal conclusions, has
been reviewed by us and is correct in all material respects.
12. No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than as may be required
under the securities or blue sky laws of the various states, as to
which we need express no opinion) is necessary or required in
connection with the due authorization, execution and delivery of the
Purchase Agreement or the due execution, delivery or performance of the
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Indenture by the Company, Finance Corp. or any of the Guarantors or for
the offering, issuance, sale or delivery of the Securities and the
Guarantees to the Initial Purchasers or the resale by the Initial
Purchasers in accordance with the Purchase Agreement or for the
performance by the Company, Finance Corp. or any of the Guarantors of
their respective obligations thereunder, in connection with the
offering, issuance or sale of the Securities and the Guarantees
hereunder or the consummation of the transactions contemplated by the
Purchase Agreement, the Registration Rights Agreement, the Indenture,
the DTC Agreement, the Credit Agreement, [if the Star Acquisition is
not consummated simultaneously with the Offering, include the following
- the Pledge and Escrow Agreement,] the Securities, the Guarantees and
the Exchange Securities (including the issuance and sale of the
Securities and the Guarantees and the use of the proceeds from the sale
of the Securities and the Guarantees as described in the Offering
Memorandum under the caption "Use of Proceeds").
13. The Company's, Finance Corp.'s and each Guarantor's execution and
delivery of the Purchase Agreement, the Registration Rights Agreement,
the Indenture, the DTC Agreement, the Credit Agreement, [if the Star
Acquisition is not consummated simultaneously with the Offering,
include the following - the Pledge and Escrow Agreement,] the
Securities, the Guarantees and the Exchange Securities, the
consummation of the transactions contemplated in the Purchase Agreement
and in the Offering Memorandum (including the issuance and sale of the
Securities and the Guarantees and the use of the proceeds from the sale
of the Securities and the Guarantees as described in the Offering
Memorandum under "Use of Proceeds"), and compliance by the Company,
Finance Corp. and the Guarantees with their respective obligations
under the foregoing instruments do not (i) violate Finance Corp.'s
certificate of incorporation or bylaws or (ii) constitute a violation
by the Company, Finance Corp. or any Guarantor of any applicable
provision of any law, statute or regulation, judgment, order or decree
(except that we express no opinion in this paragraph as to compliance
with any disclosure requirement or any prohibition against fraud or
misrepresentation or as to whether performance of the indemnification
or contribution provisions in the Purchase Agreement or the
Registration Rights Agreement would be permitted) or (iii) whether with
or without the giving of notice or lapse of time or both, breach, or
result in a default or Repayment Event under, or result in the creation
or imposition of any lien or encumbrance upon any property or assets of
the Company, Finance Corp. or any Guarantor pursuant to, any existing
obligation under any of the agreements listed on Schedule B hereto
(provided that we express no opinion as to compliance with any
financial test or cross-default provision (insofar as it relates to a
default under an agreement not listed on Schedule B) in any such
agreement). As used herein, a "Repayment Event" means any event or
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condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or
a portion of such indebtedness by the Company, any of the Guarantors or
any of their subsidiaries.
14. To our knowledge, there are no persons with registration rights or
other similar rights to have any securities registered pursuant to the
Exchange Offer Registration Statement to be filed pursuant to the
Registration Rights Agreement.
15. It is not necessary in connection with the offer, sale and delivery of
the Securities and Guarantees to the Initial Purchasers and to each
Subsequent Purchaser in the manner contemplated by the Purchase
Agreement and the Offering Memorandum to register the Securities and
Guarantees under the 1933 Act or to qualify the Indenture under the
Trust Indenture Act.
16. Each of the Company, Finance Corp. and the Guarantors is not, and after
the application of the proceeds from the sale of the Securities and the
Guarantees as described in the Offering Memorandum under "Use of
Proceeds," will not be, an investment company as such term is defined
in the Investment Company Act of 1940, as amended.
17. [if the Star Acquisition is not consummated simultaneously with the
Offering, include the following-Finance Corp. has authorized, executed
and delivered the Pledge and Escrow Agreement. The Pledge and Escrow
Agreement constitutes the valid and binding obligation of the Company
and Finance Corp., enforceable against the Company and Finance Corp. in
accordance with its terms.]
18. [if the Star Acquisition is not consummated simultaneously with the
Offering, include the following - At the time of the deposit of the
Escrow Funds (as defined) into the Escrow and Pledge Account (as
defined in the Pledge and Escrow Agreement), the pledge of the
Collateral (as defined in the Pledge and Escrow Agreement) securing the
payment of the Secured Obligations (as defined in the Pledge and Escrow
Agreement) for the benefit of the Trustee and the Holders of the
Securities will constitute a first priority perfected security interest
in such Collateral, enforceable in accordance with the UCC against the
Company, Finance Corp., Holdings and all creditors of the Company,
Finance Corp. and Holdings and any persons purporting to purchase any
of the Collateral from the Company, Finance Corp. and Holdings.]
* * *
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52
The purpose of our professional engagement was not to establish factual
matters, and preparation of the Offering Memorandum involved many determinations
of a wholly or partially nonlegal character. We make no representation that we
have independently verified the accuracy, completeness or fairness of the
Offering Memorandum or that the actions taken in connection with the preparation
of the Offering Memorandum (including the actions described in the next
paragraph) were sufficient to cause the Offering Memorandum to be accurate,
complete or fair. We are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the Offering Memorandum except to
the extent otherwise explicitly indicated in numbered paragraphs 10 and 12
above.
We can, however, confirm that we have participated in conferences with
representatives of the Issuers and the Guarantors, representatives of the
Initial Purchasers, counsel for the Initial Purchasers and representatives of
the independent accountants for the Issuers during which disclosures in the
Offering Memorandum and related matters were discussed. In addition, we have
reviewed certain corporate records furnished to us by the Issuers and the
Guarantors.
Based upon our participation in the conferences and our document review
identified in the preceding paragraph, our understanding of applicable law and
the experience we have gained in our practice thereunder and relying as to
matters of fact on statements of officers and other representatives of the
Company, we can, however, advise you that nothing has come to our attention that
has caused us to conclude that (i) the Offering Memorandum as of its date
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or (ii) the Offering Memorandum on the date of this letter
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
* * *
Except for the activities described in the immediately preceding
section of this letter, we have not undertaken any investigation to determine
the facts upon which the advice in this letter is based.
We have assumed for purposes of this letter: each document we have
reviewed for purposes of this letter is accurate and complete, each such
document that is an original is authentic, each such document that is a copy
conforms to an authentic original, and all signatures on each such document are
genuine; that the Purchase Agreement and every other agreement we have examined
for purposes of this letter constitutes a valid and
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53
binding obligation of each party to that document and that each such party has
satisfied all legal requirements that are applicable to such party to the extent
necessary to entitle such party to enforce such agreement (except that we make
no such assumptions with respect to the Issuers and the Guarantors); and that
you have acted in good faith and without notice of any fact which has caused you
to reach any conclusion contrary to any of the advice provided in this letter.
In preparing this letter we have relied without independent
verification upon: (i) information contained in certificates obtained from
governmental authorities; (ii) factual information represented to be true in the
Purchase Agreement and other documents specifically identified at the beginning
of this letter as having been read by us; (iii) factual information provided to
us by the Issuers or their representatives; and (iv) factual information we have
obtained from such other sources as we have deemed reasonable. We have assumed
that there has been no relevant change or development between the dates as of
which the information cited in the preceding sentence was given and the date of
this letter and that the information upon which we have relied is accurate and
does not omit disclosures necessary to prevent such information from being
misleading. For purposes of numbered paragraph 1, we have relied exclusively
upon certificates issued by governmental authorities in the relevant
jurisdictions and such opinion is not intended to provide any conclusion or
assurance beyond that conveyed by those certificates.
We confirm that we do not have knowledge that has caused us to conclude
that our reliance and assumptions cited in the two immediately preceding
paragraphs are unwarranted. Whenever this letter provides advice about (or based
upon) our knowledge of any particular information or about any information which
has or has not come to our attention such advice is based entirely on the actual
awareness at the time this letter is delivered on the date it bears by the
lawyers with ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ at that time who represented the Issuers and
Guarantors in connection with the offering effected pursuant to the Offering
Memorandum and by lawyers with ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ who have principal
responsibility for representing the Issuers and Guarantors on other significant
matters.
Each opinion (an "enforceability opinion") in this letter that any
particular contract is a valid and binding obligation or is enforceable in
accordance with its terms is subject to: (i) the effect of bankruptcy,
insolvency, fraudulent conveyance and other similar laws and judicially
developed doctrines in this area such as substantive consolidation and equitable
subordination; (ii) the effect of general principles of equity; and (iii) other
commonly recognized statutory and judicial constraints on enforceability
including statutes of limitations. "General principles of equity" include but
are not limited to: principles limiting the availability of specific performance
and injunctive relief; principles which limit the availability of a remedy under
certain circumstances where another remedy has been elected; principles
requiring reasonableness, good faith and fair
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54
dealing in the performance and enforcement of an agreement by the party seeking
enforcement; principles which may permit a party to cure a material failure to
perform its obligations; and principles affording equitable defenses such as
waiver, laches and estoppel.
Our advice on every legal issue addressed in this letter is based
exclusively on the internal law of New York, the General Corporation Law of the
State of Delaware, and/or the federal law of the United States, and represents
our opinion as to how that issue would be resolved were it to be considered by
the highest court in the jurisdiction which enacted such law. None of the
opinions or other advice contained in this letter considers or covers: (i) any
state securities (or "blue sky") laws or regulations or (ii) any financial
statements or supporting schedules (or any notes to any such statements or
schedules) or other financial information set forth or incorporated by reference
in (or omitted from) the Offering Memorandum. This letter does not cover any
other laws, statutes, governmental rules or regulations or decisions which in
our experience are not usually considered for or covered by opinions like those
contained in this letter or are not generally applicable to transactions of the
kind covered by the Purchase Agreement.
This letter speaks as of the time of its delivery on the date it bears.
We do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact about which we did not have knowledge at that time,
by reason of any change subsequent to that time in any law, other governmental
requirement or interpretation thereof covered by any of our opinions or advice,
or for any other reason.
This letter may be relied upon by the Initial Purchasers pursuant to
the Purchase Agreement. Without our written consent: (i) no person other than
the Initial Purchasers may rely on this letter for any purpose; (ii) this letter
may not be cited or quoted in any financial statement, prospectus, private
placement memorandum or other similar document; (iii) this letter may not be
cited or quoted in any other document or communication which might encourage
reliance upon this letter by any person or for any purpose excluded by the
restrictions in this paragraph; and (iv) copies of this letter may not be
furnished to anyone for purposes of encouraging such reliance.
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Schedule A
Good Standings of Finance Corp.
Delaware
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56
Schedule B
Contracts
1. Amended and Restated Limited Liability Company Operating Agreement of
Sleepmaster L.L.C., dated November 14, 1996.
2. Second Amended and Restated Limited Liability Company Operating
Agreement of Sleepmaster Holdings L.L.C., dated November 14, 1996
(including the joinder agreement of ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇, dated
February 26, 1999).
3. Limited Liability Company Operating Agreement of Sleep Investor L.L.C.,
dated November 14, 1996 (including the joinder agreement of certain
persons, dated December 23, 1996).
4. License Agreement and Memorandum of Agreement, each dated January 12,
1995, between Sleepmaster L.L.C. and Serta, Inc., covering certain
territories in New Jersey, New York and Connecticut, as amended.
5. License Agreement and Memorandum of Agreement, each dated January 12,
1995, between Sleepmaster L.L.C. and Serta, Inc., covering certain
territories in Pennsylvania, New Jersey, Maryland and Delaware, as
amended.
6. License Agreement, dated November 4, 1989, and Memorandum of Agreement,
dated December 1, 1969, between Palm Beach Bedding Company and Serta,
Inc., covering certain territories in Florida, as amended.
7. License Agreement, dated November 4, 1989, and Memorandum of Agreement,
dated December 1, 1969, between ▇▇▇▇ Manufacturing Company and Serta,
Inc., covering certain territories in Pennsylvania and New York, as
amended.
8. Standard Canadian License Agreement - Form B, dated as of and effective
June 1, 1994, between Serta, Inc. and Star Bedding Products (1986)
Ltd., covering certain territories in Ontario, Canada.
9. Masterpiece Sleep Products, Inc. Manufacturing and Servicing Agreement,
dated October 1, 1998, by and between Masterpiece Sleep Products, Inc.
and Sleepmaster LLC and affiliates.
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57
10. Serta, Inc. By-laws and Serta, Inc. Rules and Regulations, each
effective January 1, 1996.
11. U.S. v. Serta Associates, Inc., U.S. District for the Northern District
of Illinois, No. 50 C 843.
12. Employment Agreements and Option Agreements, each dated as of January
12, 1995, between Sleepmaster Holdings L.L.C., Sleepmaster L.L.C.,
Sleep Investor L.L.C. and each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
13. Employment Agreements, dated March 3, 1998, between Palm Beach Bedding
Company (joined by Sleepmaster Holdings L.L.C. and Sleepmaster L.L.C.)
and each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
14. Employment and Stock Purchase Agreements, dated as of February 26,
1999, by and among ▇▇▇▇ Manufacturing Company, Sleepmaster Holdings
L.L.C., Sleepmaster L.L.C., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Sleep Investor L.L.C.
and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇, III
15. Transportation and Delivery Services Agreement, dated July 1, 1996,
between Sleepmaster L.L.C. and ▇. ▇▇▇▇ and Son.
16. Agreement between United Steelworkers of America (ABG Division),
AFL-CIO, CLC and Local Union #396 and Sleepmaster L.L.C., dated July
___, 1997.
17. 1997 - 1999 Collective Agreement between Star Bedding Products (1986)
Limited and United Steelworkers of America Local 400.
18. Second Amended and Restated Secured Credit Agreement, dated as of
February 26, 1999, among Sleepmaster L.L.C., Palm Beach Bedding
Company, Lower Road Associates, LLC and ▇▇▇▇ Manufacturing Company, as
Borrowers, Sleepmaster L.L.C., as Borrowing Agent, the Lenders Party
Thereto, First Source Financial LLP, as Agent and LaSalle National
Bank, as Issuing Lender and all Collateral Documents (as defined in the
Credit Agreement).
19. Amended and Restated Securities Purchase Agreement, dated as of March
3, 1998, among Sleepmaster Holdings L.L.C., Sleepmaster L.L.C. and PMI
Mezzanine Fund, L.P., relating to the 12.0% Amended and Restated Series
A Senior Subordinated Notes due 2007, as amended by Amendment Nos. 1, 2
and 3 (including the 12% Series A Senior Subordinated Note due 2007 and
all other
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agreements, subordination agreements and guaranties executed in
connection therewith).
20. Securities Purchase Agreement, dated as of March 3, 1998, among
Sleepmaster Holdings L.L.C., Sleepmaster L.L.C. and PMI Mezzanine Fund,
L.P., relating to the 12.0% Amended and Restated Series B Senior
Subordinated Notes due 2007, as amended by Amendment Nos. 1, 2 and 3
(including the 12% Series B Senior Subordinated Note due 2007 and all
other agreements, subordination agreements and guaranties executed in
connection therewith).
21. Sleepmaster Holdings L.L.C. Amended and Restated Common Interest
Purchase Warrants, dated as of March 3, 1998 and Sleepmaster Holdings
L.L.C. Common Interest Purchase Warrants, dated as of March 3, 1998,
each as amended on February 26, 1999.
22. IRB-Related Obligations: (a) the Loan Agreement, dated as of April 1,
1996, between Palm Beach Bedding Company and Palm Beach County,
Florida, relating to $7,650,000 Palm Beach County, Florida Variable
Rate Demand Industrial Development Revenue Bonds (Palm Beach Bedding
Company Project, Series 1996) (the "IRBs") originally outstanding in
the original principal amount of $7,650,000; (b) the Trust Indenture,
dated as of April 1, 1996, by and among Palm Beach County, the Trustee
and the Credit Facility Trustee, (c) the Irrevocable Letter of Credit,
issued by First Union National Bank of Florida, (d) the Letter of
Credit and Reimbursement Agreement, dated as of April 1, 1996, between
Palm Beach Bedding Company and First Union National Bank of Florida
("First Union"), (e) the Amendment to Reimbursement Agreement, dated
March 3, 1998, between Palm Beach Bedding Company and First Union
National Bank, (f) the Mortgage and Security Agreement, dated April 1,
1996, between Palm Beach Bedding Company and First Union, (g) the
Remarketing Agreement, dated April 1, 1996, between Palm Beach Bedding
Company and First Union and (h) the Pledge Agreement, dated April 1,
1996, between Palm Beach Bedding Company and First Union.
23. Junior Subordinated Notes, dated November 14, 1996, of Sleep Investor
L.L.C. issued to each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ VIP Plus
Profit Sharing Plan, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Wit,
▇▇▇▇▇ Investments II, L.L.C., ▇▇▇▇ ▇▇▇▇▇▇, Jessand Corp. Profit Sharing
Plan and Trust, ▇▇▇▇ ▇▇▇▇▇▇▇, Panorama Holdings, L.L.C., ▇▇▇▇▇▇
▇▇▇▇▇▇▇, Holding Capital Management Corp., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇ 1989 Trust, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
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▇▇▇▇▇▇, ▇▇▇▇▇ Special Situations L.P., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ and WKM Partners.
24. Amended and Restated Securityholders Agreement, dated as of March 3,
1998, by and among Sleepmaster Holdings L.L.C., Sleep Investor L.L.C.,
PMI Mezzanine Fund, L.P., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(including the joinder agreements of each of ▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇, III, dated March 3, 1998).
25. Amended and Restated Registration Rights Agreement, dated as of March
3, 1998, by and among Sleepmaster Holdings L.L.C., Sleep Investor
L.L.C., PMI Mezzanine Fund, L.P., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ (including the joinder agreements of each of ▇▇▇▇▇▇ ▇. ▇▇▇▇
and ▇▇▇▇ ▇. ▇▇▇▇, III, dated March 3, 1998).
26. Sleep Investor Securityholders Agreement, dated November 14, 1996
(including the joinder agreement of certain persons, dated December 23,
1996).
27. Recapitalization, Redemption and Purchase Agreement among Sleepmaster
Holdings L.L.C., Sleepmaster L.L.C., ▇▇▇▇▇/▇▇▇▇▇▇▇▇▇▇ Holdings, Inc.
The Members of Sleepmaster Holdings, L.L.C., and Sleep Investor L.L.C.,
dated October 31, 1996.
28. Agreement and Plan of Merger, effective as of March 3, 1998, by and
among Sleepmaster L.L.C., Sleepmaster Acquisition Corp. and Palm Beach
Bedding Company (including the related Indemnity Escrow Agreement and
Adjustment Escrow Agreement).
29. Stock Purchase Agreement, dated as of February 26, 1999, by and among
Sleepmaster L.L.C., ▇▇▇▇ Manufacturing Company, and the stockholders
listed on the Seller signature page attached thereto (including the
related Indemnity Escrow Agreement and Adjustment Escrow Agreement).
30. Asset Purchase Agreement by and among Star Bedding Products Limited and
Sleepmaster L.L.C., as Purchaser and Star Bedding Products (1986)
Limited and ▇▇▇▇▇ ▇▇▇▇▇▇, as Seller.
31. Agreement of Lease between ▇▇▇▇▇ Mountain Industries, Inc. and
Sleepmaster, as amended by the First, Second and Third Lease
Modification Agreements, and the
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related Subordination, Non-Disturbance and Attornment Agreements
(including the letter of credit issued to ▇▇▇▇▇ Mountain Industries,
Inc.).
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Exhibit A-2
[Opinion of New Jersey Counsel]
(i) Sleepmaster L.L.C. (the "Company") has been duly formed and is
validly existing as a limited liability company in good standing under the laws
of the State of New Jersey.
(ii) Lower Road Associates, LLC ("Lower Road") has been duly formed and
is validly existing as a limited liability company in good standing under the
laws of the State of New Jersey.
(iii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the Purchase
Agreement, the Registration Rights Agreement, the Indenture, the Credit
Agreement, the Acquisition Agreement, [if the Star Acquisition is not
consummated simultaneously with the Offering, include the following the Pledge
and Escrow Agreement,] the Securities, the Exchange Securities and the DTC
Agreement.
(iv) Lower Road has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the Purchase
Agreement, the Registration Rights Agreement, the Indenture, the Credit
Agreement, the Guarantees and the Exchange Securities.
(v) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a material adverse effect on the
Company's financial condition and results of operations.
(vi) Lower Road is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a material adverse effect on Lower
Road's financial condition and results of operations.
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(vii) The authorized, issued and outstanding membership or other equity
interests of the Company is as set forth in the Capitalization chart included in
the Offering Memorandum. The shares of issued and outstanding capital stock or
other equity interests of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; and none of the outstanding shares
of capital stock or other equity interests of the Company was issued in
violation of the preemptive or other similar rights of any securityholder of the
Company. To the best of our knowledge, the Company is 99% owned by Sleepmaster
Holdings L.L.C. and 1% owned by Sleep Investor LLC, in each case directly or
indirectly, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity, other than pursuant to the Company's Credit
Agreement.
(viii) The shares of issued and outstanding capital stock or other
equity interests of Lower Road have been duly authorized and validly issued and
are fully paid and non-assessable; and none of the outstanding shares of capital
stock or other equity interests of Lower Road was issued in violation of the
preemptive or other similar rights of any securityholder of Lower Road. To the
best of our knowledge, Lower Road is owned by Sleepmaster L.L.C., directly or
indirectly, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity, other than pursuant to the Credit Agreement.
(ix) Each of the Company and Lower Road have authorized, executed and
delivered each of the Purchase Agreement, the Registration Rights Agreement, the
Indenture and the Credit Agreement. The Company has authorized, executed and
delivered the Securities [if the Star Acquisition is not consummated
simultaneously with the Offering, include the following - , the Pledge and
Escrow Agreement] and the DTC Agreement. Lower Road has authorized, executed and
delivered its Guarantee. The Company and Lower Road have authorized the Exchange
Securities.
(x) There is not pending or, to the best of our knowledge, threatened
any action, suit, proceeding, inquiry or investigation, to which the Company or
Lower Road is a party, or to which the property of the Company or Lower Road is
subject, before or brought by any New Jersey court or governmental agency or
body, which might reasonably be expected to materially and adversely affect the
properties or assets of the Company or Lower Road or the consummation of the
transactions contemplated in the Purchase Agreement or the performance by the
Company or Lower Road of their respective obligations under the Purchase
Agreement, the Indenture, the Registration Rights Agreement, [if the Star
Acquisition is not consummated simultaneously with the Offering, include the
following - the Pledge and Escrow Agreement,] the Securities, the Guarantees or
the Exchange Securities.
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(xi) To the best of our knowledge, neither the Company nor Lower Road
is in violation of its certificate of formation, limited liability company
agreement or other organizational documents.
(xii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any New Jersey court or
governmental authority or agency (other than as may be required under the
securities or blue sky laws, as to which we need express no opinion) is
necessary or required in connection with the due authorization, execution and
delivery of the Purchase Agreement or the due execution, delivery or performance
of the Indenture by the Company or Lower Road or for the offering, issuance,
sale or delivery of the Securities and the Guarantees to the Initial Purchasers
or the resale by the Initial Purchasers in accordance with the Purchase
Agreement or for the performance by the Company and Lower Road of their
respective obligations thereunder, in connection with the offering, issuance or
sale of the Securities and the Guarantees or the consummation of the
transactions contemplated by the Purchase Agreement, the Registration Rights
Agreement, the Indenture, the DTC Agreement, the Credit Agreement, [if the Star
Acquisition is not consummated simultaneously with the Offering, include the
following - the Pledge and Escrow Agreement,] the Securities, the Guarantees and
the Exchange Securities (including the issuance and sale of the Securities and
the Guarantees and the use of the proceeds from the sale of the Securities and
the Guarantees as described in the Offering Memorandum under the caption "Use of
Proceeds").
(xiii) The Company's and Lower Road's execution and delivery of the
Purchase Agreement, the Registration Rights Agreement, the Indenture, the DTC
Agreement, the Credit Agreement, [if the Star Acquisition is not consummated
simultaneously with the Offering, include the following - the Pledge and Escrow
Agreement,] the Securities, the Guarantees and the Exchange Securities, the
consummation of the transactions contemplated in the Purchase Agreement and in
the Offering Memorandum (including the issuance and sale of the Securities and
the Guarantees and the use of the proceeds from the sale of the Securities and
the Guarantees as described in the Offering Memorandum under "Use of Proceeds"),
and compliance by the Company and Lower Road with their respective obligations
under the foregoing instruments do not (i) violate the Company's and Lower
Road's certificate of formation, limited liability company agreement or other
organizational documents or (ii) constitute a violation by the Company or Lower
Road of any applicable provision of any New Jersey law, statute or regulation,
judgment, order or decree.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and the Guarantors and
public officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise,
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64
written policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
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65
Exhibit A-3
[Opinion of Barley, Snyder, ▇▇▇▇▇ & ▇▇▇▇▇, LLC]
1. The Company is a corporation duly organized, validly existing and
subsisting under the laws of the Commonwealth of Pennsylvania.
2. ▇▇▇▇ has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum
and to enter into and perform its obligations under the Purchase Agreement, the
Registration Rights Agreement, the Indenture, the Credit Agreement, the
Guarantees and the Exchange Securities.
3. ▇▇▇▇ is not qualified as a foreign corporation to transact business
in any state.
4. The shares of issued and outstanding capital stock or other equity
interests of ▇▇▇▇ have been duly authorized and validly issued and are fully
paid and non-assessable; and none of the outstanding shares of capital stock or
other equity interests of ▇▇▇▇ was issued in violation of the preemptive or
other similar rights of any security holder of ▇▇▇▇. To the best of our
knowledge, ▇▇▇▇ is owned by Sleepmaster L.L.C., directly or indirectly, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity, other than pursuant to the Credit Agreement.
5. ▇▇▇▇ has authorized, executed and delivered each of the Purchase
Agreement, the Registration Rights Agreement, the Indenture, its Guarantee and
the Credit Agreement. ▇▇▇▇ has authorized the Exchange Securities.
6. To the best of our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which ▇▇▇▇ is a party, or
to which the property of ▇▇▇▇ is subject, before or brought by any Pennsylvania
court or governmental agency or body, which might reasonably be expected to
materially and adversely affect the properties or assets of ▇▇▇▇ or the
consummation of the transactions contemplated in the Purchase Agreement or the
performance by ▇▇▇▇ of its obligations under the Purchase Agreement, the
Indenture, the Registration Rights Agreement, the Guarantees or the Exchange
Securities.
7. To the best of our knowledge, ▇▇▇▇ is not in violation of its
charter and bylaws.
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8. No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any Pennsylvania court or governmental
authority or agency (other than as may be required under the securities or blue
sky laws, as to which we need express no opinion) is necessary or required in
connection with the due authorization, execution and delivery of the Purchase
Agreement or the due execution, delivery or performance of the Indenture by ▇▇▇▇
or for the offering, issuance, sale or delivery of the Guaranty to the Initial
Purchasers or the resale by the Initial Purchasers in accordance with the
Purchase Agreement or for the performance by ▇▇▇▇ of its obligations thereunder,
in connection with the offering, issuance or sale of the Guaranty or the
consummation of the transactions contemplated by the Purchase Agreement, the
Registration Rights Agreement, the Indenture, the Credit Agreement, the
Guarantee and the Exchange Securities (including the issuance and sale of the
Securities and the Guaranty and the use of the proceeds from the sale of the
Securities and the Guaranty as described in the Offering Memorandum under the
caption "Use of Proceeds"). We express no opinion as to securities or so-called
"blue sky" laws, rules or regulations.
9. Herr's execution and delivery of the Purchase Agreement, the
Registration Rights Agreement, the Indenture, the Credit Agreement, the Guaranty
and the Exchange Securities, the consummation of the transactions contemplated
in the Purchase Agreement and in the Offering Memorandum (including the issuance
and sale of the Securities and the Guaranty and the use of the proceeds from the
sale of the Securities and the Guarantees as described in the Offering
Memorandum under "Use of Proceeds"), and compliance by ▇▇▇▇ with its obligations
under the foregoing instruments do not (i) violate Herr's charter and bylaws; or
(ii) constitute a violation by ▇▇▇▇ of any applicable provision of any
Pennsylvania law, statute or regulation, judgment, order or decree.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and the Guarantors and
public officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991).
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Exhibit A-4
[FORM OF OPINION OF ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A.]
[date]
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
First Union Capital Markets Corp.
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
World Financial Center
North Tower
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We are issuing this letter in our capacity as special counsel for Palm
Beach Bedding Company ("Palm Beach") in response to the requirement in Section
5(a)(4) of the Purchase Agreement dated May ___, 1999 (the "Purchase Agreement")
among the Issuers and the Guarantors, as defined in the Purchase Agreement and
the initial purchasers named in Schedule A thereof (the "Initial Purchasers").
Every term which is defined or given a special meaning in the Purchase Agreement
and which is not given a different meaning in this letter has the same meaning
whenever it is used in this letter as the meaning it is given in the Purchase
Agreement.
A. Basis of Opinion.
As a basis for the conclusions expressed in this opinion letter, we
have examined, considered and relied on the following documents:
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(a) the preliminary offering memorandum of the Issuers,
dated April __, 1999 and the final offering
memorandum of the Issuers, dated May __, 1999 (the
"Offering Memorandum");
(b) an executed copy of the Purchase Agreement;
(c) an executed copy of the Registration Rights
Agreement, dated as of the date hereof, among the
Issuers, the Guarantors and the Initial Purchasers;
(d) an executed copy of the Indenture, dated as of the
date hereof, among the Issuers, the Guarantors and
___________, as trustee (the "Trustee");
(e) a global note of the Issuers in the amount of
$115,000,000, dated the date hereof (the
"Securities");
(f) guarantees by the Guarantors, dated the date hereof,
of the Issuers' obligations under the Securities (the
"Guarantees");
(g) the Letter of Representations among the Issuers, the
Trustee and The Depository Trust Company;
(h) the credit agreement, dated the date hereof, among
the Issuers, the Guarantors and _______________, as
agent;
(i) resolutions dated ___________of Palm Beach;
(j) copies of all certificates and other documents
delivered today at the closing of the purchase and
sale of the Securities and the Guarantees under the
Purchase Agreement;
(k) Palm Beach's Certificate of Incorporation, Bylaws,
and corporate minute book;
(l) a certificate or other evidence of good standing of
Palm Beach issued as of a recent date by the
Secretary of State of the State of Florida;
(m) a certificate or other evidence of qualification
issued as of a recent date by the relevant
governmental authority of each state in which Palm
Beach is qualified to do business;
(n) a certificate, dated as of the date hereof,
containing certain representations to our firm
executed by certain officers of Palm Beach; and
(o) such other matters of law and fact as we have
considered necessary or appropriate for the
expression of the opinions contained herein.
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For purposes of this opinion letter, the documents and information
referred to in this Section A are herein collectively referred to as the
"Documents."
B. Assumptions.
In rendering the opinions set forth in Section C below, we have assumed
without investigation the genuineness of all signatures, other than the
signatures of Palm Beach's executive officers with respect to the Documents
described in subsections (b), (c), (d), (f), (h), (m) and (n) of Section A, and
the authenticity of all documents submitted to us as originals, the conformity
to authentic original documents of all documents submitted to us as copies, and
the veracity of the documents.
With respect to our opinions expressed below relating to existence and
good standing, we have relied, without independent investigation, upon the
certificates or other evidence of good standing as referenced in Section A
above.
As to questions of fact material to the opinions hereinafter expressed,
we have relied upon the certificates described in subsections (j), (l), (m) and
(n) of Section A and other factual representations represented to be true in the
Documents.
C. Opinions.
Based upon our examination and consideration of the Documents, and in
reliance thereon, and subject to the comments, assumptions, exceptions,
qualifications and limitations set forth in Sections B and D hereof, we are of
the opinion that:
(a) Palm Beach is a corporation existing and in good
standing under the laws of the State of Florida.
(b) Palm Beach has corporate power and authority to own,
lease and operate its properties and to conduct its
business as described in the Offering Memorandum and
to enter into and perform its obligations under the
Purchase Agreement, the Registration Rights
Agreement, the Indenture, the Credit Agreement, the
Guarantees and the Exchange Securities.
(c) Palm Beach is duly qualified as a foreign corporation
to transact business and is in good standing in each
jurisdiction in which such qualification is required
whether by reason of the ownership or leasing of
property or the conduct of business, except where the
failure so to qualify or to be in good standing would
not result in a material adverse effect on Palm
Beach's financial condition and results of
operations.
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(d) The shares of issued and outstanding capital stock or
other equity interests of Palm Beach have been duly
authorized and validly issued and are fully paid and
non-assessable. None of the outstanding shares of
capital stock or other equity interests of Palm Beach
was issued in violation of the preemptive or other
similar rights of any security holder of Palm Beach
under Palm Beach's Certificate of Incorporation,
Bylaws or any contractual provision of which we have
knowledge. To the best of our knowledge, Palm Beach
is owned by Sleepmaster L.L.C., directly or
indirectly, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity,
other than pursuant to the Credit Agreement.
(e) Palm Beach has authorized, executed and delivered
each of the Purchase Agreement, the Registration
Rights Agreement, the Indenture, its Guarantee and
the Credit Agreement, Palm Beach has authorized the
Exchange Securities.
(f) There is no legal or governmental proceeding pending
or, to our knowledge, threatened against Palm Beach
by any Florida court or governmental agency, which
might reasonably be expected to materially and
adversely affect the consummation of the transactions
contemplated in the Purchase Agreement.
(g) To the best of our knowledge, Palm Beach is not in
violation of its charter and bylaws.
(h) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree
of, any Florida court or governmental authority or
agency (other than as may be required under the
securities or blue sky laws, as to which we need
express no opinion) is necessary or required in
connection with the due authorization, execution and
delivery of the Purchase Agreement or the due
execution, delivery or performance of the Indenture
by Palm Beach or for the offering, issuance, sale or
delivery of the Securities and the Guarantees to the
Initial Purchasers or the resale by the Initial
Purchasers in accordance with the Purchase Agreement
or for the performance by Palm Beach of its
obligations thereunder, in connection with the
offering, issuance or sale of the Securities and the
Guarantees or the consummation of the transactions
contemplated by the Purchase Agreement, the
Registration Rights Agreement, the Indenture, the
Credit Agreement, the Securities, the Guarantees and
the Exchange Securities (including the issuance and
sale of the Securities and the Guarantees and the use
of the proceeds from the sale of the Securities and
the Guarantees as described in the Offering
Memorandum under the caption "Use of Proceeds."
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71
(i) Palm Beach's execution and delivery of the Purchase
Agreement, the Registration Rights Agreement, the
Indenture, the Credit Agreement, the Guarantees and
the Exchange Securities, the consummation of the
transactions contemplated in the Purchase Agreement
and in the Offering Memorandum (including the
issuance and sale of the Securities and the
Guarantees and the use of the proceeds from the sale
of the Securities and the Guarantees as described in
the Offering Memorandum under "Use of Proceeds"), and
compliance by Palm Beach with its obligations under
the foregoing instruments do not (i) violate Palm
Beach's certificate of incorporation or bylaws or
(ii) constitute a violation by Palm Beach of any
applicable provision of any Florida law, statute or
regulation, judgment order or decree.
D. Comments, Assumptions, Limitations, Qualifications and
Exceptions
The opinions expressed above are based upon and subject to, the further
comments, assumptions, limitations, qualifications and exceptions set forth
below.
(a) Whenever this letter provides advice about (or based
upon) our knowledge of any particular information or
about any information which has or has not come to
our attention such advice is based entirely on the
actual awareness at the time this letter is delivered
on the date it bears by the lawyers with ▇▇▇▇▇▇▇▇▇
Traurig at that time who represented Palm Beach in
connection with the offering effected pursuant to the
Offering Memorandum and by lawyers with ▇▇▇▇▇▇▇▇▇
Traurig who have principal responsibility for
representing the Beach on other significant matters.
(b) The opinions expressed herein are specifically
limited to the laws of the State of Florida and the
Federal law of the United States of America.
(c) This opinion letter is limited to the matters stated
herein and no opinions may be implied or inferred
beyond the matters expressly stated herein.
(d) The opinions expressed herein are as of the date
hereof, and we assume no obligation to update or
supplement such opinions to reflect any facts or
circumstances that may hereafter come to our
attention or any changes in law that may hereafter
occur.
(e) This letter may be relied upon by the Initial
Purchasers pursuant to the Purchase Agreement.
Without our written consent: (i) no person other than
the Initial Purchasers may rely on this letter for
any purpose; (ii) this letter may not be cited or
quoted in any financial statement, prospectus,
private placement memorandum or other similar
document; (iii) this letter may not be cited or
quoted in any other document or communication
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which might encourage reliance upon this letter by
any person or for any purpose excluded by the
restrictions in this paragraph; and (iv) copies of
this letter may not be furnished to anyone for
purposes of encouraging such reliance.
Respectfully submitted
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A.
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Exhibit A-5
[OPINION OF ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ STIRLING SCALES]
(i) Star Bedding Products Limited ("Star") has been duly organized and
is validly existing as a corporation in good standing under the laws of the
Province of New Brunswick.
(ii) Star has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the Acquisition
Agreement.
(iii) Star is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a material adverse effect on Star's
financial condition and results of operations.
(iv) The shares of issued and outstanding capital stock or other equity
interests of Star have been duly authorized and validly issued and are fully
paid and non-assessable; and none of the outstanding shares of capital stock or
other equity interests of Star was issued in violation of the preemptive or
other similar rights of any securityholder of Star.
(v) There is not pending or, to the best of our knowledge, threatened
any action, suit, proceeding, inquiry or investigation, to which Star is a
party, or to which the property of Star is subject, before or brought by any
Ontario court or governmental agency or body, which might reasonably be expected
to materially and adversely affect the properties or assets of Star or the
consummation of the transactions contemplated in the Purchase Agreement.
(vi) To the best of our knowledge, Star is not in violation of its
charter and bylaws.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and the Guarantors and
public officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991).
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