SECOND FORBEARANCE AGREEMENT; THIRD AMENDMENT TO THE SECOND AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT AND FIRST AMENDMENT TO THE PLEDGE AND SECURITY AGREEMENT
SECOND FORBEARANCE
AGREEMENT; THIRD AMENDMENT TO THE SECOND AMENDED AND RESTATED CREDIT AND
GUARANTY AGREEMENT AND FIRST AMENDMENT TO THE PLEDGE AND SECURITY
AGREEMENT
This SECOND FORBEARANCE AGREEMENT;
THIRD AMENDMENT TO THE SECOND AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT
AND FIRST AMENDMENT TO THE PLEDGE AND SECURITY AGREEMENT (this “Agreement”) is
entered into as of December 10, 2008, by and among ▇▇▇▇▇▇▇ Bedding Company (the
“Company”),
THL-SC Bedding Company and certain subsidiaries of the Company party to the
Credit Agreement (as hereafter defined) as Guarantors (together with the
Company, the “Credit
Parties”), the financial institutions party hereto as Lenders under the
Credit Agreement (collectively, the “Lenders”) and
Deutsche Bank AG, New York Branch, individually as a Lender (“DBNY”) and as
administrative agent for the Lenders (in such capacity, “Agent”). Capitalized
terms used but not otherwise defined herein shall have the respective meanings
ascribed to such terms in the Credit Agreement.
RECITALS
WHEREAS, the Company, the other Credit
Parties and Lenders are parties to that certain Second Amended and Restated
Credit and Guaranty Agreement, dated as of May 25, 2006 (as has been or may be
further amended, restated, supplemented or otherwise modified from time to time,
the “Credit
Agreement”), pursuant to which, among other things, the lenders party
thereto have agreed, subject to the terms and conditions set forth in the Credit
Agreement, to make certain loans and other financial accommodations to the
Company.
WHEREAS, the Company, the other Credit
Parties and Lenders are parties to that certain First Forbearance Agreement and
Second Amendment to the Second Amended and Restated Credit and Guaranty
Agreement, dated as of November 12, 2008 (the “Forbearance
Agreement”), pursuant to which the Forbearance Period thereunder shall
terminate on December 10, 2008.
WHEREAS, as of the date hereof, one or
more of the Defaults or Events of Default listed on Exhibit A hereto have
occurred and are continuing, or may occur during the Second Forbearance Period
(as hereinafter defined) (the Defaults and Events of Default described in
Exhibit A hereto being herein collectively called the “Specified
Defaults”).
WHEREAS, upon the Company’s request,
Lenders have agreed, subject to the terms and conditions set forth herein, to
forbear from exercising their default-related rights, remedies, powers and
privileges against the Company and the other Credit Parties with respect to the
Specified Defaults only and to amend certain provisions of the Credit
Agreement.
WHEREAS, upon the Company’s request,
Lenders have agreed, subject to the terms and conditions set forth herein, to
amend certain provisions of the Pledge and Security Agreement dated as of
December 19, 2003 by and between each of the Grantors party thereto and the
Agent in its capacity as Collateral Agent (as supplemented and in effect on the
date hereof, the “Pledge and Security
Agreement”).
NOW, THEREFORE, in consideration of the
foregoing, the terms, covenants and conditions contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION
1. Confirmation
by the Company of Obligations and Specified Defaults.
(a) The
Company and each other Credit Party acknowledge and agree that as of December 9,
2008, the respective aggregate principal balances of the Loans as of such date
and aggregate face amount of Letters of Credit were as follows (such amounts, in
the aggregate, the “Existing Principal and
Letters of Credit”)1:
Tranche D Term
Loans: [$__________]
Revolving
Loans: [$__________]
Letters of
Credit: [$__________]
The
Company and each Credit Party acknowledge and agree that as of December 9, 2008,
the aggregate amount of accrued and unpaid interest on the Tranche D Term Loans
and Revolving Loans is [$_______] (the “Existing Interest”),
and the accrued and unpaid commitment fees payable pursuant to Section 2.10(a)
of the Credit Agreement is [$_____] (the “Existing Commitment
Fees”) and the accrued and unpaid letter of credit fees payable pursuant
to Section 2.10(b) of the Credit Agreement is [$_______] (the “Existing LC Fees” and
together with the Existing Principal and Letters of Credit, the Existing
Interest, and the Existing Commitment Fees, the “Outstanding
Indebtedness”)2.
The foregoing amounts do not include other fees, expenses and other amounts
which are chargeable or otherwise reimbursable under the Credit Agreement and
the other Credit Documents. None of the Company and the other Credit
Parties have any rights of offset, defenses, claims or counterclaims with
respect to any of the Obligations and each of the Credit Parties are jointly and
severally obligated with respect thereto, in accordance with the terms of the
Credit Documents.
(b) The
Company and each other Credit Party acknowledge and agree that each of the
Specified Defaults constitute a Default or an Event of Default that has occurred
and is continuing as of the Second Forbearance Effective Date or that may occur
and continue during the Second Forbearance Period, as the case may
be. Prior to the effectiveness of this Agreement, the existence of
certain of the Specified Defaults (i) relieved Lenders and Agent from any
obligation to extend any Loan or provide other financial accommodations under
the Credit Agreement or other Credit Documents, and (ii) permitted Lenders and
Agent to, among other things, (A) suspend or terminate any commitment to provide
Loans or make other extensions of credit under any or all of the Credit
Agreement and the other Credit Documents, (B) accelerate all or any portion of
the Obligations, (C) commence any legal or other action to collect any or all of
the Obligations from the Company, any other Credit Party and/or any Collateral,
(D) foreclose or otherwise realize on any or all of the Collateral, and/or
appropriate, set-off and apply to the payment of any or all of the Obligations,
any or all of the Collateral, and/or (E) take any other enforcement action or
otherwise exercise any or all rights, remedies, powers and privileges provided
for by any or all of the Credit Agreement, the other Credit Documents,
applicable law and/or equity.
SECTION 2. Forbearance;
Forbearance Default Rights and Remedies.
(a) Effective
as of the Second Forbearance Effective Date (as hereinafter defined), each
Lender and Agent agree that until the expiration or termination of the Second
Forbearance Period, it will forbear from exercising its default-related rights
and remedies under the Credit Documents against the Company or any other Credit
Party solely with respect to the Specified Defaults. As used herein,
the term “Second
Forbearance Period” shall mean the period beginning on the Second
Forbearance Effective Date and ending on the earliest to occur of (i) any
Forbearance Default (as hereinafter defined), (ii) the Agent’s receipt from the
Company of a Payment Notice (as hereinafter defined) or the making of any
payment (including interest) on any Subordinated Indebtedness by the Credit
Parties, any of their Subsidiaries or the Sponsor, (iii) the first day upon
which the trustee or any of the holders of the Indebtedness under the Senior
Subordinated Note Indenture exercise any of their remedies thereunder or under
applicable law, including, without limitation, any acceleration of any such
Subordinated Indebtedness (it being understood and agreed that the mere receipt
of an acceleration notice by the Company pursuant to Section 6.02 of the Senior
Subordinated Note Indenture shall not, in and of itself, terminate the Second
Forbearance Period until the acceleration referenced in such notice becomes
effective in accordance with the proviso in Section 6.02 of the Senior
Subordinated Note Indenture) or (iv) 11:59 p.m. (New York City time) on March
31, 2009 (the earliest to occur of clauses (i) through (iv) being the “Second Forbearance
Termination Date”). As used herein, the term “Forbearance Default”
shall mean (A) the occurrence of any Event of Default other than the Specified
Defaults, or (B) any representation, warranty or certification made or deemed
made by the Company or any other Credit Party in connection with this Agreement
(other than the Permitted Exceptions (as defined below)) shall be false in any
material respect on the date as of which made or deemed made.
(b) From and
after the Second Forbearance Termination Date, including as a result of any
Event of Default (other than the Specified Defaults), the agreement of each
Lender and Agent hereunder to forbear as set forth in Section 2(a) shall
immediately terminate without the requirement of any demand, presentment,
protest, or notice of any kind, all of which are hereby waived by the Company
and each other Credit Party. The Company and each other Credit Party hereby
agree that from and after the Second Forbearance Termination Date, Lenders and
Agent may at any time, or from time to time, exercise any and all of their
rights, remedies, powers and privileges under any or all of the Credit
Agreement, any other Credit Document, applicable law and/or equity, all of which
rights, remedies, powers and privileges are fully reserved by each Lender and
Agent.
(c) Except as
set forth herein, none of the Lenders or Agent shall have any obligation to
extend the Second Forbearance Period, or enter into any other waiver,
forbearance or amendment, and the Lenders’ and Agent’s agreement to permit any
such extension, or enter into any other waiver, forbearance or amendment shall
be subject to the sole discretion of the Lenders. Any agreement by
any Lender and Agent to extend the Second Forbearance Period, if any, or enter
into any other waiver, forbearance or amendment, must be set forth in writing
and signed by a duly authorized signatory of the relevant Lenders and
Agent. The Company and the other Credit Parties each acknowledge that
Lenders and Agent have not made any assurances concerning any possibility of an
extension of the Second Forbearance Period or the entering into of any waiver,
forbearance or amendment.
(d) The
Company and the other Credit Parties each acknowledge and agree that no
additional Loans or other financial accommodation shall be made by the Lenders
to the Company during the Second Forbearance Period, other than (i) the
issuance, renewal, extension or replacement of a Letter of Credit and (ii)
Revolving Loans made (w) in connection with, and equal to, the decrease in the
amount of Letter of Credit Usage, (x) pursuant to Section 2.3(d) of the Credit
Agreement, (y) to backstop any Letter of Credit which is otherwise permitted by
the Credit Agreement or (z) to provide cash collateral to a beneficiary in lieu
of issuing a Letter of Credit; provided that the Revolving Credit Exposure is
not increased or decreased after giving effect to any Revolving Loan or other
extension of credit as defined above. In connection with any Loans or
financial accommodations incurred or extended pursuant to the Credit Agreement
during the Second Forbearance Period as permitted above, the conditions
specified in Section 3.2 of the Credit Agreement shall be required to be
satisfied; provided that solely for such purposes during the Second Forbearance
Period (x) any representations and warranties (i) pursuant to Section 4.9 and
Section 4.21 of the Credit Agreement shall not be required to be made and (ii)
pursuant to Section 4.15 of the Credit Agreement shall be deemed modified so
that the representation may exclude the effects of defaults under operating
leases of the Company and its Subsidiaries and under the Senior Subordinated
Note Indenture solely as a result of the existence of one or more Specified
Defaults and (y) no Specified Default shall be deemed to constitute a Default or
Event of Default (the items included in (x) and (y), the “Permitted
Exceptions”).
SECTION 3. Amendments
to Credit Agreement.
Effective as of the Second Forbearance
Effective Date (as hereinafter defined), the following provisions of the Credit
Agreement shall be amended as set forth below (which amendments are in addition
to those contained in the Forbearance Agreement, which shall remain in full
force and effect except as expressly modified herein). For the
avoidance of doubt, the Credit Agreement shall remain amended as set forth in
this section after the Second Forbearance Termination Date, and these amendments
shall not operate as a waiver of any Default or Event of Default.
(a) Amendments to Section
1.1.
(i) The
definition of “Adjusted
Eurodollar Rate” in Section 1.1 is amended by adding the following new
sentence at the end thereof:
“Notwithstanding
any of the foregoing, on and after the earlier to occur of (x) the Second
Forbearance Termination Date and (y) March 31, 2009, the Adjusted Eurodollar
Rate shall not at any time be less than 3.25% per annum.”
(ii) The
definition of “Applicable
Margin” in Section 1.1 is hereby amended by deleting the last paragraph
thereof (as added pursuant to Section 3(a)(i) of the Forbearance Agreement) and
inserting in lieu thereof the following new paragraph:
“Notwithstanding
the foregoing, (x) during the period from and after the Forbearance Effective
Date and to and including (but not on) the Second Forbearance Effective Date,
the Applicable Margin shall be increased by 2.0% per annum above the rate
otherwise applicable and (y) during all periods on and after the Second
Forbearance Effective Date, the “Applicable Margin” shall mean
(i) for all Loans which are Base Rate Loans, 5.285% per annum and (ii) for all
Loans which are Eurodollar Rate Loans, 6.285% per annum.”
(iii) The
definition of “Base
Rate” in Section 1.1 is deleted in its entirety and replaced by the
following:
““Base Rate” means, at any time, the
greater of (a) the Prime Rate, and (b) the rate equal to the sum of (i) 0.50%
plus (ii) the Federal Funds Effective Rate; provided, that on and after the
earlier to occur of (x) the Second Forbearance Termination Date and (y) March
31, 2009, the Base Rate shall not at any time be less than 4.25% per
annum.”
(iv) The
definition of “CFO
Certification” is amended by adding the following phrase at the end
thereof:
“, and
with respect to the consolidated balance sheet of the Company and its
Subsidiaries for each fiscal month and Fiscal Quarter ending on or after
September 27, 2008, such balance sheet shall not reclassify long-term debt as
short-term debt solely as a result of the existence of the Specified Defaults
(as defined in the Second Forbearance Agreement).”
(v) The
definition of “Collateral
Documents” is amended by inserting “, each Control Agreement” immediately
after the words “the Mortgages”.
(vi) The
definition of “Credit
Document” is amended by inserting “, the Forbearance Agreement and the
Second Forbearance Agreement” immediately after the words “the Collateral
Documents”:
(vii) The
definition of “Interest Payment
Date” is amended by (x) deleting the phrase “three months” in each of the
two places it appears therein and by inserting in lieu thereof the phrase “one
month”, (y) adding to the end of clause (i) thereof, the following “provided that, from
and after the Second Forbearance Effective Date, it shall mean the last Business
Day of each calendar month, commencing on the first such date to occur on or
after the Second Forbearance Effective Date.”
(viii) The
definition of “Responsible
Officer” is deleted in its entirety and replaced with the
following:
““Responsible Officer” means as
to any Person, any of the president, chief executive officer (to the extent an
individual has been appointed to such position by the Board of Directors or
other applicable governing body of such Person), chief financial officer, the
treasurer or the assistant treasurer, principal financial officer, principal
accounting officer or the general counsel, of such Person.”
(ix) The
definition of “Restructuring
Amendment” is amended by inserting the following new sentence immediately
at the end of the existing definition thereof:
“In no
event shall the Second Forbearance Agreement be deemed to constitute a
Restructuring Amendment.”
(x) the
following new definitions are hereby added in the appropriate alphabetical
order:
““Control Agreements” means a
tri-party deposit account control agreement by and among the applicable Credit
Party, the Collateral Agent and the respective depository institution, each in
form and substance reasonably satisfactory to the Collateral Agent and in any
event providing the Collateral Agent “control” of such deposit account within
the meaning of Article 9 of the UCC.
“Second Forbearance Agreement” means
the Second Forbearance Agreement; Third Amendment to the Second Amended and
Restated Credit and Guaranty Agreement and First Amendment to Pledge and
Security Agreement dated as of December 9, 2008 by and among the Company, the
other Credit Parties, the Lender parties thereto and Agent.
“Second Forbearance Effective
Date” has the meaning assigned to that term in the Second Forbearance
Agreement.
“Second Forbearance Period” has
the meaning assigned to that term in the Second Forbearance
Agreement.
“Second Forbearance Termination
Date” has the meaning assigned to that term in the Second Forbearance
Agreement.”
(b) Section
1.2 shall be amended by inserting the following sentence at the end
thereof:
“Notwithstanding
anything herein to the contrary or the requirements of GAAP, with respect to the
consolidated balance sheet of the Company and its Subsidiaries for each fiscal
month and Fiscal Quarter ending on or after September 27, 2008, the Company
shall not reclassify any long-term debt as short-term debt solely as a result of
the existence of the Specified Defaults (as defined in the Second Forbearance
Agreement).”.
(c) Section
2.9 shall be amended by (x) the deleting the phrase “2% per annum in excess of”
in each of the three places it appears therein and (y) deleting the word
“increased” appearing in the last sentence thereof.
(d) Section
2.10 shall be amended by:
(i) Section
2.10(a) shall be amended by inserting “provided that, from
and after the Second Forbearance Effective Date, such fees shall be payable on
the last Business Day of each calendar month in arrears” at the end thereof
..
(ii) Section
2.10(b) shall be amended by inserting “provided that, from
and after the Second Forbearance Effective Date, such fees shall be payable on
the last Business Day of each calendar month in arrears” at the end of the first
sentence therein.
(iii) Section
2.10(c) shall be amended by inserting “provided that, from
and after the Second Forbearance Effective Date, such fees shall be payable on
the last Business Day of each calendar month in arrears” at the end thereof
..
(e) Each of
Sections 2.12, 2.13 and 2.14 shall be amended by adding the following new clause
(designated clause “(d)” in the case of Sections 2.12 and 2.14 and designated
clause “(g)” in the case of Section 2.13) as follows:
“[(d)/(g)] it is understood and agreed
that, for all periods from and after the Second Forbearance Effective Date, the
provisions of Sections 2.12, 2.13 and 2.14 shall be subject to the express
requirements of Section 5(f) of the Second Forbearance Agreement and, in the
event of any conflict or inconsistency, the provisions of said Section 5(f) of
the Second Forbearance Agreement shall control.”
(f) Section
5.1(c)(ii) shall be amended by inserting the following at the end
thereof:
“provided that, the
certified public accountants’ report relating to the Company’s audited
consolidated financial statements for the Fiscal Year ending 2008, may be
qualified solely as a result of the existence of the Specified Defaults and the
defaults or events of default arising under the Senior Subordinated Note
Indenture which are set forth on Exhibit A to the Second Forbearance
Agreement;”.
(g) Section
6.1 shall be amended by inserting the following new paragraph at the end
thereof:
“Notwithstanding
the foregoing, the Credit Parties may incur Indebtedness to Subsidiaries of
Holdings which are not Credit Parties in excess of the amounts otherwise
permitted in this Section 6.1 solely to permit compliance with Section
4.5(b)(iv) of the Pledge and Security Agreement; provided that, such
Indebtedness shall be in compliance with the second proviso set forth in Section
6.1(e).”
(h) Section
6.3 shall be amended by inserting the following new paragraph at the end
thereof:
“Notwithstanding
the foregoing, the Credit Parties may make Investments in Subsidiaries of
Holdings which are not Credit Parties in excess of the amounts otherwise
permitted in this Section 6.3 solely to permit compliance with Section
4.5(b)(iv) of the Pledge and Security Agreement.”
(i) Section
8.1 shall be amended by:
(i) in
Section 8.1(c) inserting “(x)” immediately after the phrase “perform or comply
with” appearing therein and inserting the following new text at the end of the
existing text thereof and before the semicolon at the end thereof:
“or (y)
any term or condition contained in Section 4.5 of the Pledge and Security
Agreement; provided that, with
respect to the execution and delivery of Control Agreements as required by
subclause (b)(i) thereof, such default shall not have been remedied or waived
within three Business Days after the original date of required compliance
therewith”.
(ii) Replacing
every instance of the phrase “Company or any of its Material Subsidiaries (or
any group of Company’s Subsidiaries that, taken as a whole, would constitute a
Material Subsidiary” in Sections 8.1(f) and (g) with the phrase “Company or any
of its Subsidiaries”.
(iii) Adding
the word “or” at the end of Section 8.1(l).
(iv) Adding
the following as subsections (m) and (n) which shall precede the final two
paragraphs of Section 8.1:
“(m) the failure of the Senior
Subordinated Notes or any other Subordinated Indebtedness to be subordinated as
provided by any subordination provision related to such Subordinated
Indebtedness or any Credit Party shall contest in writing the validity or
enforceability of such provisions; or
(n) the failure by the Company
or any Guarantor to comply with any term or condition contained in the Second
Forbearance Agreement; provided that, (x)
with respect to any default in the performance of or compliance with any term
contained in paragraphs (c), (d), (e), (g), (h), (i) and (n) of Section 5 of the
Second Forbearance Agreement, such default shall not have been remedied or
waived within three Business Days after the original date of required compliance
therewith and (y) with respect to any default in the performance of or
compliance with covenants in the Second Forbearance Agreement not subject to a
date, the respective default shall not have been remedied or waived within three
Business Days after the earlier of (A) a Responsible Officer of any Credit Party
becoming aware of such default or (B) receipt by the Company of notice from the
Agent of such default.”
|
|
SECTION
4.
|
Amendments
to Pledge and Security
Agreement
|
Effective as of the Second Forbearance
Effective Date, the following provisions of the Pledge and Security Agreement
shall be amended as set forth below.
(a) Amendments to Section
1.1.
(i) The
definition of “Deposit
Accounts” shall be amended by adding, immediately at the end of the
existing text thereof, the phrase “or listed on Schedule 4.5”.
(ii) The
following new definitions are hereby added in the appropriate alphabetical
order:
“Bank” shall have the meaning
provided in Section 9-102 of the UCC.
“Control” shall mean, in the
case of each Deposit Account, “control” as such term is defined in Section 9-104
of the UCC.
“Trust Funds” shall mean any
Cash and Cash Equivalents constituting (i) payroll, payroll taxes, and other
employee wage and benefit payments to or for the benefit of Company’s or any of
its Subsidiaries’ employees and accrued and unpaid employee compensation
(including salaries, wages, benefits and expense reimbursements) and (ii) all
taxes required to be collected or withheld (including, without limitation,
federal and state withholding taxes (including the employer’s share thereof),
taxes owing to any governmental authority, sales, use and excise taxes, customs
duties, import duties and independent customs brokers’ charges), other taxes for
which the Company or any of its Subsidiaries may become liable and any other
fiduciary funds, in each case, solely to the extent that (x) the failure to
remit such Trust Funds to the Person entitled thereto would result under
applicable law in potential personal, criminal or civil liability to any
director, officer or employee of the Company or any of its Subsidiaries, (y) in
the case of amounts described in the preceding clause (i), the amounts
constituting Trust Funds in a given Deposit Account shall represent
(without duplication) accrued and unpaid employee compensation through the date
upon which the respective Grantor received the notice from the Collateral Agent
of its exercise of remedies with respect to such Deposit Account as required by
Section 7.4(b) (or, if sooner, the date of any Default or Event of Default with
respect to such Grantor pursuant to Section 8.1(f) or (g) of the Credit
Agreement), additional employee compensation for a period not to extend beyond
the third Business Day following its receipt of such notice (or the earlier
occurrence of such Default) and checks or direct deposit amounts already paid
(prior to the receipt of notice or Default or Event of Default described above)
in respect of prior pay periods which have not yet cleared, and (z) in each
case, any amounts to constitute Trust Funds shall only constitute same if, and
to the extent that, the Collateral Agent has received an officer’s certificate
from the chief financial officer of the Company, which certifies the aggregate
amount to be withheld or which shall constitute Trust Funds, and the respective
Deposit Accounts pursuant to which such Trust Funds are requested to be made
available, in each case received by the Collateral Agent within ten (10)
Business Days after the date upon which the respective Grantor received the
notice from the Collateral Agent of its exercise of remedies with respect to
such Deposit Account as required by Section 7.4(b) or, if sooner, the date of
any Default or Event of Default with respect to such Grantor pursuant to Section
8.1(f) or (g) of the Credit Agreement.
(b) Section
2.1 shall be amended by inserting the following at the end of paragraph (k)
before for the semi-colon:
“and all
Deposit Accounts maintained by such Grantor with any person and all Monies,
securities, Instruments and other investments deposited or required to be
deposited in any of the foregoing”.
(c) Section 4.5 shall be amended by
deleting the existing said provision thereof in its entirety and by inserting in
lieu thereof the following new Section 4.5:
“4.5 Deposit Accounts.
(a) Representations and
Warranties. As of the Second Forbearance Effective Date, no
Grantor maintains any Deposit Accounts other than the accounts listed in
Schedule 4.5 hereto. The two accounts listed on Part II of Schedule 4.5 (the
“Existing Escrow
Accounts”) are existing accounts previously established to escrow certain
funds, and no other amounts have been deposited therein (other than interest
accruing in such accounts). The maximum amount on deposit in each such Existing
Escrow Account on the Second Forbearance Effective Date is correctly set forth
in Part II of Schedule 4.5. Each Grantor is the sole account holder of each such
Deposit Account and such Grantor has not consented to, and is not otherwise
aware, of any person (other than the Collateral Agent pursuant hereto) having
sole dominion and control (within the meaning of common law) or “control”
(within the meaning of Section 9-104 of the UCC) over, or any other interest in,
any such Deposit Account and any Money or other property deposited
therein.
(b) Covenants.
(i) With
respect to each Deposit Account of any Grantor in existence on the Second
Forbearance Effective Date (other than the Existing Escrow Accounts), the
respective Grantor shall deliver to the Collateral Agent, within the time
required by the immediately succeeding sentence, (x) a Control Agreement duly
executed by such Grantor and the applicable Bank with respect to each such
Deposit Account, at which time the Collateral Agent will have a first priority
security interest (subject to such Bank’s rights as provided in the respective
Control Agreement) in each such Deposit Account, which security interest is
perfected by Control or (y) evidence reasonably satisfactory to the Collateral
Agent that each such Deposit Account that is not subject to a Control Agreement
has been closed. All Control Agreements required by the immediately
preceding sentence shall be required to be fully executed and delivered to the
Collateral Agent no later than ten Business Days after the Second Forbearance
Effective Date; provided that, such
date may be extended by an additional five Business Days at the reasonable
request of the Company; and
(ii) No
Grantor shall, at any time after the Second Forbearance Effective Date,
establish, open or acquire any Deposit Account unless, prior thereto, the
respective Bank and Grantor shall have duly executed and delivered to the
Collateral Agent a Control Agreement, in form and substance reasonably
satisfactory to the Agent, with respect to such Deposit Account or the
Collateral Agent otherwise has Control over such Deposit Account pursuant to
documentation in form and substance satisfactory to the Collateral
Agent.
(iii) From
and after the time for compliance with clause (i) above has passed (and after
giving effect to the extension of time set forth in the proviso to such clause
(i) to the extent actually extended), each Grantor shall cause all of its
unrestricted cash balances (including all payments with respect to Accounts but
excluding ▇▇▇▇▇ cash not to exceed US $20,000.00) to be deposited (whether
directly or indirectly) in one or more Deposit Accounts which are subject to a
Control Agreement in favor of and to the reasonable satisfaction of the
Collateral Agent.
(iv) At
no time shall the Subsidiaries of the
Company which are not Grantors hold unrestricted Cash, Cash Equivalents or
similar items; provided that, (a)
Subsidiaries organized under the laws of Canada may collectively hold
unrestricted Cash, Cash Equivalents, and similar items up to an amount less than
or equal to Cdn $10.0 million (less outstanding checks) at any time, (b)
Subsidiaries organized under the laws of Puerto Rico may collectively hold
unrestricted Cash, Cash Equivalents, and similar items up to an amount less than
or equal to US $2.0 million (less outstanding checks) at any time, and (c)
Subsidiaries organized under the laws of Liechtenstein may collectively hold
unrestricted Cash, Cash Equivalents, and similar items up to an amount less than
or equal to US $15,000.00 (less outstanding checks) at any time.
(v) No
Grantor shall deposit, or permit to be deposited, additional amounts in any
Existing Escrow Account (other than interest accruing in such accounts) on or
after the Second Forbearance Effective Date. Furthermore, if any amounts are
released to any Grantor from any Existing Escrow Account or are no longer
required to be maintained on deposit therein, the Grantors shall cause such
amounts to be transferred to one or more Deposit Accounts (that are not Existing
Escrow Accounts) meeting the above requirements in this Section
4.5(b).”
(d) Section
7.4 shall be amended by deleting the existing text thereof in its entirety and
by inserting in lieu thereof the following:
“(a) If
any Event of Default shall have occurred and be continuing, the Collateral Agent
may apply the balance from any Deposit Account (other than any Existing Escrow
Account) or instruct any Bank at which any such Deposit Account is maintained to
transfer all monies, securities and instruments held by such Bank to the
Collateral Agent or withhold any withdrawal rights from such Grantor with
respect to funds credited to any Deposit Account in accordance with the terms of
the applicable Control Agreement. The Collateral Agent agrees that
the actions permitted pursuant to the preceding sentence shall not be taken at
any time if an Event of Default has not occurred and is continuing.
(b) The
Collateral Agent acknowledges that the Deposit Accounts subject to Control
Agreements or otherwise under its Control may contain from time to time Trust
Funds, which the Grantors are required to collect and remit from time to time
but which, pending such remittance, shall be contained or held in such Deposit
Accounts. Following any exercise of control by the Collateral Agent as described
in the first sentence of Section 7.4(a), the Collateral Agent agrees (to the
extent permitted by law) to promptly notify the Grantors of such exercise (which
notice may be by delivery of a copy of the notice of exclusive or sole control);
provided that,
any delay or failure of giving such notice shall not affect the validity
thereof. Upon receipt of such notice (or if sooner, the occurrence of a Default
or Event of Default with respect to such Grantor pursuant to Section 8.1(f) or
(g) of the Credit Agreement), the relevant Grantors may, within 10 Business Days
thereafter, deliver (or cause to be delivered) an officer’s certificate
complying with clause (z) of the definition of Trust Funds certifying the type
and amount of any Trust Funds contained or held in the respective Deposit
Account(s) and that the failure to remit such Trust Funds to the person entitled
thereto would result under applicable law in potential personal, criminal or
civil liability to any director, officer or employee of the Company or its
Subsidiaries. Notwithstanding anything to the contrary contained herein, upon
receipt of any such officer’s certificate by the Collateral Agent, the
Collateral Agent shall remit within one Business Day of receipt of such
officer’s certificate (or instruct the relevant Bank to remit) the amount of the
Trust Funds specified in such officer’s certificate to the respective Grantor
for payment to the appropriate Person.”
(e) The
Pledge and Security Agreement shall be further amended by inserting a new
Schedule 4.5 thereto in the form attached hereto as Exhibit B.
|
|
SECTION
5.
|
Supplemental
Terms, Conditions and Covenants On and After the Second Forbearance
Effective Date.
|
The Credit Parties hereto hereby agree
to comply with the following terms, conditions and covenants from and after the
Second Forbearance Effective Date, in each case notwithstanding any provision to
the contrary set forth in this Agreement, the Forbearance Agreement, the Credit
Agreement or any other Credit Document:
(a) Specified
Defaults. Each of the Specified Defaults shall be deemed to be
an Event of Default (other than the events described in items 2 and 3 on Exhibit
A, until the holders of the Senior Subordinated Notes (or the trustee on behalf
of such holders) shall have the right to accelerate the Senior Subordinated
Notes), from and after the Second Forbearance Termination Date.
(b) Minimum
Liquidity. From and after the Second Forbearance Effective
Date, Holdings and the Company shall not, directly or indirectly, at any time
permit (i) the sum of the Cash and Cash Equivalents of the Company and all of
its Domestic Subsidiaries at the close of business on any Business Day which are
on deposit in one or more Deposit Accounts (as defined in the Pledge and
Security Agreement) with respect to which Control Agreements (as defined in the
Pledge and Security Agreement) in favor of the Collateral Agent are then in
effect (or, if prior to the expiration of the extension period provided in
Section 4.5(b)(i) of the Pledge and Security Agreement and the grace period
provided in Section 8.1(n)(y) of the Credit Agreement, with respect to which
Control Agreements are expected to be entered into before the termination of
such grace period) or are otherwise in one or more Deposit Accounts of the
Grantors maintained with the Collateral Agent where it has Control for the
benefit of the Secured Parties (the “Daily Cash Balance”)
to be less than $2.5 million on any two consecutive Business Days or (ii) the
average Daily Cash Balance for any five consecutive Business Days to be less
than $7.5 million (with the covenant contained in this sentence being herein
called the “Minimum
Liquidity Covenant”). The Company shall deliver to the Agent
on Wednesday (or the immediately succeeding Business Day if Wednesday is not a
Business Day) of each week (commencing with the week of December 15, 2008) a
report of the Daily Cash Balances as a consolidated number for each Business Day
of the preceding week, certified by the Company’s chief financial officer or
other financial officer of the Company that is a Responsible Officer (it being
understood that any unintentional transpositions or typos in such report shall
not cause a Default or Event of Default so long as after giving effect to any
correction thereto the Minimum Liquidity Covenant is still met for such
period).
(c) Draft of Long Term Business
Plan. The Company shall deliver a long-term business plan
approved by the Company’s Board of Directors (the “Long Term Business
Plan”) to Agent by no later than January 7, 2009, which shall include (i)
forecasted consolidated balance sheets (assuming a static capitalization) and
forecasted consolidated statements of income and cash flows of the Company and
its Subsidiaries for the next succeeding 3 Fiscal Years, together with an
explanation of the material assumptions on which such forecasts are based and
(ii) forecasted consolidated statements of income and cash flows of the Company
and its Subsidiaries for each month of the Fiscal Year ending in 2009, together
with an explanation of the material assumptions on which such forecasts are
based.
(d) Launch of Marketing
Process. On or before January 9, 2009, the Company shall
commence distribution of marketing materials to solicit potential debt and/or
equity investments; provided that, at
least two Business Days prior thereto, the Company shall have delivered drafts
of such marketing materials to the Agent (for further distribution to the
Steering Committee).
(e) Restructuring
Proposal. On or before January 26, 2009, the Company shall
deliver a potential restructuring proposal approved by the Company’s Board of
Directors to the Agent.
(f) Prepayments. From
and after the Second Forbearance Effective Date, all voluntary and mandatory
prepayments of the Loans (exclusive of scheduled repayments under Section 2.11
of the Credit Agreement) shall be applied ratably to (i) repay principal of
outstanding Revolving Loans and Swingline Loans (and after same have been repaid
in full, to repay and/or cash collateralize Letter of Credit Usage) and (ii)
repay outstanding principal of Term Loans, with the amount to be allocated
pursuant to preceding clause (i) to equal the amount of the respective aggregate
amount to be prepaid multiplied by a fraction the numerator of which is the
Total Utilization of Revolving Loan Commitments at such time (less the amount of
any Letter of Credit Usage which has theretofore been, and is at that time, cash
collateralized) and the denominator of which is the sum of the numerator plus
the aggregate principal amount of then outstanding Term Loans, and with the
amount to be applied pursuant to preceding clause (ii) to equal the aggregate
amount to be so prepaid multiplied by a fraction the numerator of which is the
aggregate principal amount of then outstanding Term Loans and the denominator of
which is the same as the denominator described above; provided that, the
forgoing ratable prepayment requirement shall not apply to prepayments of
outstanding Revolving Loans and Swingline Loans (or to the provision of cash
collateral for Letter of Credit Usage) to the extent such prepayments are made
in connection with (x) the substantially simultaneous issuance of a new Letter
of Credit (or the increase in amount of an existing Letter of Credit) and/or (y)
the reimbursement of Revolving Loans deemed made upon the drawing of any Letter
of Credit.
(g) Cooperation and
Access. The Company shall cooperate with the Agent, Moelis and
Company and such other professional advisors retained from time to time by
Agent, in providing reasonable access to the Credit Parties’ books, records,
properties and senior management team upon reasonable prior notice, during
regular business hours and for reasonable durational periods.
(h) Management
Discussions. The Company shall (x) cause its senior management
team, and use its commercially reasonable efforts to cause ▇▇▇▇▇▇ Buckfire and
other appropriate legal advisors, to discuss (at the option of the Company, in
person or telephonically), on a bi-weekly basis during regular business hours
and for reasonable durational periods, with the Agent, its legal advisor and
Moelis and Company and such other professional advisors retained from time to
time by Agent, and the Lenders identified to the Company as the steering
committee (the “Steering Committee”),
among other things, ongoing financial performance and operations, liquidity and
progress with respect to any asset sale, merger, consolidation or other business
combination, equity infusion, financing proposals (including, without
limitation, progress reports on the proposed debtor in possession or exit
financing (“DIP/Exit
Financing”)), change of control transaction or restructuring or plan
proposal (each, a “Proposed
Transaction”); provided that, the
Company shall have no obligation to discuss with the Agent, its legal advisors
or the Steering Committee any competing DIP/Exit Financing transaction and (y)
no later than Wednesday of each week (or the next succeeding Business Day if
Wednesday is not a Business Day), deliver to the Agent (for further distribution
to the Steering Committee), summaries of the material terms of each letter of
intent, memorandum of understanding or similar indication of interest or other
agreement received (or entered into) by the Company or its legal advisors (or
any material modifications thereto) with respect to any Proposed Transaction
(other than with respect to any competing DIP/Exit Financing), prepared by the
Company exercising its reasonable judgment as to the information to be disclosed
to the Agent and the Steering Committee (it being understood that no such weekly
summary shall be required to the extent the Company has not received any such
proposals or documents or there have been no material modifications to
previously received proposals or documents which have been previously
summarized).
(i) Financial and Other
Information. In addition to the financial statements and other
reports required to be provided under the Credit Agreement, the Company shall
deliver to the Agent:
(i) on a
weekly basis, a rolling 13-week consolidated cash flow forecast, in the form set
forth on Exhibit C (the “13-Week Cash Flow
Forecast”). Each delivery of the 13-Week Cash Flow Forecast
shall be deemed to be a representation by the Company that such 13-Week Cash
Flow Forecast has been prepared based upon good faith estimates and assumptions
that the Company believes were reasonable at the time made (it being understood
and agreed that such 13-Week Cash Flow Forecast is not to be viewed as fact and
that actual results during the period or periods covered thereby may differ from
such projected results) and shall be accompanied by a certification of the chief
financial officer or such other financial officer that is a Responsible Officer
that such 13-Week Cash Flow Forecast has been prepared based upon good faith
estimates and assumptions that the Company believes were reasonable at the time
made (it being understood and agreed that such 13-Week Cash Flow Forecast is not
to be viewed as fact and that actual results during the period or periods
covered thereby may differ from such projected results).
(ii) on a
weekly basis, a variance report showing on a line item basis the percentage and
dollar variance of actual cash disbursements and cash receipts for the prior
week from the amounts set forth for such week in the applicable 13-Week Cash
Flow Forecast.
(iii) as soon
as available and in any event within twenty-five (25) days after the end of each
month ending after the Second Forbearance Effective Date, the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such month and the related unaudited consolidated statements of income,
stockholders’ equity and cash flows of the Company and its Subsidiaries for such
month and for the portion of the Company’s Fiscal Year then elapsed, setting
forth in each case in comparative form the corresponding figures for the
preceding Fiscal Year and commencing with the January 2009 financial statements,
the corresponding figures set forth in the Long Term Business Plan, together
with a CFO Certification and MD&A with respect to the foregoing; provided that, with
respect to the fiscal month ending December 2008, the financial statements
referred to above shall be “preliminary” and shall be delivered to the Agent as
soon as available and in any event within forty-five (45) days after the end of
such month.
(j) Fees and
Expenses. The Company shall pay (x) within 10 days of receipt
of a reasonably detailed invoice therefor (subject to redaction to protect
privileges or other confidential communications) all reasonable fees and
expenses to be paid to White & Case LLP and Moelis & Company and (y) on
the earliest of (i) the Second Forbearance Termination Date, (ii) the first
Business Day occurring on or after February 12, 2009, upon which the making of
such payment would not result in a breach of the Minimum Liquidity Covenant, and
(iii) March 31, 2009, to the Agent, for the account of each Lender executing
this Agreement on or prior to the Stated Time (as defined below), a fee equal to
0.25% of such Lender’s Revolving Loan Commitment and Tranche D Term Loan
Exposure as in effect on the Second Forbearance Effective Date, the full amount
of which fee shall be fully earned and shall become due on the Second
Forbearance Effective Date and which, once paid, shall be nonrefundable for any
reason whatsoever.
(k) Prohibition on Assignments
and Participations. From and after the Second Forbearance
Effective Date, the Credit Parties, the Sponsor and each of their respective
Affiliates shall be prohibited from purchasing (by assignment, participation or
otherwise), in whole or in part, any Commitment, Loan, Letter of Credit or any
other Obligation.
(l) Subordinated Indebtedness
Payments. The Company shall give the Agent 10 Business Days’
prior notice of its intent to make any payment (including any payment of
interest but excluding payments in respect of reasonable fees and expenses of
one counsel and one financial advisor for the holders of Subordinated
Indebtedness) with respect to any Subordinated Indebtedness (the “Payment
Notice”).
(m) Restrictions on Cure Rights;
Accordion. Notwithstanding anything in the Credit Agreement to
the contrary, Holdings and the Company shall not, directly or indirectly, (x)
exercise the Cure Right described in Section 8.3 of the Credit Agreement, or (y)
increase the existing Revolving Loan Commitments or establish one or more New
Term Loan Commitments pursuant to Section 2.25 of the Credit
Agreement.
(n) Deposit Accounts; Control
Agreements; Cash Held by Non-Credit Parties; Etc. The Company
shall, and shall cause its Subsidiaries to, comply with the provisions of
Section 4.5 of the Pledge and Security Agreement, and shall take all actions so
that its Subsidiaries which are not Credit Parties transfer unrestricted Cash
and Cash Equivalents as necessary to Deposit Accounts of a Grantor subject to
Control so that no violation of Section 4.5(b)(iv) of the Pledge and Security
Agreement shall occur.
(o) Additional
Restrictions. Notwithstanding anything in the Credit Agreement
to the contrary, from and after Second Forbearance Effective Date, Holdings and
the Company shall not, nor shall they permit any of their Subsidiaries to,
directly or indirectly, (A) incur any Indebtedness, (B) create or incur any
Liens, (C) make any Investments, (D) make any Restricted Junior Payments, or (E)
consummate any Asset Sale, except in the ordinary course of business (it being
understood that extensions, renewals, replacements and issuances of letters of
credit are in the ordinary course of business and without limiting the effect of
the last paragraphs of Sections 6.1 and 6.3 of the Credit Agreement,
intercompany transactions among one or more Credit Parties and any Subsidiary of
Holdings organized under the laws of Canada, Puerto Rico or ▇▇▇▇▇▇▇▇▇▇▇▇ may be
permitted so long as such transactions are in the ordinary course of business
and consistent with past practices). Furthermore, and for the
avoidance of doubt, it is agreed that from and after the Second Forbearance
Effective Date, the Company and its Subsidiaries may not take any action that
would be prohibited by the terms of the Credit Agreement at any time while an
Event of Default is in existence. In addition, from and after the
Second Forbearance Effective Date, no Management Fees shall be payable in cash,
but shall continue to accrue and the Company and its Subsidiaries shall not
enter into, or commit to enter into, any Permitted Sale-Leaseback transaction.
The Credit Parties may pay, in the ordinary course, (i) reasonable out-of-pocket
expenses incurred by not more than ten Sponsor employees or principals
providing services to the Company and (ii) reasonable fees of members of
the Company’s Board of Directors that are not affiliated with the Sponsor and
(without duplication of out-of-pocket expenses paid pursuant to clause (i)
above) the reasonable out-of-pocket expenses of each member of the
Company's Board of Directors.
|
SECTION
6.
|
Representations,
Warranties And Covenants Of Company and Other Credit
Parties.
|
To induce the Lenders and the Agent to
execute and deliver this Agreement, each of the Company and the other Credit
Parties represents, warrants and covenants that:
(a) Organization and
Powers. Each Credit Party is a corporation, limited liability company or
limited partnership, as applicable, duly organized or formed, as applicable,
validly existing and, to the extent such concept applies, in good standing under
the laws of its jurisdiction of incorporation or formation, as
applicable. Each Credit Party has all requisite corporate or other
organizational power and authority to own and operate its properties, to carry
on its business as now conducted and as proposed to be conducted, to enter into
this Agreement and to carry out the transactions contemplated
thereby;
(b) Authorization of Agreement;
No Conflict. The execution, delivery and performance of this Agreement
have been duly authorized by all necessary corporate, limited liability company
or limited partnership, as applicable, action on the part of each Credit Party
that is a party thereto. The execution, delivery and performance by Credit
Parties of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (a) violate any provision of any law or any
governmental rule or regulation applicable to Holdings or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws (or
equivalent constituent documents) of Holdings or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Holdings or any of its Subsidiaries, except to the extent such violation could
not be reasonably be expected to have a Material Adverse Effect, (b) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contractual Obligation of Holdings or any of its
Subsidiaries, (c) result in or require the creation or imposition of any Lien
upon any of the properties or assets of Holdings or any of its Subsidiaries
(other than any Liens created under any of the Credit Documents in favor of
Collateral Agent on behalf of the Secured Parties), or (d) require any approval
of stockholders or any approval or consent of any Person under any Contractual
Obligation of Holdings or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Second Forbearance Effective
Date and disclosed in writing to Lenders and except for any such consents or
approvals the failure of which to obtain would not reasonably be expected to
have a Material Adverse Effect;
(c) Governmental
Consents. The execution, delivery and performance by the Credit Parties
of this Agreement and the consummation of the transactions contemplated hereby
do not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body (a) such as have been obtained and are
in full force and effect and (b) any such consents or approvals the failure of
which to obtain would not reasonably be expected to have a Material Adverse
Effect;
(d) Grantors. Each
Domestic Subsidiary of THL-SC Bedding Company is a Grantor and is a party to the
Pledge and Security Agreement.
(e) Deposit Accounts. As
of the Second Forbearance Effective Date, no Credit Party has any deposit
account containing unrestricted Cash other than the deposit accounts listed in
Schedule 4.5 to the Pledge and Security Agreement.
(f) Binding Obligation.
This Agreement has been duly executed and delivered by each Credit Party and is
the legally valid and binding obligation of such Credit Party, enforceable
against such Credit Party in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors’ rights generally or by equitable principles relating
to enforceability.
(g) Incorporation of
Representations and Warranties and Covenants from Credit Documents.
Except with respect to the Specified Defaults and the Permitted Exceptions, the
representations and warranties contained in the Credit Agreement and each of the
other Credit Documents are and will be true, correct and complete in all
material respects on and as of the Second Forbearance Effective Date to the same
extent as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material respects on and as of
such earlier date, and each of the agreements and covenants in the Credit
Agreement and the other Credit Documents is hereby reaffirmed with the same
force and effect as if each were separately stated herein and made as of the
date hereof.
(h) Absence of Default.
As of the date hereof, except for the Specified Defaults, (x) no Default or
Event of Default has occurred or is continuing under this Agreement, the
Forbearance Agreement, the Credit Agreement or any other Credit Document (it
being understood and agreed that the Company’s failure to deliver any MD&A
required under Section 5.1 of the Credit Agreement prior to the Second
Forbearance Agreement Effective Date has been cured or waived and it is
understood and agreed that any failures as described in items 2 and 3 of Exhibit
A to the Forbearance Agreement shall not constitute a Default or Event of
Default so long as all such failures were cured prior to the Second Forbearance
Effective Date) and (y) except as set forth on Exhibit A, no “Default” or “Event
of Default” (as those terms are defined under the Senior Subordinated Note
Indenture or the documents evidencing the Holdco Notes) has occurred or is
continuing in respect of the Senior Subordinated Notes or the Holdco
Notes.
(i) Collateral. Lenders’
and Agent’s security interests in the Collateral continue to be valid, binding,
and enforceable first-priority security interests which secure the Obligations
(subject only to the Permitted Liens).
(j) Acknowledgement. Each
of the Agent, the Lenders and the Company acknowledges that this Agreement is
not a “Restructuring Amendment” as defined in the Forbearance
Agreement.
SECTION
7. Ratification
of Liability.
(a) Each of
the Company and other Credit Parties hereby ratifies and reaffirms all of its
payment and performance obligations and obligations to indemnify, contingent or
otherwise, under this Agreement and each other Credit Document to which such
party is a party, and each such party hereby ratifies and reaffirms its grant of
Liens on its properties pursuant to such Credit Documents to which it is a party
as security for the Obligations under or with respect to the Credit Agreement,
and confirms and agrees that such Liens hereafter secure all of the
Obligations. Each Guarantor acknowledges the effectiveness and
continuing validity of its guarantee in the Credit Agreement and its liability
for the Obligations pursuant to the terms of such guarantee and that such
obligation is without defense, setoff and counterclaim.
(b) The
Company and each other Credit Party (i) acknowledges receipt of a copy of this
Agreement and all other agreements, documents and instruments executed and/or
delivered in connection herewith, (ii) consents to the terms and conditions of
same without prejudice to any Credit Party’s liability pursuant to any of the
Credit Documents, and (iii) agrees and acknowledges that each of the Credit
Documents remains in full force and effect, that such Credit Party’s obligations
thereunder are without defense, setoff and counterclaim and that each of the
Credit Documents is hereby ratified and confirmed.
SECTION
8. Reference
To And Effect Upon The Credit Agreement.
(a) Except as
expressly modified hereby, all terms, conditions, covenants, representations and
warranties contained in the Credit Agreement and other Credit Documents, and all
rights of Lenders and Agent and all of the Obligations, shall remain in full
force and effect. Each of the Company and the other Credit Parties hereby
confirms that no such party has any right of setoff, recoupment or other offset
with respect to any of the Obligations.
(b) Except as
expressly set forth herein, the effectiveness of this Agreement shall not
directly or indirectly (i) create any obligation to make any further Loans or
issue any Letters of Credit after the Second Forbearance Effective Date, (ii)
create any obligation to make any further Loans or issue any Letters of Credit
or to continue to defer any enforcement action after the occurrence of any
Forbearance Default, (iii) constitute a consent or waiver of any past, present
or future violations, including Defaults and Events of Default, of any
provisions of the Credit Agreement or any other Credit Documents, (iv) amend,
modify, prejudice or operate as a waiver of any provision of the Credit
Agreement or any other Credit Documents or any right, remedy, power or privilege
of Lenders and/or Agent, (v) constitute a consent to any merger or other
transaction or to any sale, restructuring or refinancing transaction, or (vi)
constitute a course of dealing or other basis for altering any Obligations or
any other contract or instrument. Except as expressly set forth
herein, each Lender and Agent reserves all of its rights, remedies, powers and
privileges under the Credit Agreement, the other Credit Documents, applicable
law and/or equity. All of the provisions of the Credit Agreement and the other
Credit Documents are hereby reiterated, and if ever waived, are hereby
reinstated. Notwithstanding any other provision in this Agreement, it
is understood and agreed that during the Second Forbearance Period,
notwithstanding the Company’s inability to make the statements required by
Section 3.2 of the Credit Agreement (or in any Funding Notice or Request for
Issuance required thereby), solely to the extent excused pursuant to the last
sentence of Section 2(d) hereof, but subject to all other terms and conditions
contained in the Credit Agreement and Section 2(d) hereof, any Issuing Bank may
issue, renew, extend or replace Letters of Credit and the Company shall be
permitted to request Revolving Loans (and Lenders agree to make such Revolving
Loans), provided that the Revolving Credit Exposure is not increased or
decreased after giving effect to such issuance, renewal, extension or
replacement of any such Letter of Credit or the making of any such Revolving
Loans.
(c) From and
after the Second Forbearance Effective Date, (i) the term “Agreement” in the
Credit Agreement, and all references to the Credit Agreement in any Credit
Document shall mean the Credit Agreement, and (ii) the term “Credit Document” in
the Credit Agreement and the other Credit Documents shall include, without
limitation, this Agreement and any agreements, instruments and other documents
executed and/or delivered in connection herewith.
(d) This
Agreement shall not be deemed or construed to be a satisfaction, reinstatement,
novation or release of the Credit Agreement or any other Credit
Document.
SECTION
9. Company’s
Release and Duty to Indemnify for Assigned Claims.
(a) By its
execution hereof and in consideration of the mutual covenants contained herein
and other accommodations granted to the Credit Parties hereunder, each Credit
Party, on behalf of itself and each of its Subsidiaries, and its or their
successors, assigns and agents, hereby expressly forever waives, releases and
discharges any and all claims (including, without limitation, cross-claims,
counterclaims, and rights of setoff and recoupment), causes of action (whether
direct or derivative in nature), demands, suits, costs, expenses and damages
(collectively, the “Claims”) any of them
may have or allege to have as of the date of this Agreement (and all defenses
that may arise out of any of the foregoing) of any nature, description, or kind
whatsoever, based in whole or in part on facts, whether actual, contingent or
otherwise, now known, unknown, or subsequently discovered, whether arising in
law, at equity or otherwise, against Agent or any Lender, their respective
affiliates, agents, principals, managers, managing members, members,
stockholders, “controlling persons” (within the meaning of the United States
federal securities laws), directors, officers, employees, attorneys,
consultants, advisors, agents, trusts, trustors, beneficiaries, heirs, executors
and administrators of each of the foregoing (collectively, the “Released Parties”)
involving or otherwise relating to this Agreement or any of the other agreements
entered into in connection herewith, the Credit Agreement, the Credit Documents
or any or all of the actions and transactions contemplated hereby or thereby,
including, without limitation, any actual or alleged performance or
nonperformance by any of the Released Parties hereunder or
thereunder. Each Credit Party hereby acknowledges that the agreements
in this paragraph (a) are intended to be in full satisfaction of all or any
alleged injuries or damages arising in connection with the Claims. In
entering into this Agreement, each Credit Party expressly disclaims any reliance
on any representations, acts, or omissions by any of the Released Parties and
hereby agrees and acknowledges that the validity and effectiveness of the
releases set forth above does not depend in any way on any such representation,
acts and/or omissions or the accuracy, completeness, or validity
thereof. The provisions of this paragraph shall survive the
termination or expiration of the Second Forbearance Period and the termination
of the Credit Documents and the payment in full of all obligations of the Credit
Parties under or in respect of the Credit Agreement and other Credit Documents
and all other amounts owing thereunder.
(b) Each
Credit Party represents and warrants that it has not assigned to any Person any
Claim other than to the Collateral Agent pursuant to the Pledge and Security
Agreement. In the event that the foregoing representation and
warranty is, or is purported to be, untrue, each Credit Party agrees to
indemnify and hold harmless the Released Parties against, and to pay, any and
all actions, demands, obligations, causes of action, decrees, awards, claims,
liabilities, losses and costs (including, but not limited to, reasonable
expenses of investigation and fees and expenses of counsel) that any of the
Released Parties may sustain or incur as a result of the breach or purported
breach of the foregoing representation and warranty, in each case, in the manner
and to the extent set forth in Section 10.3 of the Credit
Agreement. The provisions of this paragraph shall survive the
termination or expiration of the Second Forbearance Period and the termination
of the Credit Documents and the payment in full of all obligations of the Credit
Parties under or in respect of the Credit Agreement and other Credit Documents
and all other amounts owing thereunder.
SECTION
10. Construction.
This Agreement and all other agreements
and documents executed and/or delivered in connection herewith have been
prepared through the joint efforts of all of the parties hereto. Neither the
provisions of this Agreement or any such other agreements and documents nor any
alleged ambiguity therein shall be interpreted or resolved against any party on
the ground that such party or its counsel drafted this Agreement or such other
agreements and documents, or based on any other rule of strict
construction. Each of the parties hereto represents and declares that
such party has carefully read this Agreement and all other agreements and
documents executed in connection therewith, and that such party knows the
contents thereof and signs the same freely and voluntarily. The
parties hereto acknowledge that they have been represented by legal counsel of
their own choosing in negotiations for and preparation of this Agreement and all
other agreements and documents executed in connection herewith and that each of
them has read the same and had their contents fully explained by such counsel
and is fully aware of their contents and legal effect.
SECTION
11. Counterparts.
This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed an
original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart. Any party
hereto may execute and deliver a counterpart of this Agreement by delivering by
facsimile or other electronic transmission a signature page of this Agreement
signed by such party, and any such facsimile or other electronic signature shall
be treated in all respects as having the same effect as an original
signature.
SECTION
12. Severability.
The invalidity, illegality, or
unenforceability of any provision in or obligation under this Agreement in any
jurisdiction shall not affect or impair the validity, legality, or
enforceability of the remaining provisions or obligations under this Agreement
or of such provision or obligation in any other jurisdiction.
SECTION
13. Further
Assurances.
The Company and each other Credit Party
agrees to, and to cause any other Credit Party to, take all further actions and
execute all further documents as Agent may from time to time reasonably request
to carry out the transactions contemplated by this Agreement and all other
agreements executed and delivered in connection herewith; provided that any
failure to do so shall be an Event of Default if such failure has not been
remedied or waived within 5 Business Days after the Company’s receipt of notice
from the Agent.
SECTION
14. Section
Headings.
Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute part
of this Agreement for any other purpose.
SECTION
15. Notices.
All
notices, requests, and demands to or upon the respective parties hereto shall be
given in accordance with the Credit Agreement. For purposes of Section 10.1 of
the Credit Agreement, from and after the Second Forbearance Effective Date the
address of the Agent shall be deemed to be as set forth below (until such time
as the Agent changes such address for notices as permitted pursuant to said
Section 10.1 of the Credit Agreement):
▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy:
▇▇▇ ▇▇▇ ▇▇▇▇
SECTION
16. Governing
Law.
This
Agreement and the rights and obligations of the parties under this Agreement
shall be governed by, and construed and interpreted in accordance with, the law
of the State of New York.
SECTION
17. Acknowledgements.
Each
Credit Party hereby acknowledges that:
(a) it has
carefully read and fully understood all of the terms and conditions of this
Agreement;
(b) it has
consulted with, or had a full and fair opportunity to consult with, and has been
advised by fully competent counsel in the negotiation, execution and delivery of
this Agreement;
(c) it has
had a full and fair opportunity to participate in the drafting of this Agreement
and that no provision of this Agreement shall be construed against or
interpreted to the disadvantage of any party hereto by any court or other
governmental or judicial authority by reason of any party hereto having or being
deemed to have structured, dictated or drafted such provision;
(d) it is
freely, voluntarily, knowingly and intelligently entering into this
Agreement;
(e) none of
the Lenders or Agent has a fiduciary relationship to any Credit Party, and the
relationship between Agent and the Lenders, on the one hand, and the Credit
Parties, on the other, is solely that of creditor and debtor; and
(f) no joint
venture exists among the Credit Parties, Agent and the Lenders.
SECTION
18. Effectiveness.
This Agreement shall become effective
at the time (the “Second Forbearance Effective
Date”) that all of the following conditions precedent have been satisfied
as determined by Agent in its sole discretion:
(a) Agreement. Agent
shall have received duly executed signature pages for this Agreement signed by
the Company, each other Credit Party, the Requisite Lenders and the Requisite
Class Lenders holding Term Loans.
(b) Due Authorization.
Agent shall have received resolutions from each Credit Party evidencing the
corporate or similar authority of such Credit Party to execute, deliver and
perform its obligations under this Agreement and, as applicable, all other
agreements and documents executed in connection therewith.
(c) Opinions. The
Agent shall have received opinions of counsel to the Credit
Parties (other than the entities organized under the laws of the
State of Nevada) as to the transactions contemplated hereby in form and
substance reasonably acceptable to Agent.
(d) Financial
Reports. The Company shall have delivered to the Agent all
past due financial reports with respect to the Fiscal Quarter ended September
27, 2008 and related certifications and other information, in each case, as
required under Sections 5.1(b) and (d) of the Credit Agreement.
(e) 13-Week Cash Flow
Forecast. The Company shall have delivered to the Agent the
initial 13-Week Cash Flow Forecast certified by the chief financial officer of
the Company as being prepared based upon good faith estimates and assumptions
that were reasonable at the time made (it being understood and agreed that such
13-Week Cash Flow Forecast is not to be viewed as fact and that actual results
during the period or periods covered thereby may differ from such projected
results).
(f) Interest. The
Company shall have paid to the Agent for the account of the Lenders ($[___]),
which shall be the portion of the interest that accrued during the Forbearance
Period under the Forbearance Agreement based on the increase in the Applicable
Margin thereunder applicable immediately prior to the Second Forbearance
Effective Date.3
(g) Forbearance Fee.
Agent shall have received, for the account of each Lender which delivers its
original or facsimile signature page to this Agreement to the Agent or its
designee no later than 6:00 p.m. (New York City time) on December 9, 2008 (the
“Stated Time”),
payment of a Forbearance Fee (which shall be fully earned and non-refundable
when paid) equal to 0.25% of such Lender’s Revolving Loan Commitment and Tranche
D Term Loan Exposure, as the case may be. Such forbearance fee will
not be creditable against any future amendment or forbearance fees.
(h) Other
Fees. The Company shall have paid (x) all the reasonable fees,
expenses and disbursements of White & Case LLP and Moelis & Company, for
which reasonably detailed invoices (subject to redaction to protect privileges
or other confidential communications) have been presented on or prior to the
6:00 p.m. (New York City time) on December 9, 2008 and (y) “evergreen” retainers
of $150,000 to each of White & Case LLP and Moelis &
Company.
SECTION
19. Assignments;
No Third Party Beneficiaries.
This Agreement shall be binding upon
and inure to the benefit of the Company, the other Credit Parties, Lenders,
Agent and their respective successors and assigns; provided, that neither the
Company nor any other Credit Party shall be entitled to delegate any of its
duties hereunder and shall not assign any of its rights or remedies set forth in
this Agreement without the prior written consent of Agent in its sole
discretion. No Person other than the parties hereto and their permitted
successors and assigns, shall have any rights hereunder or be entitled to rely
on this Agreement and all third-party beneficiary rights are hereby expressly
disclaimed.
SECTION
20. Final
Agreement.
This Agreement, the Credit Agreement,
the other Credit Documents, and the other written agreements, instruments, and
documents entered into in connection herewith and therewith (collectively, the
“Company/Lender
Documents”) set forth in full the terms of agreement between the parties
hereto and thereto and are intended as the full, complete, and exclusive
contracts governing the relationship between such parties, superseding all other
discussions, promises, representations, warranties, agreements, undertakings and
understandings between the parties with respect thereto. No term of
the Company/Lender Documents may be amended, restated, waived or otherwise
modified except in a writing signed by the party against whom enforcement of the
modification, amendment, or waiver is sought, unless otherwise provided in the
applicable Company/Lender Document. Any waiver of any condition in,
or breach of, any of the foregoing in a particular instance shall not operate as
a waiver of other or subsequent conditions or breaches of the same or a
different kind. Lenders’ and/or Agent’s exercise or failure to
exercise any rights or remedies under any of the foregoing in a particular
instance shall not operate as a waiver of its right to exercise the same or
different rights, remedies, powers and privileges in any other
instances. There are no oral agreements among the parties
hereto.
[Signature
pages to follow]
|
|
IN
WITNESS WHEREOF, this Second Forbearance Agreement; Third Amendment to Second
Amended and Restated Credit and Guaranty Agreement and First Amendment to the
Pledge and Security Agreement has been executed by the parties hereto as of the
date first written above.
▇▇▇▇▇▇▇ BEDDING
COMPANY,
By:
________________________________
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title:
Executive Vice President, Chief Financial Officer,
Treasurer and Assistant
Secretary
|
|
THL-SC BEDDING
COMPANY,
By:
_____________________________
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title:
Executive Vice President, Chief Financial Officer,
Treasurer and Assistant
Secretary
THE
SIMMONS MANUFACTURING CO., LLC
WORLD
OF SLEEP OUTLETS, LLC
SIMMONS
CONTRACT SALES, LLC
WINDSOR
BEDDING COMPANY
SIMMONS
EXPORT CO.
By:
_________________________________
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title:
Executive Vice President, Chief Financial Officer,
Treasurer and Assistant
Secretary
DREAMWELL,
LTD.
SIMMONS
CAPITAL MANAGEMENT, LLC
By:
_________________________________
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title:
President and Treasurer
DEUTSCHE
BANK AG, NEW YORK BRANCH,
As
Agent
By:
____________________________________
Name: [_____________________]
Title: [_____________________]
By:
____________________________________
Name: [_____________________]
Title: [_____________________]
DEUTSCHE
BANK A.G., CAYMAN ISLANDS BRANCH,
Individually
as a Lender
By:
____________________________________
Name: [_____________________]
Title: [_____________________]
By:
____________________________________
Name: [_____________________]
Title: [_____________________]
EXHIBIT A (Specified Events
of Default)
|
1.
|
The
failure of the Company to comply with Section 6.6 (all Section references
in this Exhibit A are to the Credit Agreement) for the Fiscal Quarter[s]
ended September 27, 2008 and December 27,
2008.
|
|
2.
|
Any
Default or Event of Default pursuant to Section 8.1(b) occurring on or
after January 15, 2009 solely as a result an “Default” or “Event of
Default” under, and as defined in, the Senior Subordinated Note Indenture,
which occurs as a result of the Company’s failure to pay regular scheduled
interest payments with respect to the Senior Subordinated Notes on or
after January 15, 2009.
|
|
3.
|
Any
Default or Event of Default pursuant to Section 8.1(b) as a result of a
default under Section 4.03 of the Senior Subordinated Note Indenture as a
result of the failure of the Company to furnish certain periodic
reports.
|
|
4.
|
Any
Default or Event of Default pursuant to Sections 5.1(h) or 8.1(d) as a
result of the events or conditions described in 1 – 3
above.
|
EXHIBIT
B
SCHEDULE
4.5
TO PLEDGE
AND SECURITY AGREEMENT
|
|
I. DEPOSIT
ACCOUNTS (OTHER THAN EXISTING ESCROW ACCOUNTS DESCRIBED IN PART II BELOW)
AS OF THE SECOND FORBEARANCE EFFECTIVE
DATE
|
|
Grantor
|
Name
of Depositary
|
Bank
Account No.
|
Account
Name
|
|
▇▇▇▇▇▇▇
Bedding Company
|
Wachovia
|
2079900423033
|
▇▇▇▇▇▇▇
Bedding Company
|
|
The
Simmons Manufacturing Co., LLC
|
Wachovia
|
2079900242799
|
▇▇▇▇▇▇▇
Manufacturing Company Lockbox
|
|
The
Simmons Manufacturing Co., LLC
|
First
Hawaiian Bank
|
49-040212
|
Hawaiian
Lockbox
|
|
Simmons
Contract Sales, LLC
|
Wachovia
|
2000017263223
|
Simmons
Contract Sales, LLC
|
|
World
of Sleep Outlets, LLC
|
Wachovia
|
2005800875182
|
▇▇▇▇▇▇▇
Mattress Outlet
|
|
World
of Sleep Outlets, LLC
|
US
Bank
|
153505034261
|
▇▇▇▇▇▇▇
Factory Outlet
|
|
World
of Sleep Outlets, LLC
|
Chase
|
1563958618
|
▇▇▇▇▇▇▇
Mattress Factory Outlet
|
|
World
of Sleep Outlets, LLC
|
Bank
of America
|
004968328105
|
World
of Sleep Outlets, LLC
|
|
World
of Sleep Outlets, LLC
|
National
Penn
|
8920974
|
Simmons
Co Factory Outlets (D/B/A World of Sleep Outlets)
|
|
World
of Sleep Outlets, LLC
|
Capital
Bank
|
4581
|
Simmons
World of Sleep, Inc.
|
|
Simmons
Capital Management, LLC
|
US
Bank
|
153790589847
|
SCM
|
|
Simmons
Capital Management, LLC
|
US
Bank
|
153790554841
|
SCM
|
|
Dreamwell,
Ltd.
|
US
Bank
|
153790554858
|
Dreamwell
|
|
Dreamwell,
Ltd.
|
US
Bank
|
253710015202
|
Dreamwell
|
II. EXISTING
ESCROW ACCOUNTS
|
Grantor
|
Name
of Depositary
|
Bank
Account No.
|
Account
Name
|
Maximum
Deposited Amount
|
EXHIBIT
C
13-Week Cash Flow
Forecast