Credit Agreement - Sealy Mattress Co.
EXHIBIT I
[FORM OF NOTICE OF BORROWING]
NOTICE OF BORROWING
Pursuant to that certain Credit Agreement dated as of December 18, 1997, as
amended, supplemented or otherwise modified to the date hereof (said Credit
Agreement, as so amended, supplemented or otherwise modified, being the ``CREDIT
AGREEMENT'', the terms defined therein and not otherwise defined herein being
used herein as therein defined), by and among Sealy Mattress Company, an Ohio
corporation, as borrower (``COMPANY''), Sealy Corporation, a Delaware
corporation, as guarantor, Goldman Sachs Credit Partners L.P., as arranger and
syndication agent, the financial institutions listed therein as Lenders
(``LENDERS''), Morgan Guaranty Trust Company of New York, as administrative
agent (``ADMINISTRATIVE AGENT''), and Bankers Trust Company, as documentation
agent, this represents Company's request to borrow as follows:
1. Date of borrowing:
----------------- ---------------------------, ------------
2. Amount of borrowing: $
------------------- ---------------------------
3. Lender(s): [ ] a. Lenders, in
----------
accordance with their applicable Pro
Rata Shares
[ ] b. Swing Line Lender
4. Type of Loans: [ ] a. Tranche A Term Loans
-------------
[ ] b. Revolving Loans
[ ] c. Swing Line Loan
5. Interest rate option: [ ] a. Base Rate Loan(s)
--------------------
[ ] b. Eurodollar Rate Loans with an
initial Interest
Period of ____________ month(s)
The proceeds of such Loans are to be deposited in Company's account at
Administrative Agent.
The undersigned officer, to the best of his or her knowledge, on behalf of
the Company certifies that:
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are or shall be true, correct and
complete in all material respects on and as of the date hereof to the same
extent as though made on and as of the Funding Date, except to the extent
such representations and warranties specifically relate
<PAGE>
to an earlier date, in which case such representations and warranties were
true, correct and complete in all material respects on and as of such
earlier date;
[(i) No event has occurred and is continuing or would result from the
consummation of the borrowing contemplated hereby that would constitute an
Event of Default or a Potential Event of Default; [and]
[(ii) FOR REVOLVING LOANS: The amount of the proposed borrowing will
not cause the Total Utilization of Revolving Loan Commitments to exceed the
Revolving Loan Commitments.].
DATED: ____________________ SEALY MATTRESS COMPANY
By:
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT II
[FORM OF NOTICE OF CONVERSION/CONTINUATION]
NOTICE OF CONVERSION/CONTINUATION
Pursuant to that certain Credit Agreement dated as of December 18, 1997, as
amended, supplemented or otherwise modified to the date hereof (said Credit
Agreement, as so amended, supplemented or otherwise modified, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined), by and among Sealy Mattress Company, an Ohio
corporation, as borrower ("COMPANY"), Sealy Corporation, a Delaware corporation,
as guarantor, Goldman Sachs Credit Partners L.P., as arranger and syndication
agent, the financial institutions listed therein as Lenders, Morgan Guaranty
Trust Company of New York, as administrative agent, and Bankers Trust Company,
as documentation agent, this represents Company's request to convert or continue
Loans as follows:
1. Date of conversion/continuation:
------------------------------- ----------------,------
2. Amount of Loans being converted/continued: $
----------------------------------------- -----------
3. Type of Loans being [_] a. Tranche A Term Loans
converted/continued: [_] b. Revolving Loans
-------------------
4. Nature of conversion/continuation:
---------------------------------
[_] a. Conversion of Base Rate Loans to Eurodollar Rate Loans
[_] b. Conversion of Eurodollar Rate Loans to Base Rate Loans
[_] c. Continuation of Eurodollar Rate Loans as such
5. If Loans are being continued as or converted to Eurodollar Rate
Loans, the duration of the new Interest Period that commences on the
conversion/continuation date: month(s)
---------------
II-I-1
<PAGE>
In the case of a conversion to or continuation of Eurodollar Rate Loans, the
undersigned officer, to the best of his or her knowledge, and Company certify
that no Event of Default has occurred and is continuing under the Credit
Agreement.
DATED: SEALY MATTRESS COMPANY
-------------------------
By:
---------------------------------
Name:
Title:
II-I-2
<PAGE>
EXHIBIT III
[FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT]
NOTICE OF ISSUANCE OF LETTER OF CREDIT
Pursuant to that certain Credit Agreement dated as of December 18, 1997, as
amended, supplemented or otherwise modified to the date hereof (said Credit
Agreement, as so amended, supplemented or otherwise modified, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined), by and among Sealy Mattress Company, an Ohio
corporation, as borrower ("COMPANY"), Sealy Corporation, a Delaware corporation,
as guarantor, Goldman Sachs Credit Partners L.P., as arranger and syndication
agent, the financial institutions listed therein as Lenders, Morgan Guaranty
Trust Company of New York, as administrative agent ("ADMINISTRATIVE AGENT"), and
Bankers Trust Company, as documentation agent, this represents Company's request
for the issuance of a Letter of Credit by Administrative Agent as follows:
1. Date of issuance of Letter of Credit: ________________, ________
------------------------------------
2. Type of Letter of Credit: [_] a. Commercial Letter of Credit
------------------------
[_] b. Standby Letter of Credit
3. Face amount of Letter of Credit: $________________________
-------------------------------
4. Currency of Letter of Credit (if not in U.S. Dollars):
----------------------------------------------------- ----------
5. Expiration date of Letter of Credit: ________________, ________
-----------------------------------
6. Name and address of beneficiary:
-------------------------------
___________________________________________
___________________________________________
___________________________________________
___________________________________________
7. Attached hereto is:
------------------
[_] a. the verbatim text of such proposed Letter of Credit
[_] b. a description of the proposed terms and conditions of such
Letter of Credit, including a precise description of any
documents to be presented by the beneficiary which, if
presented by the beneficiary prior to the expiration date of
such Letter of Credit, would require the Issuing Lender to
make payment under such Letter of Credit.
III-1
<PAGE>
The undersigned officer, to the best of his or her knowledge, on behalf of
the Company certifies that:
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are or shall be true, correct and
complete in all material respects on and as of the date of issuance of the
proposed Letter of Credit, to the same extent as though made on and as of
the date hereof, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties were true, correct and complete in all material respects on
and as of such earlier date;
(ii) No event has occurred and is continuing or would result from the
issuance of the Letter of Credit contemplated hereby that would constitute
an Event of Default or a Potential Event of Default; and
(iii) The issuance of the proposed Letter of Credit will not cause (a)
the Letter of Credit Usage to exceed $20,000,000 or (b) the Total
Utilization of Revolving Loan Commitments to exceed the Revolving Loan
Commitments.
DATED: ____________________ SEALY MATTRESS COMPANY
By:
----------------------------
Name:
Title:
III-2
<PAGE>
EXHIBIT IV
[FORM OF TRANCHE A TERM NOTE]
SEALY MATTRESS COMPANY
PROMISSORY NOTE DUE DECEMBER __, 2002
$[1] New York, New York
[Closing Date]
FOR VALUE RECEIVED, SEALY MATTRESS COMPANY, an Ohio corporation ("COMPANY"),
promises to pay to [2] ("PAYEE") or its registered assigns the principal amount
of [3] ($[1]) in the installments referred to below.
Company also promises to pay interest on the unpaid principal amount hereof,
from the date hereof until paid in full, at the rates and at the times which
shall be determined in accordance with the provisions of that certain Credit
Agreement dated as of December 18, 1997 by and among Company, Sealy Corporation,
a Delaware corporation, as guarantor, Goldman Sachs Credit Partners L.P., as
arranger and syndication agent, the financial institutions listed therein,
Morgan Guaranty Trust Company of New York, as administrative agent
("ADMINISTRATIVE AGENT"), and Bankers Trust Company, as documentation agent
(said Credit Agreement, as it may be amended, supplemented or otherwise modified
from time to time, being the "CREDIT AGREEMENT", the terms defined therein and
not otherwise defined herein being used herein as therein defined).
Company shall make principal payments on this Note in consecutive quarterly
installments, commencing on March __, 1998 and ending on December __, 2002.
Each such installment shall be due on the date specified in the Credit Agreement
and in an amount determined in accordance with the provisions thereof; provided
--------
that the last such installment shall be in an amount sufficient to repay the
entire unpaid principal balance of this Note, together with all accrued and
unpaid interest thereon.
This Note is one of Company's "Tranche A Term Notes" in the aggregate
principal amount of $120,000,000 and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and
--------------------
[1] Insert amount of Lender's Tranche A Term Loan in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Tranche A Term Loan in words.
IV-1
<PAGE>
conditions under which the Tranche A Term Loan evidenced hereby was made and is
to be repaid.
All payments of principal and interest in respect of this Note shall be made
in lawful money of the United States of America in same day funds at the Funding
and Payment Office or at such other place as shall be designated in writing for
such purpose in accordance with the terms of the Credit Agreement. Unless and
until an Assignment Agreement effecting the assignment or transfer of this Note
shall have been accepted by Agent and recorded in the Register as provided in
subsection 10.1B(ii) of the Credit Agreement, Company and Agent shall be
entitled to deem and treat Payee as the owner and holder of this Note and the
Loan evidenced hereby. Payee hereby agrees, by its acceptance hereof, that
before disposing of this Note or any part hereof it will make a notation hereon
of all principal payments previously made hereunder and of the date to which
interest hereon has been paid; provided, however, that the failure to make a
-------- -------
notation of any payment made on this Note shall not limit or otherwise affect
the obligations of Company hereunder with respect to payments of principal of or
interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in subsections 10.1 and 10.16 of the Credit Agreement.
IV-2
<PAGE>
No reference herein to the Credit Agreement and no provision of this Note or
the Credit Agreement shall alter or impair the obligations of Company, which are
absolute and unconditional, to pay the principal of and interest on this Note at
the place, at the respective times, and in the currency herein prescribed.
After the occurrence of an Event of Default, Company promises to pay all
costs and expenses, including reasonable attorneys' fees, all as provided in
subsection 10.2 of the Credit Agreement, incurred in the collection and
enforcement of this Note. Company hereby consents to renewals and extensions of
time at or after the maturity hereof, without notice, and hereby waives
diligence, presentment, protest, demand and notice of every kind and, to the
full extent permitted by law, the right to plead any statute of limitations as a
defense to any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
SEALY MATTRESS COMPANY
By:
--------------------------------
Name:
Title:
IV-3
<PAGE>
EXHIBIT V
[FORM OF REVOLVING NOTE]
SEALY MATTRESS COMPANY
PROMISSORY NOTE DUE DECEMBER __, 2002
$[1] New York, New York
[Closing Date]
FOR VALUE RECEIVED, SEALY MATTRESS COMPANY, an Ohio corporation ("COMPANY"),
promises to pay to [2] ("PAYEE") or its registered assigns, on or before
December 18, 2002, the lesser of (x) [3] ($[1]) and (y) the unpaid principal
amount of all advances made by Payee to Company as Revolving Loans under the
Credit Agreement referred to below.
Company also promises to pay interest on the unpaid principal amount hereof,
from the date hereof until paid in full, at the rates and at the times which
shall be determined in accordance with the provisions of that certain Credit
Agreement dated as of December 18, 1997 by and among Company, Sealy Corporation,
a Delaware corporation, as guarantor, Goldman Sachs Credit Partners L.P., as
arranger and syndication agent, the financial institutions listed therein,
Morgan Guaranty Trust Company of New York, as administrative agent
("ADMINISTRATIVE AGENT"), and Bankers Trust Company, as documentation agent
(said Credit Agreement, as it may be amended, supplemented or otherwise modified
from time to time, being the "CREDIT AGREEMENT", the terms defined therein and
not otherwise defined herein being used herein as therein defined).
This Note is one of Company's "Revolving Notes" in the aggregate principal
amount of $100,000,000 and is issued pursuant to and entitled to the benefits of
the Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Revolving Loans evidenced
hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be made
in lawful money of the United States of America in same day funds at the Funding
and Payment Office or at such other place as shall be designated in writing for
such purpose in accordance with the terms of the Credit Agreement. Unless and
until an Assignment Agreement effecting the
----------------------
[1] Insert amount of Lender's Revolving Loan Commitment in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Revolving Loan Commitment in words.
V-1
<PAGE>
assignment or transfer of this Note shall have been accepted by Agent and
recorded in the Register as provided in subsection 10.1B(ii) of the Credit
Agreement, Company and Agent shall be entitled to deem and treat Payee as the
owner and holder of this Note and the Loans evidenced hereby. Payee hereby
agrees, by its acceptance hereof, that before disposing of this Note or any part
hereof it will make a notation hereon of all principal payments previously made
hereunder and of the date to which interest hereon has been paid; provided,
--------
however, that the failure to make a notation of any payment made on this Note
-------
shall not limit or otherwise affect the obligations of Company hereunder with
respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in subsections 10.1 and 10.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note or
the Credit Agreement shall alter or impair the obligations of Company, which are
absolute and unconditional, to pay the principal of and interest on this Note at
the place, at the respective times, and in the currency herein prescribed.
After the occurrence of an Event of Default, Company promises to pay all
costs and expenses, including reasonable attorneys' fees, all as provided in
subsection 10.2 of the Credit
V-2
<PAGE>
Agreement, incurred in the collection and enforcement of this Note. Company
hereby consents to renewals and extensions of time at or after the maturity
hereof, without notice, and hereby waives diligence, presentment, protest,
demand and notice of every kind and, to the full extent permitted by law, the
right to plead any statute of limitations as a defense to any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
SEALY MATTRESS COMPANY
By:
-----------------------------------
Name:
Title:
V-3
<PAGE>
TRANSACTIONS
ON
REVOLVING NOTE
Outstanding
Type of Amount of Amount of Principal
Loan Made Loan Made Principal Paid Balance Notation
Date This Date This Date This Date This Date Made By
------- --------- --------- -------------- ----------- --------
V-4
<PAGE>
EXHIBIT VI
[FORM OF SWING LINE NOTE]
SEALY MATTRESS COMPANY
PROMISSORY NOTE DUE DECEMBER __, 2002
$10,000,000 New York, New York
[Closing Date]
FOR VALUE RECEIVED, SEALY MATTRESS COMPANY, an Ohio corporation
("COMPANY"), promises to pay to MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("PAYEE") or its registered assigns, on or before December __, 2002, the
lesser of (x) TEN MILLION AND NO/100 Dollars ($10,000,000.00) and (y) the unpaid
principal amount of all advances made by Payee to Company as Swing Line Loans
under the Credit Agreement referred to below.
Company also promises to pay interest on the unpaid principal amount hereof,
from the date hereof until paid in full, at the rates and at the times which
shall be determined in accordance with the provisions of that certain Credit
Agreement dated as of December 18, 1997 by and among Company, Sealy Corporation,
a Delaware corporation, as guarantor, Goldman Sachs Credit Partners L.P., as
arranger and syndication agent, the financial institutions listed therein,
Morgan Guaranty Trust Company of New York, as administrative agent
("ADMINISTRATIVE AGENT"), and Bankers Trust Company, as documentation agent
(said Credit Agreement, as it may be amended, supplemented or otherwise modified
from time to time, being the "CREDIT AGREEMENT", the terms defined therein and
not otherwise defined herein being used herein as therein defined).
This Note is Company's "Swing Line Note" and is issued pursuant to and
entitled to the benefits of the Credit Agreement, to which reference is hereby
made for a more complete statement of the terms and conditions under which the
Swing Line Loans evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be made
in lawful money of the United States of America in same day funds at the Funding
and Payment Office or at such other place as shall be designated in writing for
such purpose in accordance with the terms of the Credit Agreement.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
VI-1
<PAGE>
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in subsections 10.1 and 10.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note or
the Credit Agreement shall alter or impair the obligations of Company, which are
absolute and unconditional, to pay the principal of and interest on this Note at
the place, at the respective times, and in the currency herein prescribed.
After the occurrence of an Event of Default, Company promises to pay all
costs and expenses, including reasonable attorneys' fees, all as provided in
subsection 10.2 of the Credit Agreement, incurred in the collection and
enforcement of this Note. Company hereby consents to renewals and extensions of
time at or after the maturity hereof, without notice, and hereby waives
diligence, presentment, protest, demand and notice of every kind and, to the
full extent permitted by law, the right to plead any statute of limitations as a
defense to any demand hereunder.
VI-2
<PAGE>
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
SEALY MATTRESS COMPANY
By:
--------------------------------------
Name:
Title:
VI-3
<PAGE>
TRANSACTIONS
ON
SWING LINE NOTE
Outstanding
Amount of Amount of Principal
Loan Made Principal Paid Balance Notation
Date This Date This Date This Date Made By
------- --------- -------------- ----------- --------
VI-4
<PAGE>
EXHIBIT VII
[FORM OF COMPLIANCE CERTIFICATE]
COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFY ON BEHALF OF HOLDINGS (AS DEFINED BELOW) THAT:
(1) We are the duly elected [Title] and [Title] of Sealy Corporation, a
Delaware corporation ("HOLDINGS");
(2) We have reviewed the terms of that certain Credit Agreement dated
as of December 18, 1997, as amended, supplemented or otherwise modified to
the date hereof (said Credit Agreement, as so amended, supplemented or
otherwise modified, being the "CREDIT AGREEMENT", the terms defined
therein and not otherwise defined in this Certificate (including Attachment
No. 1 annexed hereto and made a part hereof) being used in this Certificate
as therein defined), by and among Company, Holdings, Goldman Sachs Credit
Partners L.P., as arranger and syndication agent, the financial institutions
listed therein, Morgan Guaranty Trust Company of New York, as administrative
agent ("ADMINISTRATIVE AGENT"), and Bankers Trust Company, as
documentation agent, and the terms of the other Loan Documents, and we have
made, or have caused to be made under our supervision, a review in
reasonable detail of the transactions and condition of Holdings and its
Subsidiaries during the accounting period covered by the attached financial
statements; and
(3) The examination described in paragraph (2) above did not disclose,
and we have no knowledge of, the existence of any condition or event which
constitutes an Event of Default or Potential Event of Default during or at
the end of the accounting period covered by the attached financial
statements or as of the date of this Certificate.
[Set forth [below] [in a separate attachment to this Certificate] are
all exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Holdings has taken, is taking, or proposes to take with respect to each such
condition or event:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------]
VII-1
<PAGE>
The foregoing certifications, together with the computations set forth
in Attachment No. 1 annexed hereto and made a part hereof and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this ____ day of ____________, [199_] [200_] pursuant to subsection
6.1(iv) of the Credit Agreement.
SEALY CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
VII-2
<PAGE>
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of ______________, [199_][200_] and pertains to the period
from ____________, [199_][200_] to ____________, [199_][200_]. Subsection
references herein relate to subsections of the Credit Agreement.
A. MINIMUM INTEREST COVERAGE RATIO (for the four-Fiscal Quarter
period ending _____________, [199_][200_])
1. Consolidated Net Income: $_____________
2. Consolidated Interest Expense, together with any
non-cash interest expense with respect to the Junior
Subordinated Seller Notes not included in
Consolidated Interest Expense:
$_____________
3. Provisions for taxes based on income (including,
without duplication, foreign withholding tax): $_____________
4. Total depreciation expense: $_____________
5. Total amortization expense: $_____________
6. Other non-cash items reducing Consolidated
Net Income:
7. Less other non-cash items increasing Consolidated
----
Net Income: $_____________
8. Schedule 1.1(i) deductions: $_____________
9. Cumulative effect of accounting changes
to the extent such changes result in a
reduction of Consolidated Net Income: $_____________
10. Cumulative effect of accounting changes
to the extent such changes result in an
increase in Consolidated Net Income $_____________
VII-3
<PAGE>
11. Consolidated Adjusted EBITDA
(1+2+3+4+5+6-7+8+9-10): $_____________
12. Interest Coverage Ratio (11):(2): ____:1.00
13. Minimum ratio required under subsection 7.6A: ____:1.00
B. MAXIMUM LEVERAGE RATIO (as of _____________, [199_][200_])
1. Consolidated Total Debt: $_____________
2. Consolidated Adjusted EBITDA (A.11 above): $_____________
3. Leverage Ratio (1):(2): ____:1.00
4. Maximum Leverage Ratio permitted under subsection
7.6B: ____:1.00
C. MINIMUM CONSOLIDATED ADJUSTED EBITDA (for the four-
Fiscal Quarter period ending ____________, [199_][200_])
1. Consolidated Adjusted EBITDA (A.11 above): $_____________
2. Minimum required under subsection 7.6C: $_____________
D. CONSOLIDATED CAPITAL EXPENDITURES
1. Consolidated Capital Expenditures for Fiscal
Year-to-date: $_____________
2. Maximum amount of Consolidated Capital
Expenditures permitted under subsection 7.8A for
Fiscal Year (as adjusted in accordance with the
provisos to such subsection; calculations attached
hereto): $_____________
3. MIS Upgrade Expenditures not included in
calculations under D.1 above: $_____________
4. Maximum permitted under subsection 7.8B $12,000,000
5. Consolidated Capital Expenditures (not
included in calculations under D.1 or D.3 above)
VII-4
<PAGE>
made in reliance on subsection 7.8C
(calculations against Excess Proceeds Amount at
the time of each such expenditure attached
hereto): $_____________
VII-5
<PAGE>
EXHIBIT VIII
KIRKLAND & ELLIS
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
Citicorp Center
153 East 53rd Street
New York, NY 10022-4675
To Call Writer Direct: 212 446-4800 Facsimile:
212 446-4800 212 446-4900
December 18, 1997
To the Administrative Agent,
the Collateral Agent, the Documentation
Agent, the Syndication Agent and
each of the Lenders party to the
Credit Agreement referred to below:
Ladies and Gentlemen:
We are issuing this opinion letter in our capacity as special legal
counsel to Sealy Corporation, a Delaware corporation ("Holdings"), Sealy
--------
Mattress Company, an Ohio corporation (the "Borrower"), and each other Domestic
--------
Subsidiary of Borrower that is a party to a Subsidiary Guaranty (collectively,
the "Subsidiary Guarantors" and, together with Holdings and the Borrower, the
---------------------
"Credit Parties," and each a "Credit Party"), in response to the requirement in
--------------- ------------
(a) subsections 4.1J(vii) and 4.1(P) of the Credit Agreement (the "Term
----
A/Revolver Credit Agreement") dated as of the date hereof by and among Holdings,
---------------------------
the Borrower, the various lending institutions party thereto (the "Term
----
A/Revolver Lenders"), Goldman Sachs Credit Partners L.P., as Arranger and
------------------
Syndication Agent, Morgan Guaranty Trust Company of New York, as Administrative
Agent, and Bankers Trust Company, as Documentation Agent, and (b) subsection
3.1J(vi) and 3.1(P) of the AXEL Credit Agreement (the "AXEL Credit Agreement,"
---------------------
and together with the Term A/Revolver Credit Agreement, the "Credit
------
Agreements"), dated as of the date hereof by and among Holdings, the Borrower,
the various lending institutions party thereto (the "AXEL Lenders," collectively
------------
with the AXEL Lenders and Term A/Revolver Lenders, (the "Lenders")), Goldman
-------
Sachs Credit Partners L.P., as Arranger and Syndication Agent, Morgan Guaranty
Trust Company of New York, as Administrative Agent and Bankers Trust Company, as
Documentation Agent (the Lenders and the various aforementioned agents under the
Credit Agreements being herein called "you"). The term "Transaction Documents"
--- ---------------------
whenever it is used in this letter means the Credit Agreements and the
following additional documents: (a) the Notes, (b) the Guaranties and Collateral
Documents executed on or before the date hereof listed on Schedule E (the
----------
"Collateral Documents"), (c) the Financing Statements (as defined in opinion
---------------------
paragraph 9 of this letter) executed by the Credit Parties, (d) the
Recapitalization Agreement and (e) the Related Documents listed on Schedule F.
----------
Unless otherwise indicated, capitalized terms used herein but not otherwise
defined herein have the respective meanings set forth in the Credit Agreements.
CHICAGO DENVER LONDON LOS ANGELES NEW YORK
<PAGE>
KIRKLAND & ELLIS
December 18, 1997
Page 2
Subject to the assumptions, qualifications, exclusions and other
limitations which are identified in this letter and in the schedules attached to
this letter, we advise you, and with respect to each legal issue addressed in
this letter, it is our opinion, that:
1. Holdings is a corporation existing and in good standing under the
General Corporation Law of the State of Delaware. Each Subsidiary
Guarantor is a corporation existing under the general corporate law of
its state of incorporation. Each Credit Party is in good standing in
the jurisdictions set forth below such Credit Party's name on Schedule
--------
G. For purposes of the foregoing opinions in this paragraph, we have
-
relied exclusively upon the certificates issued by the governmental
authorities in each respective state of incorporation and other
relevant jurisdictions for the other Credit Parties incorporated in
states other than Delaware, Illinois and New York and such opinions
are not intended to provide any conclusion or assurance beyond that
conveyed by such certificates. Based upon our review of the
Certificate (or Articles, as the case may be) of Incorporation and
Bylaws of each Credit Party (other than the Borrower), each Credit
Party (other than the Borrower) has the corporate power to own its
property and assets of which we are aware and to transact the business
in which, to our actual knowledge, it is engaged or presently proposes
to engage (as such business is described in the Offering Circular
dated December 11, 1997, relating to the Senior Subordinated Notes and
the Discount Notes).
2. Each Credit Party (other than the Borrower) has the corporate power to
enter into each of the Transaction Documents (other than the
Recapitalization Agreement) to which it is a party and perform its
obligations under each of the Credit Agreements, the Notes, the
Collateral Documents and the Related Documents to which it is a party.
3. The Board of Directors of each Credit Party (other than the Borrower)
has adopted by requisite vote the resolutions necessary to authorize
such Credit Party's execution and delivery of the Transaction
Documents (other than the Recapitalization Agreement) to which it is a
party and the performance of the Transaction Documents (other than the
Recapitalization Agreement and the Financing Statements) to which it
is a party and no approval by the shareholders of such Credit Parties
is required in connection with the authorization of such execution,
delivery and performance of the
<PAGE>
KIRKLAND & ELLIS
December 18, 1997
Page 3
Transaction Documents (other than the Recapitalization Agreement) to
which it is a party.
4. Each Credit Party (other than the Borrower) has duly executed and
delivered the Transaction Documents (other than the Recapitalization
Agreement) to which it is a party.
5. Each of the Transaction Documents (other than the Recapitalization
Agreement and the Financing Statements) is a valid and binding
obligation of each Credit Party that is a party thereto and is
enforceable against each such Credit Party in accordance with its
terms.
6. The execution and delivery of the Transaction Documents (other than
the Recapitalization Agreement) to which it is a party by each Credit
Party and performance of the obligations under the Transaction
Documents (other than the Recapitalization Agreement and the Financing
Statements) to which it is a party will not (a) conflict with any of
the Transaction Documents, (b) violate any existing provisions of such
Credit Party's Certificate (or Articles, as the case may be) of
Incorporation or Bylaws, (c) constitute a violation by such Credit
Party of any applicable provision of existing statutory law or
governmental regulation covered by this letter, (d) result in the
creation or imposition of any lien, charge or encumbrance upon any of
the property of any Credit Party other than liens, charges and
encumbrances in your favor or (e) violate any existing order, writ,
injunction or decree applicable to any Credit Party of which we are
aware of any court or governmental instrumentality. Without limiting
the foregoing, the making of the Loans and the application of the
proceeds thereof as provided in the Credit Agreements do not violate
Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System.
7. No Credit Party is presently required to obtain any consent, approval,
authorization or order of any court or governmental agency in order to
obtain the right to enter into any of the Transaction Documents (other
than the Recapitalization Agreement) or to take any of the actions
taken by such Credit Party in connection with the consummation of the
transactions contemplated by the Transaction Documents (other than the
Recapitalization Agreement), except for: (a) those obtained or made on
or prior to the Closing Date, (b) any actions or filings to perfect
the liens and security
<PAGE>
KIRKLAND & ELLIS
December 18, 1997
Page 4
interests granted under the Collateral Documents, (c) actions or
filings required in connection with ordinary course conduct by the
Credit Parties of their respective businesses and ownership or
operation by the Credit Parties of their respective assets and (d)
actions and filings required under the Securities Act of 1933, as
amended, or any state "blue sky" law or related regulation and the
Trust Indenture Act of 1939, as amended (as to which matters, except
as specifically set forth in paragraph 18, we express no opinion).
8. Each of the Holdings Security Agreement, the Company Security
Agreement, the Company Patent and Trademark Security Agreement, the
Subsidiary Security Agreement, the Subsidiary Patent and Trademark
Security Agreement and Section 4 of the Mortgage (the "New York
--------
Mortgage") dated the date hereof executed by Sealy Mattress of Albany,
--------
Inc. ("Sealy Albany") (collectively, the "Security Agreements")
------------ -------------------
creates a valid and enforceable security interest in favor of the
Collateral Agent in the collateral therein respectively described (the
"Collateral") which constitutes property in which a security interest
----------
can be granted under Article 9 of the Uniform Commercial Code as
enacted in New York (the "New York UCC"). Such Collateral is referred
------------
to herein as the "Code Collateral."
---------------
9. The Uniform Commercial Code financing statements (Form UCC-1) which
have been signed by representatives of each of the applicable Credit
Parties and delivered on or before the date of this letter in
connection with the transactions specified in the Collateral Documents
(the "Financing Statements"), have been duly executed and delivered by
--------------------
each such Credit Party. When certain of the Financing Statements have
been duly filed or recorded, as appropriate, in the Offices of the
Secretary of State of the States of New York and Illinois (and, with
respect to certain of the Financing Statements signed by Sealy Albany,
the Office of the Clerk, Albany County), the security interests under
the Security Agreements in the Code Collateral presently located or
deemed located in the States of New York and Illinois under Section 9-
103 of the New York UCC will be perfected to the extent such security
interests in such Code Collateral can be perfected by the filing of
financing statements in the States of New York and Illinois.
10. Under Section 9-103 of the New York UCC, the perfection and effect of
perfection of the security interests in favor of the Collateral Agent
in the remaining Code Collateral will be governed by laws other than
those of the States of New York and
<PAGE>
KIRKLAND & ELLIS
December 18, 1997
Page 5
Illinois. Although we express no opinion as to such laws, we have
reviewed the Commerce Clearing House, Inc. Secured Transactions Guide
as supplemented through November 25, 1997 (the "Guide") and, based
-----
solely on such review, we advise you that when the remaining
Financing Statements executed by each Credit Party are duly filed or
recorded, as appropriate, in the filing offices set forth on Schedule
--------
H, the security interests under the Security Agreements in
-
such Code Collateral described therein will be perfected to the extent
such security interests can be perfected by the filing of financing
statements in such other states.
11. Upon the filing and recordation of the Company Patent and Trademark
Security Agreement and the Subsidiary Patent and Trademark Security
Agreement with the United States Patent and Trademark Office (and the
payment of required filing fees) and the filing of appropriate
financing statements as described in paragraphs 9 and 10 of this
letter, the security interest for the benefit of the Collateral Agent
in the United States patents and registered trademarks described
therein will be perfected under applicable Federal law to the extent
that security interests in such Collateral may be perfected under such
Federal laws.
12. Assuming (in addition to all other assumptions upon which this letter
is based) that the Collateral Agent has taken and is retaining
possession in the State of New York of the certificates representing
the securities which are certificated and pledged pursuant to the
Holdings Pledge Agreement, the Company Pledge Agreement and the
Subsidiary Pledge Agreement (collectively, the "Pledge Agreements"),
-----------------
duly endorsed to the Collateral Agent or in blank by an effective
endorsement (within the meaning of Section 8-102(a)(11) of the New
York UCC), the security interest in favor of the Collateral Agent in
such pledged securities is perfected by "control" under the New York
UCC; and assuming further (in addition to all other assumptions upon
which this letter is based) that the Collateral Agent has taken
possession of such pledged certificated securities and such
accompanying endorsements without notice (actual or constructive), at
or prior to the time of the delivery of such pledged certificated
securities and endorsements to the Collateral Agent, of any adverse
claim within the meaning of Section 8-102(a)(1) of the New York UCC,
the Collateral Agent has acquired a security interest in such pledged
securities free of any such adverse claims.
<PAGE>
KIRKLAND & ELLIS
December 18, 1997
Page 6
13. The New York Mortgage is in proper form for recording and, upon
recordation in the Office of the Clerk, Albany County and the payment
of all applicable recording fees
and taxes, will create in favor of the Collateral Agent a valid and
enforceable mortgage lien on Sealy Albany's interest in that portion
of the "Mortgaged Property", as defined therein, that constitutes real
property (including fixtures, to the extent the same constitute real
property).
14. The Credit Parties are not "investment companies" within the meaning
of the Investment Company Act of 1940, as amended.
15. The Credit Parties are not "holding companies" or "subsidiary
companies" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
16. To the best of our actual knowledge (based solely upon lien searches,
inquiries of officers of the Credit Parties and the certificates
executed and delivered to us by officers of such parties), (i) there
are no actions, suits or proceedings pending or threatened (a) against
any Credit Parties (other than those identified in Schedules 4.10(A)-
(G) to the Recapitalization Agreement), which have not been disclosed
to you or your counsel or (b) against any Credit Parties with respect
to any of the Transaction Documents and (ii) there does not exist any
judgment, order or injunction prohibiting or imposing any material
adverse condition upon the consummation of the transactions
contemplated by the Transaction Documents.
17. All monetary obligations of the Borrower under the Credit Agreements
are within the definition of "Senior Debt" under, and as defined in,
the Senior Subordinated Note Indenture, the Discount Note Indenture
and the Junior Subordinated Seller Notes.
18. It is not necessary in connection with the execution and delivery of
the Notes and the Credit Agreements to the Lenders to register the
Notes or the Credit Agreements or the Loans under the Securities Act
of 1933, as amended, or to qualify any indenture in respect thereof
under the Trust Indenture Act of 1939, as amended.
<PAGE>
KIRKLAND & ELLIS
December 18, 1997
Page 7
In preparing this letter, we have relied without any independent
verification upon the assumptions recited in Schedule B to this letter and upon:
----------
(i) information contained in certificates obtained from governmental
authorities; (ii) factual information represented to be true in the Credit
Agreements and the other Transaction Documents; (iii) factual information
provided to us in a support certificate signed by the Credit Parties; and (iv)
factual information we have obtained from such other sources as we have deemed
reasonable. We have assumed without investigation 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.
While we have not conducted any independent investigation to determine
facts upon which our opinions are based or to obtain information about which
this letter advises you, we confirm that we do not have any actual knowledge
which has caused us to conclude that our reliance and assumptions cited in the
preceding paragraph are unwarranted or that any information supplied in this
letter is wrong. The terms "knowledge," "actual knowledge" and "aware" whenever
used in this letter with respect to our firm means conscious awareness at the
time this letter is delivered on the date it bears by the following Kirkland &
Ellis lawyers who have had significant involvement with negotiation or
preparation of the Transaction Documents (herein called "our Designated
Transaction Lawyers"): Lance C. Balk, Linda K. Riley Myers, Debra B. Arenare,
Mark J. Eagan, Frederick Tanne, Brian Land, Jeffrey W. Stevenson, Robert J.
Frances, Brian W. Raftery, Andrew E. Nagel, Jordon L. Kruse and Jeff A. Hess.
Our advice on every legal issue addressed in this letter is based
exclusively on the internal laws of New York and Illinois or the Federal law of
the United States except that (i) the opinions in paragraphs 1 through 4 are
also based on the General Corporation Law of the State of Delaware and our
review of summary compilations of the corporate statutes of the jurisdictions of
incorporation of the Subsidiary Guarantors that are incorporated in states other
than Delaware, Illinois and New York and (ii) our advice in paragraph 10 is
based on the laws as summarized in the Guide to the extent indicated in that
paragraph. We advise you that issues addressed by this letter may be governed
in whole or in part by other laws, but we express no opinion as to whether any
relevant difference exists between the laws upon which our opinions are based
and any other laws which may actually govern. Our opinions are subject to all
qualifications in Schedule A and do not cover or otherwise address any law or
----------
legal issue which is identified in the attached Schedule C or any provision in
----------
the Credit Agreement or any of the other Transaction Documents of any type
identified in Schedule D. Provisions in the Transaction Documents which are not
----------
excluded by
<PAGE>
KIRKLAND & ELLIS
December 18, 1997
Page 8
Schedule D or any other part of this letter or its attachments are called the
----------
"Relevant Agreement Terms."
------------------------
Our advice on each legal issue addressed in this letter represents our
opinion as to how that issue would be resolved were it to be considered by the
highest court of the jurisdiction upon whose law our opinion on that issue is
based. The manner in which any particular issue would be treated in any actual
court case would depend in part on facts and circumstances particular to the
case, and this letter is not intended to guarantee the outcome of any legal
dispute which may arise in the future. It is possible that some Relevant
Agreement Terms of a remedial nature contained in the Collateral Documents may
not prove enforceable for reasons other than those cited in this letter should
an actual enforcement action be brought, but (subject to all the exceptions,
qualifications, exclusions and other limitations contained in this letter) such
unenforceability would not in our opinion prevent you from realizing the
principal benefits purported to be provided by the Relevant Agreement Terms of a
remedial nature contained in the Collateral Documents.
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 our Designated Transaction Lawyers did
not have actual knowledge at that time, by reason of any change subsequent to
that time in any law covered by any of our opinions, or for any other reason.
The attached schedules are an integral part of this letter, and any term defined
in this letter or any schedule has that defined meaning wherever it is used in
this letter or in any schedule to this letter.
You may rely upon this letter only for the purpose served by the provisions
in the Credit Agreements cited in the initial paragraph of this letter in
response to which it has been delivered. Without our written consent: (i) no
person other than you may rely on this letter for any purpose and (ii) this
letter may not be cited or quoted in any financial statement, prospectus,
private placement memorandum or other similar document. Notwithstanding the
foregoing, persons who subsequently become Lenders (or participants in
accordance with the terms of the Credit Agreements) may rely on this letter as
of the time of its delivery on the date hereof as if this letter were addressed
to them.
Sincerely,
/s/ Kirkland & Ellis
Kirkland & Ellis
<PAGE>
SCHEDULE A
GENERAL QUALIFICATIONS
All of our opinions ("our opinions") in the letter to which this Schedule
is attached ("our letter") are subject to each of the qualifications set forth
in this Schedule.
1. Bankruptcy and Insolvency Exception. Each of our opinions in our
-----------------------------------
letter is subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws
relating to or affecting creditors' rights. This exception includes:
a. the federal Bankruptcy Code and thus comprehends, among others,
matters of turn-over, automatic stay, avoiding powers, fraudulent
transfer, preference, discharge, conversion of a non-recourse
obligation into a recourse claim, limitations on ipso facto and
anti-assignment clauses and the coverage of pre-petition security
agreements applicable to property acquired after a petition is
filed;
b. all other federal and state bankruptcy, insolvency,
reorganization, receivership, moratorium, arrangement and
assignment for the benefit of creditors laws that affect the
rights of creditors generally or that have reference to or affect
only creditors of specific types of debtors;
c. state fraudulent transfer and conveyance laws; and
d. judicially developed doctrines in this area, such as substantive
consolidation of entities and equitable subordination.
2. Equitable Principles Limitation. Each of our opinions as to the
-------------------------------
validity, binding effect or enforceability of any of the Transaction
Documents or to the availability of injunctive relief and other
equitable remedies is subject to the effect of general principles of
equity, whether applied by a court of law or equity. This limitation
includes principles:
a. governing the availability of specific performance, injunctive
relief or other equitable remedies, which generally place the
award of such remedies, subject to certain guidelines, in the
discretion of the court to which application for such relief is
made;
b. affording equitable defenses (e.g., waiver, laches and estoppel)
against a party seeking enforcement;
A-1
<PAGE>
c. requiring good faith and fair dealing in the performance and
enforcement of a contract by the party seeking its enforcement;
d. requiring reasonableness in the performance and enforcement of an
agreement by the party seeking enforcement of the contract;
e. requiring consideration of the materiality of (i) a breach and
(ii) the consequences of the breach to the party seeking
enforcement;
f. requiring consideration of the commercial impracticability or
impossibility of performance at the time of attempted
enforcement; and
g. affording defenses based upon the unconscionability of the
enforcing party's conduct after the parties have entered into the
contract.
3. Other Common Qualifications. Each of our opinions as to the validity,
---------------------------
binding effect or enforceability of any of the Transaction Documents
or to the availability of injunctive relief and other equitable
remedies is subject to the effect of rules of law that:
a. limit or affect the enforcement of provisions of a contract that
purport to waive, or to require waiver of, the obligations of
good faith, fair dealing, diligence and reasonableness;
b. provide that forum selection clauses in contracts are not
necessarily binding on the court(s) in the forum selected;
c. limit the availability of a remedy under certain circumstances
where another remedy has been elected;
d. provide a time limitation after which a remedy may not be
enforced;
e. limit the right of a creditor to use force or cause a breach of
the peace in enforcing rights;
f. relate to the sale or disposition of collateral or the
requirements of a commercially reasonable sale;
g. limit the enforceability of provisions releasing, exculpating or
exempting a party from, or requiring indemnification of a party
for, liability for its own action or inaction, to the extent the
action or inaction involves negligence, recklessness, willful
misconduct, unlawful conduct, violation of public policy or
litigation against another party determined adversely to such
party;
A-2
<PAGE>
h. may, where less than all of a contract may be unenforceable,
limit the enforceability of the balance of the contract to
circumstances in which the unenforceable portion is not an
essential part of the agreed exchange;
i. govern and afford judicial discretion regarding the determination
of damages and entitlement to attorneys' fees and other costs;
j. may permit a party that has materially failed to render or offer
performance required by the contract to cure that failure unless
(i) permitting a cure would unreasonably hinder the aggrieved
party from making substitute arrangements for performance, or
(ii) it was important in the circumstances to the aggrieved party
that performance occur by the date stated in the contract; and/or
k. may render guarantees unenforceable under circumstances where
your actions, failures to act or waivers, amendments or
replacement of the Transaction Documents so radically change the
essential nature of the terms and conditions of the guaranteed
obligations and the related transactions that, in effect, a new
relationship has arisen between you and the Borrower and/or other
Credit Parties which is substantially and materially different
from that presently contemplated by the Transaction Documents.
4. Referenced Provision Qualification. Each opinion regarding the
----------------------------------
validity, binding effect or enforceability of a provision (the "First
-----
Provision")in any of the Transaction Documents requiring any Credit
---------
Party to perform its obligations under, or to cause any other person
to perform its obligations under, any other provision (a "Second
------
Provision") of any Transaction Document, or stating that any action
---------
will be taken as provided in or in accordance with such Second
Provision are subject to the same qualifications as the corresponding
opinion in this letter relating to the validity, binding effect and
enforceability of such Second Provision. Requirements in the
Transaction Documents that provisions therein may only be waived or
amended in writing may not be enforceable to the extent that an oral
agreement or an implied agreement by trade practice or course of
conduct has been created modifying any such provision.
5. Collateral Qualifications. The opinions and advice contained in our
-------------------------
letter are subject to the following advice:
a. certain rights of debtors and duties of secured parties referred
to in Sections 1-102(3) and 9-501(3) of the New York UCC may not
be waived, released, varied or disclaimed by agreement prior to a
default;
b. our opinions regarding the creation and perfection of security
interests are subject to the effect of (i) the limitations on the
existence and perfection of security interests in proceeds
resulting from the operation of Section 9-306,
A-3
<PAGE>
Section 9-115 or Section 8-321(1) [1977 version] of any
applicable Uniform Commercial Code; (ii) the limitations in favor
of buyers imposed by Sections 9-307 and 9-308 of any applicable
Uniform Commercial Code; (iii) the limitations with respect to
documents, instruments and securities imposed by Section 9-309
and 8-303 of any applicable Uniform Commercial Code; (iv) other
rights of persons in possession of money, instruments and
proceeds constituting certificated or uncertificated securities;
and (v) section 547 of the Bankruptcy Code with respect to
preferential transfers and section 552 of the Bankruptcy Code
with respect to any Collateral acquired by any Credit Party
subsequent to the commencement of a case against or by any Credit
Party under the Bankruptcy Code;
c. Article 9 of each applicable Uniform Commercial Code requires the
filing of continuation statements within specified periods in
order to maintain the effectiveness of the filings referred to in
our letter;
d. Additional filings may be necessary if any Credit Party changes
its name, identity or corporate structure or the jurisdiction in
which any of its places of business, its chief executive office
or any Collateral is located;
e. your security interest in certain of the Collateral may not be
perfected by the filing of financing statements under the Uniform
Commercial Code;
f. we express no opinion regarding the perfection of any security
interest except as specifically set forth in our letter or
regarding the continued perfection of any security interest in
any Collateral upon or following the removal of such Collateral
to another jurisdiction and we express no opinion regarding the
priority of any security interest (except for the limited opinion
set forth in paragraph 12 regarding the acquisition of certain
security interests free of adverse claims);
g. the assignment of any contract, lease, license, or permit may
require the approval of the issuer thereof or the other parties
thereto (other than to the extent provided in Section 9-318(4) of
the New York UCC, security interests in the right to receive the
payment of money under any such contract);
h. we express no opinion with respect to any self-help remedies to
the extent they vary from those available under the New York UCC
or with respect to any remedies otherwise inconsistent with the
New York UCC to the extent that the New York UCC is applicable
thereto;
i. a substantial body of case law treats guarantors as "debtors"
under the New York UCC, thereby according guarantors rights and
remedies of debtors established by the New York UCC;
A-4
<PAGE>
j. we express no opinion as to whether the guarantee would remain
enforceable if you release the primary obligor either directly or
by electing a remedy which precludes you from proceeding directly
against the primary obligor;
k. we express no opinion with respect to the creation, perfection or
enforceability of security interests in property in which it is
illegal or violative of governmental rules or regulations to
grant a security interest (such as, for example, governmental
permits and licenses), general intangibles which terminate or
become terminable if a security interest is granted therein,
property subject to negative pledge clauses of which you have
knowledge, vehicles, ships, vessels, barges, boats, railroad
cars, locomotives or other rolling stock, aircraft, aircraft
engines, propellers and related parts, or other property for
which a state or federal statute or treaty provides for
registration or certification of title or which specifies a place
of filing different than that specified in Section 9-401 of any
applicable Uniform Commercial Code, cash which is not in your
possession, uncertificated securities, crops, timber to be cut,
fixtures, accounts subject to subsection (5) of Section 9-103 of
any applicable Uniform Commercial Code, consumer goods, farm
products, equipment used in farming operations, accounts or
general intangibles arising from or relating to the sale of farm
products by a farmer, property identified to a contract with, or
in the possession of, the United States of America or any state,
county, city, municipality or other governmental body or agency,
goods for which a negotiable document of title has been issued,
and copyrights, patents and trademarks (except as expressly set
forth in opinion paragraph 11), other literary property rights,
service marks, know-how, processes, trade secrets, undocumented
computer software, unrecorded and unwritten data and information,
and rights and licenses thereunder;
l. we express no opinion with respect to the enforceability of any
security interest in any accounts, chattel paper, documents,
instruments or general intangibles with respect to which the
account debtor or obligor is the United States of America, any
state, county, city, municipality or other governmental body, or
any department, agency or instrumentality thereof;
m. we express no opinion with respect to the enforceability of any
provision of any Transaction Document which purports to authorize
you to sign or file financing statements or other documents
without the signature of the debtor (except to the extent a
secured party may execute and file financing statements without
the signature of the debtor under Section 9-402(2) of the
applicable Uniform Commercial Code);
n. we express no opinion with respect to the enforceability of any
provision of any Transaction Document which purports to authorize
you to purchase at a
A-5
<PAGE>
private sale collateral which is not subject to widely
distributed standard price quotations or sold on a recognized
market;
o. we note that the remedies under the Pledge Agreements to sell or
offer for sale the Pledged Collateral (as defined in the Pledge
Agreements) are subject to compliance with applicable state and
federal securities laws;
p. we express no opinion in this letter regarding creation or
perfection of any security interest in, and the term "Code
----
Collateral" shall not include, any property in which a security
----------
interest may be granted under the Uniform Commercial Code in the
New York UCC but which is property in which a security interest
may not be granted under Article 9 of the Uniform Commercial Code
as in effect in any of the following jurisdictions: the
jurisdiction in which such property is located, the jurisdiction
in which the debtor is located (as defined in Section 9-103(3)(d)
of the New York UCC) or (in the case of a deposit account) the
jurisdiction in which the office of the depositary institution at
which the deposit account is maintained is located;
q. we express no opinion regarding the enforceability of any pre-
default waiver of redemption rights; and
r. we express no opinion regarding the enforceability of any
provisions asserting that Collateral is owned by or is property
of a secured party prior to such secured party's foreclosure of
such Collateral in accordance with the applicable Uniform
Commercial Code or, in the case of cash collateral, the
application of such cash collateral in payment of the secured
obligations.
A-6
<PAGE>
SCHEDULE B
ASSUMPTIONS
For purposes of our letter, we have relied, without investigation, upon
each of the following assumptions:
1. The Borrower is existing and in good standing in its jurisdiction of
incorporation.
2. You are existing and in good standing in your jurisdiction of
organization.
3. The Borrower has the full corporate power and authority to execute,
deliver and to perform its obligations under each of the Transaction
Documents to which it is a party and each of the Transaction Documents
to which it is a party has been duly authorized by all necessary
action and has been duly executed and delivered by the Borrower.
4. You have full power and authority (including without limitation under
the laws of your jurisdiction of organization) to execute, deliver and
to perform your obligations under each of the Transaction Documents to
which you are a party and each of the Transaction Documents to which
you are a party has been duly authorized by all necessary action on
your part and has been duly executed and duly delivered by you.
5. The Transaction Documents to which you are a party constitute valid
and binding obligations of yours and are enforceable against you in
accordance with their terms (subject to qualifications, exclusions and
other limitations similar to those applicable to our letter).
6. You have complied with all legal requirements pertaining to your
status as such status relates to your rights to enforce the
Transaction Documents to which you are a party against any of the
Credit Parties.
7. Each document submitted to us for review 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 (other than those of or on behalf of the Credit Parties) on
each such document are genuine.
8. There has not been any mutual mistake of fact or misunderstanding,
fraud, duress or undue influence.
9. The conduct of the parties to the Transaction Documents has complied
with any requirement of good faith, fair dealing and conscionability.
B-1
<PAGE>
10. You have acted in good faith and without notice of any defense against
the enforcement of any rights created by, or adverse claim to any
property or security interest transferred or created as part of, the
transactions effected under the Transaction Documents (herein called
the "Transactions").
------------
11. There are no agreements or understandings among the parties, written
or oral, and there is no usage of trade or course or prior dealing
among the parties that would, in either case, define, supplement or
qualify the terms of the Credit Agreements or any of the other
Transaction Documents.
12. With respect to the opinions set forth in opinion paragraphs 6 and 7,
we assume that no Credit Party will in the future take any
discretionary action (including a decision not to act) permitted under
the Transaction Documents that would result in a violation of law or
constitute a breach or default under any other agreements or court
orders to which such Credit Party may be subject.
13. With respect to the opinions set forth in opinion paragraphs 5, 6 and
7, we assume that each Credit Party will in the future obtain all
permits and governmental approvals required, and will in the future
take all actions required, relevant to the consummation of the
Transactions or performance of the Transaction Documents.
14. Each Credit Party's Certificate (or Articles, as the case may be) of
Incorporation (or equivalent governing instrument), all amendments to
that Certificate (or those Articles, as the case may be) of
Incorporation all resolutions adopted establishing classes or series
of stock under that Certificate (or those Articles, as the case may
be) of Incorporation and each Credit Party's Bylaws and all amendments
to its Bylaws have been adopted in accordance with all applicable
legal requirements (except that this assumption is limited to those of
the preceding items with respect to the adoption of which we did not
have involvement).
15. With respect to the opinions set forth in opinion paragraph 18, we
assume that you are acquiring Notes for investment and not with a view
to the distribution thereof, and that each of you is an "Accredited
Investor" as such term is defined in Regulation D under the Securities
Act of 1933, as amended.
16. Collateral Assumptions. The opinions and advice contained in our
----------------------
letter are subject to the following assumptions:
a. Each applicable Credit Party (i) has the requisite title and rights
to any property involved in the Transactions including, without
limiting the generality of the foregoing, each item of Collateral
existing on the date hereof and (ii) will have the requisite title
and rights to each item of Collateral arising after the date
hereof.
B-2
<PAGE>
b. The descriptions of Collateral in the Collateral Documents and the
Financing Statements reasonably describe the property intended to
be described as Collateral and the legal descriptions of real
estate described in the Financing Statements to be filed as fixture
filings are accurate.
c. Value (as defined in Section 1-201(44) of the New York UCC) has
been given by you to each Credit Party for the security interests
and other rights in and assignments of Collateral described in or
contemplated by the Collateral Documents.
d. The representations made by each Credit Party in the Security
Agreements to which it is a party with respect to its chief
executive office and location of equipment and inventory are and
will remain true and correct.
B-3
<PAGE>
SCHEDULE C
EXCLUDED LAW AND LEGAL ISSUES
None of the opinions or advice contained in our letter covers or otherwise
addresses any of the following laws, regulations or other governmental
requirements or legal issues:
1. except with respect to the Investment Company Act of 1940, as amended,
to the extent of our opinion in opinion paragraph 14, except with
respect to the Public Utility Holdings Company Act of 1935, as amended,
to the extent of our opinion in opinion paragraph 15, and except with
respect to the Securities Act of 1933, as amended, and the Trust
Indenture Act of 1939, as amended, to the extent of our opinions in
opinion paragraph 18, federal securities laws and regulations (including
all other laws and regulations administered by the United States
Securities and Exchange Commission), state "Blue Sky" laws and
regulations, and laws and regulations relating to commodity (and other)
futures and indices and other similar instruments;
2. pension and employee benefit laws and regulations (e.g., ERISA);
3. federal and state antitrust and unfair competition laws and
regulations;
4. compliance with fiduciary duty requirements;
5. the statutes and ordinances, the administrative decisions and the
rules and regulations of counties, towns, municipalities and special
political subdivisions and judicial decisions to the extent that they
deal with any of the foregoing;
6. federal and state environmental, land use and subdivision, tax,
racketeering (e.g., RICO), health and safety (e.g., OSHA), and labor
---- ----
laws and regulations;
7. federal patent, trademark (except to the extent of our opinion in
paragraph 11) and copyright, state trademark, and other federal and
state intellectual property laws and regulations;
8. federal and state laws, regulations and policies concerning (i)
national and local emergency, (ii) possible judicial deference to acts
of sovereign states, and (iii) criminal and civil forfeiture laws;
9. other federal and state statutes of general application to the extent
they provide for criminal prosecution (e.g., mail fraud and wire fraud
statutes);
C-1
<PAGE>
10. any laws, regulations, directives and executive orders that prohibit or
limit the enforceability of obligations based on attributes of the party
seeking enforcement (e.g., the Trading with the Enemy Act and the
International Emergency Economic Powers Act); and
11. the effect of any law, regulation or order which hereafter is enacted,
promulgated or issued.
We have not undertaken any research for purposes of determining whether any
Credit Party or any of the Transactions which may occur in connection with the
Credit Agreements or any of the other Transaction Documents is subject to any
law or other governmental requirement other than to those laws and requirements
which in our experience would generally be recognized as applicable both to
general business corporations which are not engaged in regulated business
activities and to transactions of the type contemplated by the Transaction
Documents to occur on the date hereof, and none of our opinions covers any such
law or other requirement unless (i) one of our Designated Transaction Lawyers
had actual knowledge of its applicability at the time our letter was delivered
on the date it bears and (ii) it is not excluded from coverage by other
provisions in our letter or in any Schedule to our letter.
C-2
<PAGE>
SCHEDULE D
EXCLUDED PROVISIONS
None of the opinions in the letter to which this Schedule is attached
covers or otherwise addresses any of the following types of provisions which may
be contained in the Transaction Documents:
1. Indemnification for negligence, willful misconduct or other wrongdoing
or strict product liability or any indemnification for liabilities
arising under securities laws.
2. Provisions mandating contribution towards judgments or settlements
among various parties.
3. Waivers of (i) legal or equitable defenses, (ii) rights to damages,
(iii ) rights to counter claim or set off, (iv) statutes of
limitations, (v) rights to notice, (vi) the benefits of statutory,
regulatory, or constitutional rights, unless and to the extent the
statute, regulation, or constitution explicitly allows waiver, and
(vii) other benefits to the extent they cannot be waived under
applicable law.
4. Provisions providing for forfeitures or the recovery of amounts deemed
to constitute penalties, or for liquidated damages to the extent
deemed to be penalties, acceleration of future amounts due (other than
principal) without appropriate discount to present value, and, (to the
extent deemed to constitute penalties) late charges, prepayment
charges, and increased interest rates upon default.
5. Time-is-of-the-essence clauses.
6. Provisions which provide a time limitation after which a remedy may
not be enforced.
7. Agreements to submit to the jurisdiction of any particular court or
other governmental authority (either as to personal jurisdiction or
subject matter jurisdiction); waiver of service of process
requirements which would otherwise be applicable; and provisions
otherwise purporting to affect the jurisdiction and venue of courts.
8. Provisions appointing one party as an attorney-in-fact for an adverse
party or providing that the decision of any particular person will be
conclusive or binding on others.
9. Provisions purporting to limit rights of third parties who have not
consented thereto or purporting to grant rights to third parties.
D-1
<PAGE>
10. Provisions which purport to award attorneys' fees solely to one party.
11. Provisions purporting to create a trust or constructive trust without
compliance with applicable trust law.
12. Provisions that provide for the appointment of a receiver.
13. Provisions or agreements regarding proxies, shareholders agreements,
shareholder voting rights, voting trusts, and the like.
14. Provisions in any of the Transaction Documents requiring any Credit
Party to perform its obligations under, or to cause any other person
to perform its obligations under, or stating that any action will be
taken as provided in or in accordance with, any agreement or other
document that is not a Transaction Document.
15. Provisions, if any, which are contrary to the public policy of any
jurisdiction.
D-2
<PAGE>
SCHEDULE E
COLLATERAL DOCUMENTS
1. Holdings Guaranty
2. Holdings Security Agreement
3. Holdings Pledge Agreement
4. Company Pledge Agreement
5. Company Security Agreement
6. Company Patent and Trademark Security Agreement
7. Subsidiary Guaranty
8. Subsidiary Pledge Agreement
9. Subsidiary Security Agreement
10. Subsidiary Patent and Trademark Security Agreement
11. Intercreditor Agreement
12. New York Mortgage
E-1
<PAGE>
SCHEDULE F
RELATED DOCUMENTS
1. Junior Subordinated Seller Notes
2. Senior Subordinated Note Indenture
3. Senior Subordinated Notes
4. Discount Note Indenture
5. Senior Subordinated Discount Notes
F-1
<PAGE>
SCHEDULE G
GOOD STANDING JURISDICTIONS
1. Sealy Corporation
-----------------
Delaware
2. Sealy Mattress Company
----------------------
Ohio
3. A. Brandwein & Co.
------------------
Illinois
Wisconsin
4. Sealy Mattress Company of Albany, Inc.
--------------------------------------
New York
5. Ohio-Sealy Mattress Manufacturing Co.
-------------------------------------
Georgia
6. Ohio-Sealy Mattress Company of Puerto Rico
------------------------------------------
Ohio
7. Ohio-Sealy Mattress Manufacturing Co., Inc.
-------------------------------------------
Massachusetts
8. Sealy Mattress Company of Michigan, Inc.
----------------------------------------
Michigan
9. Sealy Mattress Company of Memphis
---------------------------------
Louisiana
Tennessee
G-1
<PAGE>
10. Ohio-Sealy Mattress Manufacturing Co. -- Houston
------------------------------------------------
Texas
11. The Ohio Mattress Company Licensing and Components Group
--------------------------------------------------------
Colorado
Delaware
Illinois
Indiana
Ohio
Pennsylvania
12. Sealy of Maryland and Virginia, Inc.
------------------------------------
Maryland
13. Sealy of Minnesota, Inc.
------------------------
Minnesota
14. Ohio-Sealy Mattress Manufacturing Co. -- Fort Worth
---------------------------------------------------
Texas
15. Sealy Mattress Company of Kansas City, Inc.
-------------------------------------------
Kansas
Missouri
16. Sealy Mattress Manufacturing Company, Inc.
------------------------------------------
Arizona
California
Colorado
Delaware
Florida
Hawaii
Iowa
New Jersey
North Carolina
Oregon
Pennsylvania
Utah
G-2
<PAGE>
17. Sealy Mattress Company of Illinois
----------------------------------
Illinois
Wisconsin
18. The Stearns & Foster Bedding Company
------------------------------------
Arizona
California
Delaware
Florida
Georgia
Illinois
New Jersey
Ohio
Texas
19. The Stearns & Foster Upholstery Furniture Company
-------------------------------------------------
Mississippi
Ohio
20. Sealy, Inc.
-----------
Ohio
G-3
<PAGE>
SCHEDULE H
FILING OFFICES
Reflected on Attached Chart
H-1
<PAGE>
CALFEE, HALTER & GRISWOLD LLP
Attorneys at Law
-------------------------------------------------
1400 McDonald Investment Center
800 Superior Avenue Cleveland, Ohio 44114-2688
216/622-8200 Fax 216/241-0816
Direct Dial No. 216/622-8446
December 18, 1997
To the Administrative Agent,
the Syndication Agent, the
Documentation Agent and each
of the Lenders party
to the Credit Agreement or the
AXEL Credit Agreement
Ladies and Gentlemen:
We have acted as counsel to Sealy Mattress Company, an Ohio corporation
(the "Borrower"), in connection with the execution and delivery of (i) that
certain Credit Agreement, dated as of December 18, 1997 (the "Credit Agreement")
and (ii) that certain AXEL Credit Agreement dated, as of December 18, 1997 (the
"AXEL Credit Agreement"), each among the Borrower, Sealy Corporation, a Delaware
corporation and shareholder of the Borrower ("Sealy Corp."), Goldman Sachs
Credit Partners, L.P., as arranger and Syndication Agent, Morgan Guaranty Trust
Company of New York, as Administrative Agent, Bankers Trust Company, as
Documentation Agent, and those financial institutions signatory thereto (the
"Lenders"). Except as specified herein to the contrary, all capitalized terms
used in this opinion shall have the meanings given lo them in the Credit
Agreement and the AXEL Credit Agreement.
This opinion is being delivered to you pursuant to and in satisfaction of
subsection 4.1P of the Credit Agreement and subsection 3.1P of the AXEL Credit
Agreement. In connection with this opinion, we have examined originals, or
copies certified or otherwise authenticated to our satisfaction, of the
following documents and records:
(a) the Articles of Incorporation of the Borrower, certified as being true
and correct as of December 17, 1997, by the Secretary of State of Ohio, and
certified as being true and correct as of the date hereof by the Vice
President and General Counsel of the Borrower;
(b) a copy of the Code of Regulations of the Borrower, certified as being
true and correct as of the date hereof by the Vice President and General
Counsel of the Borrower;
<PAGE>
CALFEE, HALTER & GRISWOLD LLP
December 18, 1997
Page 2
(c) a copy of resolutions adopted by the Board of Directors of the Borrower
by written consent on December 18, 1997, authorizing, inter alia, the
----- ----
Borrower's execution and delivery of and performance under each of the Loan
Documents to which the Borrower is a party, certified as being true and
correct as of the date hereof by the Vice President and General Counsel of the
Borrower;
(d) a Certificate from the Secretary of State of the State of Ohio, dated
December 17, 1997, with respect to the status of the Borrower as a corporation
in good standing under the laws of the State of Ohio;
(e) a Certificate executed by the Vice President and General Counsel of the
Borrower, a copy of which Certificate is attached hereto as Exhibit A (the
"General Counsel Certificate");
(f) an executed copy of the Credit Agreement and the AXEL Credit Agreement;
(g) executed copies of the Notes to be issued on the Closing Date;
(h) an executed copy of the Company Pledge Agreement;
(i) an executed copy of the Company Security Agreement;
(j) an executed copy of the Company Patent and Trademark Security
Agreement;
(k) the Closing Date Mortgage executed by Company;
(l) the Intercreditor Agreement;
(m) each of the Uniform Commercial Code financing statements executed by
the Borrower (as itemized on Schedule I hereto) (the "Financing Statements"),
and filed, respectively, in the offices referred to on such Financing
Statements; and
(n) such other documents and records, and such other certifications or
representations as to factual matters of public officials or officers of the
Borrower as we have deemed necessary to appropriate for the purpose of
rendering this opinion.
<PAGE>
CALFEE, HALTER & GRISWOLD LLP
December 18, 1997
Page 3
The documents, instruments, and financing Statements set forth in
subparagraphs (f) through (m) above are collectively referred to as the "Loan
Documents."
In rendering this opinion we have relied upon the above-described certified
copies of the Articles of Incorporation and Code of Regulations, as amended, of
the Borrower and certified copies of the authorizing resolutions of the
Borrower, and factual good standing certificates with respect to the Borrower,
and, with respect to certain legal matters, the General Counsel Certificate. Any
opinion hereinafter set forth with respect to the incorporation, existence,
qualification to do business or good standing of the Borrower, is based solely
thereon and we have not conducted an independent review or investigation of the
matters set forth therein. Insofar as an opinion relates to matters set forth
in the General Counsel Certificate, we have relied, with your consent, solely
upon such General Counsel Certificate with respect to the accuracy of the
factual matters and legal conclusions contained therein and, except as
specifically set forth in the following sentence of this opinion, we have not
independently verified or established the accuracy of such matters. We do note
that the stock records and corporate records of the Borrower are incomplete and
we are unable to verify the accuracy of certain information contained in the
General Counsel Certificate. However, nothing has come to the attention of the
attorneys in this firm who have directly and substantially participated in this
transaction (consisting of Lawrence N. Schultz, Dale C. LaPorte, Thomas A.
Cicarella, Douglas A. Neary, M. Ann Harlan and Tracy W. Smirnoff) providing
clear evidence that the statements in the General Counsel's Certificate are
incorrect with respect to such matters. Except to the extent expressly set
forth herein, we have not undertaken any independent investigation with respect
to such matters, and no inference as to our knowledge should be drawn from the
fact of our legal representation of the Borrower in connection with other
matters.
In rendering our opinions, we have not conducted an investigation into the
specific types of business and activities in which the Borrower engages or the
manner in which it conducts business as would enable us to render an opinion
(and, accordingly, we express no opinion) as to the applicability of any law or
regulation of the United States or the State of Ohio not of general
applicability to business corporations.
On the basis of and in reliance upon the foregoing, and subject to the
assumptions, limitations, qualifications and exceptions set forth below, we are
of the opinion that:
1. The Borrower is a corporation validly existing and in good standing
under the laws of the State of Ohio. Based upon our review of the Articles of
Incorporation and Code of Regulations of the Borrower, the Borrower has the
corporate power to own its property and assets of which we are aware and to
transact the business in which, to our actual knowledge, it is
<PAGE>
CALFEE, HALTER & GRISWOLD LLP
December 18, 1997
Page 4
engaged or presently proposes to engage (as such business is described in the
Offering Circular dated December 11, 1997, relating to the Senior Subordinated
Notes and Discount Notes).
2. The Borrower has the corporate power and authority to execute, deliver
and perform the Loan Documents to which it is a party. The Borrower has duly
executed the Loan Documents.
3. The execution, delivery and performance by the Borrower of those Loan
Documents to which it is a party, and its Consummation of the transactions
provided for therein, have been authorized by all necessary corporate action on
behalf of the Borrower.
4. Neither the execution nor the delivery by the Borrower of the Loan
Documents will conflict with, result in a breach or violation of, or constitute
a default under, any of the terms, conditions or provisions of any present
statute, rule or regulation binding on the Borrower.
In rendering the opinions set forth above, we have assumed, without any
independent investigation but without any knowledge to the contrary, that:
(a) all records and documents that have been submitted to us as
originals are authentic, and all records and documents that have been
submitted to us as copies conform to authentic, original records and
documents;
(b) no action has been taken which amends, revokes or otherwise
terminates or affects any of the documents or records which have reviewed;
(c) the genuineness of all facsimile signatures;
(d) the conformity to original documents of all documents submitted to
us as certified, conformed, facsimile or photostatic copies;
(e) the authenticity of the originals of such copies; and
(f) all persons executing agreements, instruments or documents examined
or relied upon by us had the capacity to sign such agreements, instruments
or documents, and all such signatures are genuine (other than with respect
to the signatures of officers of the Borrower).
We render no opinion as to whether any of the Loan Documents is the valid,
binding and enforceable obligation of the Borrower.
<PAGE>
CALFEE, HALTER & GRISWOLD LLP
December 18, 1997
Page 5
We are admitted to the practice of law in the State of Ohio and the
opinions expressed herein relate solely to the laws of the State of Ohio, and
the federal laws of the United States, and no opinion is expressed with respect
to any applicable law of any other jurisdiction or with respect to any law not
of general applicability to business corporations which would impact the
opinions provided herein.
The information set forth herein is as of the date hereof. We assume no
obligation to advise you of changes that may thereafter be brought to our
attention. Our opinions are based on statutory laws and judicial decisions that
are in effect on the date hereof, and we express no opinion with respect to any
law, regulation, rule or governmental policy that may be enacted or adopted
after the date hereof nor do we assume any responsibility to advise you of
future changes in our opinions.
A copy of this opinion letter may be delivered by any of you to any
Eligible Assignee (as defined in the Credit Agreement or the AXEL Credit
Agreement, as applicable) in connection with and at the time of any assignment
and delegation by any of you as a Lender to such Eligible Assignee of all or a
portion of your Loans and Commitments in accordance with the provisions of the
Credit Agreement or the AXEL Credit Agreement, and such Eligible Assignee may
rely on the opinions expressed above as if this opinion letter were addressed
and delivered to such Eligible Assignee on the date hereof.
This opinion is limited to the matters expressly stated herein. Except as
set forth in the immediately preceding paragraph, the opinions expressed herein
are solely for use by the Administrative Agent and the Lenders in connection
with the Credit Agreement and may not be used, quoted or relied upon by you for
any other purpose, or by any other person or entity for any purpose, without our
prior written consent.
Very truly yours,
/s/ Calfee, Halter & Griswold LLP
CALFEE, HALTER & GRISWOLD LLP
<PAGE>
Schedule I
[Copies of 75 UCC-1 Filings received December 18, 1997--List to be compiled
and supplied post-closing.]
<PAGE>
Exhibit A
CERTIFICATE OF THE VICE PRESIDENT
---------------------------------
AND GENERAL COUNSEL OF SEALY MATTRESS COMPANY
---------------------------------------------
AND SEALY CORPORATION
---------------------
TO: Calfee, Halter & Griswold LLP
I, Kenneth L. Walker, do hereby certify that I am the duly elected and
qualified Vice President and General Counsel of Sealy Mattress Company, an Ohio
corporation (the "Borrower"), and Sealy Corporation, a Delaware corporation
("Sealy Corp."), and that as of the date hereof:
1. Attached hereto as Appendix 1 is a true and correct copy of the
Articles of Incorporation of the Borrower as in effect on the date hereof,
certified as of December 17th, 1997, by the Secretary of State of the State of
----
Ohio.
2. Attached hereto as Appendix 2 is a true and correct copy of the Code of
Regulations, as amended, of the Borrower as in effect on the date hereof.
3. Attached hereto as Appendix 3 is a true and correct copy of resolutions
duly adopted by the Board of Directors of the Borrower by written consent on
December 18th, 1997, which resolutions have not been modified, revoked or
----
rescinded and remain in full force and effect on the date hereof.
4. The officers listed below are duly elected officers of the Borrower,
holding the offices indicated opposite their respective names, duly authorized
by the Directors of the Borrower to execute, deliver and perform the Loan
Documents on behalf of the Borrower and to take all further action and to
execute, deliver and perform all other documents as they deem advisable in
connection with the transactions provided for therein, and the signatures set
forth below are the genuine signatures of such officers:
Offices Officer Signature
------- ------- ---------
President and Chief Executive Ronald L. Jones _______________________
Officer
Vice President and Treasurer Ronald H. Stolle /s/ Ronald H. Stolle
-----------------------
5. The individuals listed below are the only directors of the Borrower and
have all been duly elected by Sealy Corp., the sole shareholder of the Borrower:
<PAGE>
December 18, 1997
Page 7
Directors Signature
--------- ---------
Ronald L. Jones _______________________
Kenneth L. Walker /s/ Kenneth L. Walker
-----------------------
Ronald H. Stolle /s/ Ronald H. Stolle
-----------------------
6. Sealy Corp. owns 1,000 shares of common stock, par value one dollar
($1.00) per share (the "Shares"), of the Borrower consisting of all of the
issued and outstanding shares of capital stock of the Borrower. All of the
Shares have been fully paid for by Sealy Corp. The Borrower has not issued or
authorized any outstanding options, warrants or similar rights to subscribe for
or purchase any capital stock of the borrower or outstanding securities
convertible into, exchangeable for, or evidencing the right to subscribe for,
any shares of capital stock or other equity securities of the Borrower.
Please note, however, that the stock records and the corporate records of
the Borrower are incomplete and I am unable to verify the accuracy of certain of
the information including, without limitation, information regarding the
election of directors and the issuance of shares of the Borrower. However,
nothing has come to my attention which leads me to believe the statements set
forth in this certificate are incorrect as to such matters.
All capitalized terms not otherwise defined in this Certificate are used
herein as defined in the opinion of Calfee, Halter & Griswold LLP delivered
pursuant to subsection 4.1P of that certain Credit Agreement, dated as of
December 18, 1997 (the "Credit Agreement") and subsection 3.1P of that certain
AXEL Credit Agreement, dated as of December 18, 1997 (the "AXEL Credit
Agreement"). The undersigned acknowledges and agrees that Calfee, Halter &
Griswold LLP intend to, and may, rely on this Certificate and the matters
contained herein, in rendering opinions in connection with the transactions
contemplated by the Credit Agreement and the AXEL Credit Agreement.
SEALY MATTRESS COMPANY
By:/s/ Kenneth L. Walker
--------------------------
Kenneth L. Walker
Vice President and General Counsel
Effective Date:_____________, 1997
<PAGE>
December 18, 1997
Page 8
SEALY CORPORATION
By:/s/ Kenneth L. Walker
---------------------------
Kenneth L. Walker
Vice President and General Counsel
<PAGE>
EXHIBIT IX
[FORM OF OPINION OF O'MELVENY & MYERS LLP]
[O'M&M Letterhead]
[Date]
1 9 9 7
[file number]
[doc ID]
Goldman Sachs Credit Partners L.P.,
as Arranger and Syndication Agent
Morgan Guaranty Trust Company
of New York,
as Administrative Agent
Bankers Trust Company,
as Documentation Agent
and
The Lenders Party to the Credit
Agreement Referenced Below
Re: Loans to Sealy Mattress Company
-------------------------------
Ladies and Gentlemen:
We have acted as counsel to Goldman Sachs Credit Partners L.P., as
arranger and syndication agent (in such capacity, "Syndication Agent"), and
Morgan Guaranty Trust Company of New York, as administrative agent (in such
capacity, "Administrative Agent"; collectively, Syndication Agent and
Administrative Agent are referred to herein as "Agents"), in connection with
the preparation and delivery of (i) a Credit Agreement dated as of December 18,
1997 (the "Revolver/Tranche A Term Loan Credit Agreement") and (ii) an AXEL
Credit Agreement dated as of December 18, 1997 (the "AXEL Credit Agreement";
together with the
IX-1
<PAGE>
Revolver/Tranche A Term Loan Credit Agreement, the "Credit Agreements"), each
among Sealy Mattress Company, an Ohio corporation ("Company"), Sealy
Corporation, a Delaware corporation ("Holdings"), the financial institutions
listed therein as lenders, Agents and Bankers Trust Company, as documentation
agent, and in connection with the preparation and delivery of certain related
documents.
We have participated in various conferences with representatives of
Company and Agents and conferences and telephone calls with Kirkland & Ellis,
counsel to Company and Holdings, during which the Credit Agreements and related
matters have been discussed, and we have also participated in the meeting held
on the date hereof (the "Closing") incident to the funding of the initial
loans made under the Credit Agreements. We have reviewed the forms of the
Credit Agreements and the respective exhibits thereto, including the forms of
the promissory notes annexed thereto (the "Notes"), and the opinions of
Kirkland & Ellis and Calfee, Halter & Griswold LLP (collectively, the
"Opinions") and the officers' certificates and other documents delivered at
the Closing. We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals or copies and the due
authority of all persons executing the same, and we have relied as to factual
matters on the documents that we have reviewed.
Although we have not independently considered all of the matters
covered by the Opinions to the extent necessary to enable us to express the
conclusions therein stated, we believe that the Credit Agreements and the
respective exhibits thereto are in substantially acceptable legal form and that
the Opinions and the officers' certificates and other documents delivered in
connection with the execution and delivery of, and as conditions to the making
of the initial loans under, the Credit Agreements and the Notes are
substantially responsive to the respective requirements of the Credit
Agreements.
Respectfully submitted,
IX-2
<PAGE>
EXHIBIT X
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "AGREEMENT") is entered into by and
between the parties designated as Assignor ("ASSIGNOR") and Assignee
("ASSIGNEE") above the signatures of such parties on the Schedule of Terms
attached hereto and hereby made an integral part hereof (the "SCHEDULE OF
TERMS") and relates to that certain Credit Agreement described in the Schedule
of Terms (said Credit Agreement, as amended, supplemented or otherwise modified
to the date hereof and as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "CREDIT AGREEMENT", the terms defined
therein and not otherwise defined herein being used herein as therein defined).
IN CONSIDERATION of the agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
SECTION 1. ASSIGNMENT AND ASSUMPTION.
-------------------------
(a) Effective upon the Settlement Date specified in Item 4 of the Schedule
of Terms (the "SETTLEMENT DATE"), Assignor hereby sells and assigns to
Assignee, without recourse, representation or warranty (except as expressly set
forth herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Credit Agreement and the other Loan Documents with respect to
Assignor's Commitments and outstanding Loans, if any, which represents, as of
the Settlement Date, the percentage interest specified in Item 3 of the Schedule
of Terms of all rights and obligations of Lenders arising under the Credit
Agreement and the other Loan Documents with respect to the Commitments and any
outstanding Loans (the "ASSIGNED SHARE"). Without limiting the generality of
the foregoing, the parties hereto hereby expressly acknowledge and agree that
any assignment of all or any portion of Assignor's rights and obligations
relating to Assignor's Revolving Loan Commitment shall include (i) in the event
Assignor is an Issuing Lender with respect to any outstanding Letters of Credit
(any such Letters of Credit being "ASSIGNOR LETTERS OF CREDIT"), the sale to
Assignee of a participation in the Assignor Letters of Credit and any drawings
thereunder as contemplated by subsection 3.1C of the Credit Agreement and (ii)
the sale to Assignee of a ratable portion of any participations previously
purchased by Assignor pursuant to said subsection 3.1C with respect to any
Letters of Credit other than the Assignor Letters of Credit.
X-1
<PAGE>
(b) In consideration of the assignment described above, Assignee hereby
agrees to pay to Assignor, on the Settlement Date, the principal amount of any
outstanding Loans included within the Assigned Share, such payment to be made by
wire transfer of immediately available funds in accordance with the applicable
payment instructions set forth in Item 5 of the Schedule of Terms.
(c) Assignor hereby represents and warrants (i) that Item 3 of the Schedule
of Terms correctly sets forth the amount of the Commitments, the outstanding
Term Loan and the Pro Rata Share corresponding to the Assigned Share and (ii)
that the assignment complies with clause (a) or (b), as applicable, of
subsection 10.1B(i).
(d) Assignor and Assignee hereby agree that, upon giving effect to the
assignment and assumption described above, (i) Assignee shall be a party to the
Credit Agreement and shall have all of the rights and obligations under the Loan
Documents, and shall be deemed to have made all of the covenants and agreements
contained in the Loan Documents, arising out of or otherwise related to the
Assigned Share, and (ii) Assignor shall be absolutely released from any of such
obligations, covenants and agreements assumed or made by Assignee in respect of
the Assigned Share. Assignee hereby acknowledges and agrees that the agreement
set forth in this Section 1(d) is expressly made for the benefit of Company,
Agents, Assignor and the other Lenders and their respective successors and
permitted assigns.
(e) Assignor and Assignee hereby acknowledge and confirm their understanding
and intent that (i) this Agreement shall effect the assignment by Assignor and
the assumption by Assignee of Assignor's rights and obligations with respect to
the Assigned Share, (ii) any other assignments by Assignor of a portion of its
rights and obligations with respect to the Commitments and any outstanding Loans
shall have no effect on the Commitments, the outstanding Term Loan and the Pro
Rata Share corresponding to the Assigned Share as set forth in Item 3 of the
Schedule of Terms or on the interest of Assignee in any outstanding Revolving
Loans corresponding thereto, and (iii) from and after the Settlement Date,
Administrative Agent shall make all payments under the Credit Agreement in
respect of the Assigned Share (including without limitation all payments of
principal and accrued but unpaid interest, commitment fees and letter of credit
fees with respect thereto) (A) in the case of any such interest and fees that
shall have accrued prior to the Settlement Date, to Assignor, and (B) in all
other cases, to Assignee; provided that Assignor and Assignee shall make
--------
payments directly to each other to the extent necessary to effect any
appropriate adjustments in any amounts distributed to Assignor and/or Assignee
by Administrative Agent under the Loan Documents in respect of the Assigned
Share in the event that, for any reason whatsoever, the payment of consideration
contemplated by Section 1(b) occurs on a date other than the Settlement Date.
X-2
<PAGE>
SECTION 2. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
--------------------------------------------------
(a) Assignor represents and warrants that it is the legal and beneficial
owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor shall not be responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Loan Documents or for any representations, warranties,
recitals or statements made therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Assignor to Assignee or by or on behalf
of Company or any of its Subsidiaries to Assignor or Assignee in connection with
the Loan Documents and the transactions contemplated thereby or for the
financial condition or business affairs of Company or any other Person liable
for the payment of any Obligations, nor shall Assignor be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or the use of the Letters of Credit or
as to the existence or possible existence of any Event of Default or Potential
Event of Default.
(c) Assignee represents and warrants that it is an Eligible Assignee; that
it has experience and expertise in the making of loans such as the Loans; that
it has acquired the Assigned Share for its own account in the ordinary course of
its business and without a view to distribution of the Loans within the meaning
of the Securities Act or the Exchange Act or other federal securities laws (it
being understood that, subject to the provisions of subsection 10.1 of the
Credit Agreement, the disposition of the Assigned Share or any interests therein
shall at all times remain within its exclusive control); and that it has
received, reviewed and approved a copy of the Credit Agreement (including all
Exhibits and Schedules thereto).
(d) Assignee represents and warrants that it has received from Assignor such
financial information regarding Company and its Subsidiaries as is available to
Assignor and as Assignee has requested, that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the assignment evidenced by this Agreement, and
that it has made and shall continue to make its own appraisal of the
creditworthiness of Company and its Subsidiaries. Assignor shall have no duty
or responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any other credit or other information with respect thereto, whether coming
into its possession before the making of the initial Loans or at any time or
times thereafter, and Assignor shall not have any responsibility with respect to
the accuracy of or the completeness of any information provided to Assignee.
X-3
<PAGE>
(e) Each party to this Agreement represents and warrants to the other party
hereto that it has full power and authority to enter into this Agreement and to
perform its obligations hereunder in accordance with the provisions hereof, that
this Agreement has been duly authorized, executed and delivered by such party
and that this Agreement constitutes a legal, valid and binding obligation of
such party, enforceable against such party in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity.
SECTION 3. MISCELLANEOUS.
-------------
(a) Each of Assignor and Assignee hereby agrees from time to time, upon
request of the other such party hereto, to take such additional actions and to
execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the party
(including, if applicable, any party required to evidence its consent to or
acceptance of this Agreement) against whom enforcement of such change, waiver,
discharge or termination is sought.
(c) Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the notice address of each of
Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to
either such party, such other address as shall be designated by such party in a
written notice delivered to the other such party. In addition, the notice
address of Assignee set forth on the Schedule of Terms shall serve as the
initial notice address of Assignee for purposes of subsection 10.8 of the Credit
Agreement.
(d) In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION
X-4
<PAGE>
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(f) This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(h) This Agreement shall become effective upon the date (the "EFFECTIVE
DATE") upon which all of the following conditions are satisfied: (i) the
execution of a counterpart hereof by each of Assignor and Assignee, (ii) the
execution of a counterpart hereof by Company as evidence of its consent hereto
to the extent required under subsection 10.1B(i) of the Credit Agreement, (iii)
the receipt by Administrative Agent of the processing and recordation fee
referred to in subsection 10.1B(i) of the Credit Agreement, (iv) in the event
Assignee is a Non-US Lender (as defined in subsection 2.7B(iii)(a) of the Credit
Agreement), the delivery by Assignee to Administrative Agent of such forms,
certificates or other evidence with respect to United States federal income tax
withholding matters as Assignee may be required to deliver to Administrative
Agent pursuant to said subsection 2.7B(iii)(a), (v) the execution of a
counterpart hereof by Administrative Agent as evidence of its acceptance hereof
in accordance with subsection 10.1B(ii) of the Credit Agreement, and (vi) the
receipt by Administrative Agent of originals or telefacsimiles of the
counterparts described above and authorization of delivery thereof, and (vii)
the recordation by Administrative Agent in the Register of the pertinent
information regarding the assignment effected hereby in accordance with
subsection 10.1B(ii) of the Credit Agreement.
[Remainder of page intentionally left blank]
X-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized, such execution being made as of the Effective Date in the applicable
spaces provided on the Schedule of Terms.
X-6
<PAGE>
SCHEDULE OF TERMS
31. BORROWER: Sealy Mattress Company, an Ohio corporation
--------
32. NAME AND DATE OF CREDIT AGREEMENT: Credit Agreement dated as of December
---------------------------------
18, 1997 by and among the Borrower, Sealy Corporation, a Delaware
corporation, as guarantor, Goldman Sachs Credit Partners L.P., as arranger
and syndication agent, the financial institutions listed therein, Morgan
Guaranty Trust Company of New York, as administrative agent, and Bankers
Trust Company, as documentation agent.
AMOUNTS:
-------
RE: REVOLVING
RE: TERM LOANS LOAN
-------------- -------
(a) Aggregate Commitments of all
all Lenders: $______ $_____
(b) Assigned Share/Pro Rata Share: ______% _____%
(c) Amount of Assigned Share of
Commitments: $______ $_____
(d) Amount of Assigned Share of
Term Loans: $______
34. SETTLEMENT DATE: ____________, [199_][200_]
---------------
35. PAYMENT INSTRUCTIONS:
--------------------
ASSIGNOR: ASSIGNEE:
See Annex A See Annex B
36. NOTICE ADDRESSES:
----------------
ASSIGNOR: ASSIGNEE:
See Annex A See Annex B
X-7
<PAGE>
37. SIGNATURES:
----------
[NAME OF ASSIGNOR], [NAME OF ASSIGNEE],
as Assignor as Assignee
By: _____________________ By: _______________________
Name: Name:
Title: Title:
Consented to and accepted in accor-
dance with subsections 10.1B(i) and
(ii) of the Credit Agreement
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Administrative Agent
By: _____________________
Name:
Title:
[Consented to and accepted in accordance with
subsection 10.1B(i) of the Credit Agreement
SEALY MATTRESS COMPANY
By: _____________________________
Name:
Title:]
X-8
<PAGE>
ANNEX A
-------
ASSIGNOR PAYMENT INSTRUCTIONS:
-----------------------------
_____________________________
_____________________________
_____________________________
Attention:___________________
Reference:___________________
ASSIGNOR NOTICE ADDRESSES:
-------------------------
_____________________________
_____________________________
_____________________________
Attention:___________________
Reference:___________________
X-9
<PAGE>
ANNEX B
-------
ASSIGNEE PAYMENT INSTRUCTIONS:
-----------------------------
_____________________________
_____________________________
_____________________________
Attention:___________________
Reference:___________________
ASSIGNEE NOTICE ADDRESSES:
-------------------------
_____________________________
_____________________________
_____________________________
Attention:___________________
Reference:___________________
X-10
<PAGE>
EXHIBIT XI
[FORM OF CERTIFICATE RE NON-BANK STATUS]
CERTIFICATE RE NON-BANK STATUS
Reference is hereby made to that certain Credit Agreement dated as of
December 18, 1997, as amended, supplemented or otherwise modified to the date
hereof (said Credit Agreement, as so amended, supplemented or otherwise
modified, being the "CREDIT AGREEMENT", the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Sealy Mattress Company, an Ohio corporation, as borrower, Sealy Corporation, a
Delaware corporation, as guarantor, Goldman Sachs Credit Partners L.P., as
arranger and syndication agent, the financial institutions listed therein as
Lenders, Morgan Guaranty Trust Company of New York, as administrative agent, and
Bankers Trust Company, as documentation agent. Pursuant to subsection 2.7B(iii)
of the Credit Agreement, the undersigned hereby certifies that it is not a
"bank" or other Person described in Section 881(c)(3) of the Internal Revenue
Code of 1986, as amended.
DATED: __________________________ [NAME OF LENDER]
By: ____________________________________
Name:
Title:
XI-1
<PAGE>
EXHIBIT XII
[FORM OF FINANCIAL CONDITION CERTIFICATE]
This FINANCIAL CONDITION CERTIFICATE (this "CERTIFICATE") is delivered in
connection with that certain Credit Agreement dated as of December 18, 1997 (the
"CREDIT AGREEMENT"), by and among Sealy Mattress Company, an Ohio corporation
("COMPANY"), Sealy Corporation, a Delaware corporation ("HOLDINGS"), the
financial institutions referred to therein as lenders (the "CREDIT AGREEMENT
LENDERS"), Goldman Sachs Credit Partners L.P. ("GSCP"), as arranger and
syndication agent, Morgan Guaranty Trust Company of New York ("MORGAN
GUARANTY"), as administrative agent (the "CA ADMINISTRATIVE AGENT"), and
Bankers Trust Company ("BTCO"), as documentation agent, and that certain AXEL
Credit Agreement dated as of December 18, 1997 ("AXEL CREDIT AGREEMENT") by
and among Company, Holdings, the financial institutions listed therein as
lenders (the"AXEL LENDERS"), GSCP as arranger and syndication agent, Morgan
Guaranty, as administrative agent (the "AXEL ADMINISTRATIVE AGENT"), and BTCo,
as documentation agent. Capitalized terms used herein without definition have
the same meanings as in the Credit Agreement.
A. I am, and at all pertinent times mentioned herein have been, the duly
qualified and acting vice president, controller and principal accounting officer
of Holdings. I am familiar with the terms and conditions of the Credit
Agreement and the AXEL Credit Agreement.
B. I have carefully reviewed the contents of this Certificate, and I have
conferred with counsel for Holdings for the purpose of discussing the meaning of
its contents.
C. In connection with preparing for the consummation of the transactions
and financings contemplated by the Credit Agreement and the AXEL Credit
Agreement (the "PROPOSED TRANSACTIONS"), I have participated in the
preparation of, and I have reviewed, pro forma projections of net income and
cash flows for Holdings and its Subsidiaries for the fiscal years of Holdings
ending November 30, 1998 through November 30, 2008, inclusive (the "PROJECTED
FINANCIAL STATEMENTS"). The Projected Financial Statements, attached hereto as
Exhibit A, give effect to the consummation of the Proposed Transactions and
---------
assume that the debt obligations of Holdings will be paid from the cash flow
generated by the operations of Holdings and its Subsidiaries and other cash
resources. The Projected Financial Statements were prepared on the basis of
information available at August 31, 1997. I know of no facts that have occurred
since such date that would lead me to believe that the Projected Financial
Statements are inaccurate in any material respect. The Projected Financial
Statements do not reflect (i) any potential changes in interest rates from those
assumed in the Projected Financial Statements, (ii) any potential material,
adverse changes in general business conditions, or (iii) any potential changes
in income tax laws.
D. In connection with the preparation of the Projected Financial
Statements, I have made such investigations and inquiries as I have deemed
necessary and prudent therefor and, specifically, have relied on historical
information with respect to revenues, expenses and other relevant items supplied
by the supervisory personnel of Holdings and its Subsidiaries directly
responsible for the various operations involved. The assumptions upon which the
Projected Financial Statements are
<PAGE>
based are stated therein. Although any assumptions and any projections by
necessity involve uncertainties and approximations, I believe, based on my
discussions with other members of management, that the assumptions on which the
Projected Financial Statements are based are reasonable. Based thereon, I
believe that the projections for Holdings and its Subsidiaries, taken as a
whole, reflected in the Projected Financial Statements provide reasonable
estimations of future performance, subject, as stated above, to the
uncertainties and approximations inherent in any projections.
Based on the foregoing, I have, in my capacity as vice president, controller
and principal accounting officer of Holdings, reached the following conclusions:
1. Holdings and its Subsidiaries are not now, nor will the incurrence
of the Obligations under the Credit Agreement and the Obligations (as such
term is defined in the AXEL Credit Agreement) under the AXEL Credit
Agreement, and the incurrence of the other obligations contemplated by the
Proposed Transactions render Holdings and its Subsidiaries "insolvent" as
defined in this paragraph 1. The recipients of this Certificate and I have
agreed that, in this context, "insolvent" means that the present fair
saleable value of assets (on a going concern basis based on the valuation
procedures performed by Valuation Research Corporation in their letter of
even date herewith (the "VRC OPINION")) is less than the amount that will
be required to pay the probable liability on existing debts as they become
absolute and matured. We have also agreed that the term "debts" includes
any legal liability, whether matured or unmatured, liquidated or
unliquidated, absolute, fixed or contingent. My conclusion expressed above
is supported by the VRC Opinion. The assumptions on which the VRC Opinion
is based are stated therein. I believe that the assumptions on which the
VRC Opinion is based are reasonable.
2. By the incurrence of the Obligations under the Credit Agreement,
the Obligations (as such term is defined in the AXEL Credit Agreement) under
the AXEL Credit Agreement, and the incurrence of the other obligations
contemplated by the Proposed Transactions, Holdings and its Subsdiaries will
not incur debts beyond its ability to pay as such debts mature. I have
based my conclusion in part on the Projected Financial Statements, which
demonstrate that Holdings and its Subsidiaries will have positive cash flow
after paying all of its scheduled anticipated indebtedness (including
scheduled payments under the Credit Agreement, the AXEL Credit Agreement,
the other obligations contemplated by the Proposed Transactions and other
permitted indebtedness). I have concluded that the realization of current
assets in the ordinary course of business will be sufficient to pay
recurring current debt and short-term and long-term debt service as such
debts mature, and that the cash flow (including earnings plus non-cash
charges to earnings) will be sufficient to provide cash necessary to repay
the Loans and other Obligations under the Credit Agreement and the Loans (as
such term is defined in the AXEL Credit Agreement) and other Obligations (as
such term is defined in the AXEL Credit Agreement) under the AXEL Credit
Agreement, the other obligations contemplated by the Proposed Transactions
and other long-term indebtedness as such debt matures. The foregoing
conclusion also assumes that Holdings and its Subsidiaries will refinance
their outstanding debt in the year in which the Senior Subordinated Notes
and the Discount Notes mature.
XII-2
<PAGE>
3. As of the Closing Date, the incurrence of the Obligations under the
Credit Agreement, the Obligations (as such term is defined in the AXEL
Credit Agreement) under the AXEL Credit Agreement, and the incurrence of the
other obligations contemplated by the Proposed Transactions will not leave
Holdings and its Subsidiaries with property remaining in their hands
constituting "unreasonably small capital." In reaching this conclusion, I
understand that "unreasonably small capital" depends upon the nature of
the particular business or businesses conducted or to be conducted, and I
have reached my conclusion based on the needs and anticipated needs for
capital of the businesses conducted or anticipated to be conducted by
Holdings and its Subsidiaries in light of the Projected Financial Statements
and available credit capacity.
4. To the best of my knowledge, Holdings and its Subsidiaries have not
executed the Credit Agreement, the AXEL Credit Agreement, or any documents
mentioned therein, or made any transfer or incurred any obligations
thereunder, with actual intent to hinder, delay or defraud either present or
future creditors.
I understand that Administrative Agent, AXEL Administrative Agent, Credit
Agreement Lenders, and AXEL Lenders are relying on the truth and accuracy of the
foregoing in connection with the extension of credit to Company pursuant to the
Credit Agreement and the AXEL Credit Agreement.
On behalf of Holdings, in my capacity as vice president, controller and
principal accounting officer, I represent the foregoing information to be, to
the best of my knowledge and belief, true and correct and execute this
Certificate this ___ day of December, 1997.
SEALY CORPORATION
By: ____________________________
Name:
Vice President, Controller and
Principal Accounting Officer
XII-3
<PAGE>
EXHIBIT XIII
[FORM OF] INTERCREDITOR AGREEMENT
This Intercreditor Agreement is dated as of December 18, 1997, and
entered into by and among Morgan Guaranty Trust Company of New York, as
administrative agent (in such capacity, the "Revolving Facility Agent") for the
lenders and the issuer of letters of credit under the Revolving Credit Agreement
referred to below, Morgan Guaranty Trust Company of New York, as administrative
agent (in such capacity, the "AXEL Facility Agent") for the lenders under the
AXEL Credit Agreement referred to below, and Morgan Guaranty Trust Company of
New York, as collateral agent (in such capacity, together with its successors in
such capacity, the "Collateral Agent") under each of the Security Documents, the
Subsidiary Guaranty and the Holdings Guaranty dated of even date herewith
referred to below.
RECITALS
WHEREAS, Sealy Mattress Company (the "Company"), as the borrower, the
several lenders from time to time parties thereto (the "Revolving Facility
Lenders"), Goldman Sachs Credit Partners L.P. ("GSCP"), as arranger and
syndication agent, and the Revolving Facility Agent have entered into a Credit
Agreement dated as of December 18, 1997 (said agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the
"Revolving Credit Agreement"; the terms defined therein and not otherwise
defined herein being used herein as therein defined);
WHEREAS, the Company, the various financial institutions parties
thereto (the "AXEL Facility Lenders"), GSCP, as arranger and syndication agent,
and the AXEL Facility Agent have entered into an AXEL Credit Agreement dated as
of December 18, 1997 (said agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "AXEL Credit
Agreement");
WHEREAS, the Company may from time to time enter into one or more
Interest Rate Agreements (collectively, the "Lender Interest Rate Agreements")
with one or more Lenders (in such capacity, collectively, "Interest Rate
Exchangers") in accordance with the terms of the Financing Agreements (as
hereinafter defined);
WHEREAS, the terms of the Revolving Credit Agreement and the AXEL
Credit Agreement require that the Company execute and deliver to the Collateral
Agent the Company Security Agreement, the Company Pledge Agreement and the
Company Patent and Trademark
XIII-1
<PAGE>
Security Agreement securing the Company's obligations to the Revolving Facility
Lenders, the AXEL Facility Lenders, the Revolving Facility Agent and the AXEL
Facility Agent as provided therein;
WHEREAS, the terms of the Revolving Credit Agreement and the AXEL
Credit Agreement also require that all of the Domestic Subsidiaries of the
Company execute and deliver to the Collateral Agent a guaranty (the "Subsidiary
Guaranty") guaranteeing the Company's obligations to the Revolving Facility
Lenders (including the obligations of the Company to the Issuing Lender in
respect of any Letters of Credit), the AXEL Facility Lenders, the Revolving
Facility Agent and the AXEL Facility Agent as provided therein (such Domestic
Subsidiaries and any future Domestic Subsidiaries executing the Subsidiary
Guaranty being referred to herein as the "Subsidiary Guarantors"; the Subsidiary
Guarantors and Holdings collectively being referred to herein as the
"Guarantors"), and that all Domestic Subsidiaries of the Company execute and
deliver to the Collateral Agent the Subsidiary Pledge Agreement, the Subsidiary
Security Agreement and the Subsidiary Patent and Trademark Security Agreement
securing the obligations of such Subsidiaries under the Subsidiary Guaranty;
WHEREAS, the terms of the Revolving Credit Agreement and the AXEL
Credit Agreement also require that Holdings execute and deliver to the
Collateral Agent a guaranty (the "Holdings Guaranty"; together with the
Subsidiary Guaranty, the "Guaranties") guaranteeing the Company's obligations to
the Revolving Facility Lenders (including the obligations of the Company to the
Issuing Lender in respect of any Letters of Credit), the AXEL Facility Lenders,
the Revolving Facility Agent and the AXEL Facility Agent as provided therein,
and that Holdings execute and deliver to the Collateral Agent the Holdings
Pledge Agreement and the Holdings Security Agreement securing the obligations of
Holdings under the Holdings Guaranty (the Holdings Pledge Agreement, the
Holdings Security Agreement, together with the Subsidiary Pledge Agreement, the
Subsidiary Security Agreement, the Subsidiary Patent and Trademark Security
Agreement, the Company Security Agreement, the Company Pledge Agreement and the
Company Patent and Trademark Security Agreement and any other security
agreements, mortgages and deeds of trust entered into by any Loan Party (as
hereinafter defined) for the benefit of any Secured Parties and any other
security agreements, mortgages and deeds of trust entered into by any Loan Party
(as hereinafter defined) for the benefit of any Secured Parties (hereinafter
defined), being collectively referred to herein as the "Security Documents");
WHEREAS, the Revolving Facility Agent, the AXEL Facility Agent and the
Collateral Agent (such parties collectively referred to as the "Parties") desire
to set forth certain provisions regarding the appointment, duties and
responsibilities of the Collateral Agent and to set forth certain other
provisions concerning the obligations of the Company, Holdings and the
Subsidiaries of Holdings executing the Guaranties and the Security Documents
(collectively, the "Loan Parties") to the Parties, the Revolving Facility
Lenders, the AXEL Facility Lenders and any Interest Rate Exchangers
(collectively, together with the Parties, the "Secured Parties") under the
agreements referred to in the foregoing recitals; and
XIII-2
<PAGE>
WHEREAS, the Parties wish to set forth their agreement as to the
decisions relating to the exercise of remedies under the Security
Documents, the Guaranties and certain limitations on the exercise of such
remedies.
NOW, THEREFORE, the Parties and, by their acceptance of the benefits
hereof and of the Guaranties and the Security Documents, the Interest Rate
Exchangers agree as follows:
Appointment As Collateral Agent. The Revolving Facility Agent on behalf
-------------------------------
of the Revolving Facility Lenders, the AXEL Facility Agent on behalf of the AXEL
Facility Lenders, and the Interest Rate Exchangers hereby severally appoint
Morgan Guaranty Trust Company of New York to serve as the Collateral Agent and
representative of the Secured Parties, and each such Party and Interest Rate
Exchanger authorizes the Collateral Agent to act as agent for the Secured
Parties (a) for the purposes of executing and delivering on its behalf the
Security Documents to be executed and delivered by the Loan Parties and, subject
to the provisions of this Agreement, enforcing the Secured Parties' rights in
respect of the Collateral and the obligations of the Loan Parties under the
Security Documents, and (b) for the purpose of enforcing the Secured Parties'
rights under the Guaranties and the obligations of the Guarantors under the
Guaranties. The Collateral Agent hereby accepts such appointment and agrees to
act as Collateral Agent hereunder and to enter into and act as Collateral Agent
under each of the Security Documents and the Guaranties in accordance with the
terms thereof and of this Agreement.
Decisions Relating to Exercise of Remedies Vested in Requisite Obligees.
-----------------------------------------------------------------------
The Collateral Agent agrees to make such demands, to give such notices
and to take such other actions under this Agreement, the Guaranties and the
Security Documents as are expressly required under the terms hereof and thereof
or as Requisite Obligees may request, and to take such action to enforce the
Guaranties and the Security Documents and to foreclose upon, collect and dispose
of the Collateral or any portion thereof as may be expressly required under the
terms of this Agreement, the Guaranties or the Security Documents or as
Collateral Agent may be directed by Requisite Obligees. The Collateral Agent
shall not be required to take any action that is in its opinion contrary to law
or to the terms of this Agreement, any or all of the Security Documents or the
Guaranties or that would in its opinion subject it or any of its officers,
employees, agents or directors to liability, and the Collateral Agent shall not
be required to take any action under this Agreement, any or all of the Security
Documents or the Guaranties unless and until the Collateral Agent shall be
indemnified to its satisfaction by the Secured Parties against any and all loss,
cost, expense or liability in connection therewith.
Each Party executing this Agreement agrees that the Collateral Agent
may act as Requisite Obligees may request (regardless of whether any individual
Party or any other Secured Party agrees, disagrees or abstains with respect to
such request), that the Collateral Agent shall have no liability for acting in
accordance with such request and that no Party or Secured Party shall have any
liability to any other Party or Secured Party for any such request. The
Collateral
XIII-3
<PAGE>
Agent shall give prompt notice to all Parties of actions taken pursuant to the
instructions of Requisite Obligees; provided, however, that the failure to give
-------- -------
any such notice shall not impair the right of the Collateral Agent to take any
such action or the validity or enforceability under this Agreement of the action
so taken.
The Collateral Agent may at any time request directions from
the Requisite Obligees as to any course of action or other matters relating
hereto or to the Security Documents or the Guaranties. Directions given by
Requisite Obligees to the Collateral Agent shall be binding on the Parties, the
Revolving Facility Lenders, the AXEL Facility Lenders and all Secured Parties
for all purposes.
Each Party, on behalf of the Secured Parties, and each Interest Rate
Exchanger, agrees not to take any action whatsoever to enforce any term or
provision of the Security Documents or the Guaranties or to enforce any of its
rights in respect of the Collateral, except through the Collateral Agent in
accordance with this Agreement.
Application of Proceeds of Security, Guaranty Payments, Etc.
-----------------------------------------------------------
The Collateral Agent shall establish and maintain two accounts into
which it shall deposit (i) all amounts received by it in its capacity as the
Collateral Agent in respect of any Security Document or the Guaranties
(including all monies received on account of any sale of or other realization
upon any of the Collateral pursuant to any Security Document or pursuant to
Section 5(b) hereof and all monies received by it on account of the enforcement
of the Guaranties), and (ii) all amounts received by it as a result of payments
described in Section 5(c). One of the two accounts referred to in the preceding
sentence shall be established and maintained for the benefit of all Secured
Parties (other than with respect to L/C Obligations) (the "General Collateral
Account") and the second such account shall be established and maintained solely
for the benefit of the Issuing Lender (the "L/C Collateral Account", and
together with the General Collateral Account, the "Collateral Accounts"). The
Collateral Agent shall have exclusive dominion and control over the Collateral
Accounts.
All amounts which the Collateral Agent is required at any time to
deposit in the respective Collateral Accounts pursuant to Section 3(a) shall be
allocated between, and deposited in, such General Collateral Account and such
L/C Collateral Account, respectively, pro rata in accordance with (i) the
aggregate amount of such Secured Obligations (other than L/C Obligations) then
outstanding and (ii) the aggregate amount of the L/C Obligations then
outstanding. If any amounts are delivered to the Collateral Agent as cash
collateral for the Letters of Credit pursuant to Section 8 of the Revolving
Credit Agreement or as collateral for the liability of the Issuing Lender under
outstanding Letters of Credit, they shall be deposited in the L/C Collateral
Account. If after giving effect to such deposit or at any other time the balance
in the L/C Collateral Account exceeds all L/C Obligations then outstanding, the
excess shall be transferred to the General Collateral Account. After giving
effect to any such deposit to the L/C
XIII-4
<PAGE>
Collateral Account, subsequent allocations pursuant to the first sentence of
this Section 3(b) shall be adjusted to the extent necessary to cause the ratio
of the aggregate amount of the Secured Obligations (other than L/C Obligations)
then outstanding to the balance in the General Collateral Account to be equal to
the ratio of the aggregate amount of the L/C Obligations then outstanding to the
balance in the L/C Collateral Account. Prior to the delivery of a Notice of
Acceleration any amounts deposited in the Collateral Accounts may be disbursed
from the Collateral Accounts only upon the prior written consent of the
Requisite Obligees. After the occurrence of a Notice of Acceleration and until
such Notice is rescinded, the Collateral Agent shall disburse funds from the
Collateral Accounts only as provided in this Section 3.
When a Notice of Acceleration is in effect, all amounts deposited in
the General Collateral Account shall be applied in the following order of
priority:
First, to the extent not theretofore paid by or on behalf of
-----
any Loan Party, to pay all fees, costs, expenses of the Collateral
Agent incurred in connection with the performance of its duties
hereunder or under the Security Documents or the Guaranties, as the
case may be, including reasonable attorneys' fees and expenses and all
Collateral Agent Obligations and any other amounts payable to the
Collateral Agent hereunder or under any of the Security Documents or
the Guaranties in respect of any indemnities or other obligations of
the Loan Parties with such application made pro rata from the General
Collateral Account and the L/C Collateral Account based on the amounts
on deposit therein;
Second, to the other Secured Parties pro rata in accordance
------ --- ----
with the aggregate amount of all Secured Obligations (other than L/C
Obligations) held by such Secured Parties;
Third, if any L/C Obligations shall remain unpaid, to the L/C
-----
Collateral Account to the extent the aggregate amount in such L/C
Collateral Account does not exceed the aggregate amount of such L/C
Obligations; and
Fourth, the balance, if any, to the Company or such other
------
person or persons as are entitled thereto.
When a Notice of Acceleration is in effect, all amounts
deposited in the L/C Collateral Account shall be applied in the following order
of priority (provided that an amount not to exceed all L/C Obligations which are
not then L/C Current Obligations shall not be so applied, and shall instead be
held by Collateral Agent in the L/C Collateral Account as collateral for such
L/C Obligations, until they become L/C Current Obligations):
First, to the extent not theretofore paid by or on behalf of
-----
any Loan Party, to pay all fees, costs, expenses of the Collateral
Agent incurred in connection with the
XIII-5
<PAGE>
performance of its duties hereunder or under the Security Documents or
the Guaranties, as the case may be, including reasonable attorneys'
fees and expenses and all Collateral Agent Obligations and any other
amounts payable to the Collateral Agent hereunder or under any of the
Security Documents or the Guaranties in respect of any indemnities or
other obligations of the Loan Parties with such application made pro
rata from the General Collateral Account and the L/C Collateral Account
based on the amounts on deposit therein;
Second, to the holders of any L/C Current Obligations pro rata
------
in accordance with the aggregate amount of all L/C Current Obligations)
held by them,
Third, if any Secured Obligations (other than L/C Obligations)
-----
shall remain unpaid, to the General Collateral Account to the extent
the aggregate amount in the General Collateral Account does not exceed
the aggregate amount of such Secured Obligations; and
Fourth, the balance, if any, to the Company or such other
------
person or persons as are entitled thereto.
Unless the Collateral Agent shall have received instructions from the
Requisite Obligees as to the times at which any amounts are to be distributed
pursuant to Sections 3(c) or 3(d), all distributions or transfers pursuant to
Sections 3(c) or 3(d) shall be made at such times and as promptly as the
Collateral Agent shall in its good faith discretion determine to be reasonable
and practicable under the circumstances, given the amount available for
distribution or transfer in the relevant Collateral Account, the time at which
the next addition to such Collateral Account is expected to be made, and the
cost of distributing funds to the Secured Parties entitled to receive the same.
The Collateral Agent shall at all times have the right to request distribution
instructions as contemplated by the preceding sentence.
Pending the disbursement thereof pursuant to the terms of this
Agreement, all amounts in the Collateral Accounts shall be invested by the
Collateral Agent in such Cash Equivalents as it shall determine from time to
time or such other investments as shall be approved by Requisite Obligees;
provided that so long as no Event of Default shall have occurred and be
--------
continuing, the Collateral Agent shall make such other investments at the
direction of the Company. All reasonable commissions and other reasonable costs
and expenses incurred by the Collateral Agent in connection with the acquisition
or disposition by it of Cash Equivalents or such other investments may be
deducted by the Collateral Agent from the income received by the Collateral
Agent with respect thereto.
Payments by the Collateral Agent in respect of the Revolving Credit
Agreement Obligations (other than L/C Obligations) shall be made to the
Revolving Facility Agent for
XIII-6
<PAGE>
distribution to the Revolving Facility Lenders in accordance with the terms of
the Revolving Credit Agreement; payments with respect to the L/C Obligations
shall be made to the Revolving Facility Agent for distribution to the Issuing
Lender in accordance with the terms of the Revolving Credit Agreement; payments
by the Collateral Agent in respect of the AXEL Credit Agreement Obligations
shall be made to the AXEL Facility Agent for distribution to the AXEL
FacilityLenders in accordance with the terms of the AXEL Credit Agreement; and
payments by the Collateral Agent in respect of the Lender Interest Rate
Agreement Obligations shall be distributed to the Interest Rate Exchangers pro
---
rata in accordance with the aggregate amount of Lender Interest Rate Agreement
----
Obligations held by such Interest Rate Exchanger.
Information.
-----------
Upon the request of the Collateral Agent, each Party and Interest Rate
Exchanger agrees to promptly inform the Collateral Agent of the existence and
amount of the Secured Obligations owing to such Party or such Interest Rate
Exchanger and such other Secured Parties for whom such Party is acting as agent,
trustee or other representative and of any commitments to extend additional
credit which will constitute Secured Obligations by such Party or other Secured
Parties. Upon request of the Collateral Agent, each Party (other than the
Collateral Agent) and each Interest Rate Exchanger will inform the Collateral
Agent of such payments on the Secured Obligations as may be received from time
to time by such Party and such other Secured Parties for whom such Party is
acting as agent, trustee or other representative.
If, notwithstanding the request of the Collateral Agent, any Party or
Interest Rate Exchanger shall fail or refuse reasonably promptly to certify as
to the existence or amount of any Secured Obligation or such other information
concerning the Secured Obligations as the Collateral Agent may reasonably
request, the Collateral Agent shall be entitled to determine such existence or
amount of such Secured Obligations by such method as the Collateral Agent may,
in its sole discretion, determine in good faith, including by reliance upon a
certificate of an officer of the Company. The Collateral Agent may rely
conclusively, and shall be fully protected in so relying, on any determination
made by it in good faith in accordance with the provisions of this Section (or
as otherwise directed by a court of competent jurisdiction after notice and
hearing on the merits) and, in the absence of gross negligence, shall have no
liability to Company, any Subsidiary, any holder of any Secured Obligation or
any other person as a result of such determination.
If the Collateral Agent receives any Notice of Acceleration or
certificate rescinding a Notice of Acceleration or any request by the Company
for any consent, waiver or amendment with respect hereto or any Security
Document or the Guaranties, it shall give prompt notice thereof to each Party at
the address for such Party provided for in Section 8 hereof.
A Notice of Acceleration shall be deemed to have been given only when
the Notice of Acceleration has actually been received by the Collateral Agent
and to have been rescinded
XIII-7
<PAGE>
when the Collateral Agent has actually received from the creditor or creditor
group which gave such Notice of Acceleration a notice withdrawing such Notice of
Acceleration. A Notice of Acceleration shall be deemed to be outstanding at all
times after such Notice of Acceleration has been given until such time, if any,
as such Notice of Acceleration has been rescinded.
The Collateral Agent shall keep executed counterparts of this
Agreement, the Security Documents and the Guaranties at the Collateral Agent's
address as set forth under Collateral Agent's signature on the signature page to
this Agreement and shall permit any Secured Party to inspect this Agreement, the
Security Documents and the Guaranties upon request and to take copies thereof.
Intercreditor Arrangements.
--------------------------
Each of the Collateral Agent, each of the other Parties (on behalf of
the respective Secured Parties) and each Interest Rate Exchanger hereby agrees,
and each of the Loan Parties hereby acknowledges, that the liens and security
interests granted to the Collateral Agent under the Security Documents shall be
treated as having equal priority and shall at all times be shared by the Secured
Parties as provided herein.
If any Secured Party acquires custody, control or possession of any
Collateral or proceeds therefrom, or payments with respect to the Guaranties,
other than by distribution from the Collateral Agent pursuant to the terms of
this Agreement, such Secured Party shall promptly cause such Collateral,
proceeds or payments to be delivered to or put in the custody, possession or
control of the Collateral Agent for disposition or distribution in accordance
with the provisions of Section 3. Until such time as the provisions of the
immediately preceding sentence have been complied with, such Secured Party shall
be deemed to hold all such Collateral, proceeds and payments in trust for the
parties entitled thereto hereunder. Nothing in this Section shall prevent a
Secured Party from receiving and retaining payments (a) for the provision of
services to any Loan Party, or (b) in connection with any extension of credit or
other financial accommodation to any Loan Party if the obligations of such Loan
Party incurred in connection with such extension of credit or other financial
accommodation do not constitute Secured Obligations, or (c) as security for any
such extension of credit or other financial accommodation if the obligations of
such Loan Party incurred in connection with such services, extension of credit
or other financial accommodation do not constitute Secured Obligations, and if
such obligations are not incurred and such security is not given in breach of
the Financing Agreements (as defined in Section 6).
If (a) at any time after the occurrence of an Acceleration and for so
long as such Acceleration is continuing, any Secured Party shall receive payment
(voluntary or involuntary) on account of any Secured Obligation (i) from or on
behalf of the Company or any Subsidiary or any guarantor of payment or
performance of any of the Secured Obligations, or (ii) pursuant to any turnover
or similar provision contained in any agreement evidencing or relating to
XIII-8
<PAGE>
subordinated indebtedness of the Company or any Loan Party or other obligor, or
(b) at any time any Secured Party shall receive payment (voluntary or
involuntary) on account of any Secured Obligation by way of the exercise of any
right of setoff (or similar right) with respect to any assets (whether or not
such assets shall constitute Collateral) of any Loan Party or as a result of any
counterclaim, purchase of any participation by any Loan Party or otherwise, then
such payment, prepayment or repayment (herein, a "Secured Obligation Payment")
shall be deemed to be the proceeds of Collateral and shall be delivered to or
put in the custody, possession or control of the Collateral Agent by the Secured
Party receiving such Secured Obligation Payment for disposition or distribution
by the Collateral Agent in accordance with Section 3.
Any Secured Party receiving a Secured Obligation Payment that is
required pursuant to this Section to be turned over to the Collateral Agent for
application under Section 3 is deemed to have received such Secured Obligation
Payment solely as agent for the Secured Parties and the Collateral Agent, and
will immediately turn such Secured Obligation Payment, in the form received
except for the endorsement of such receiving party where appropriate, over to
the Collateral Agent, and until so turned over, will hold such Secured
Obligation Payment in trust for the Secured Parties and the Collateral Agent.
Each Party shall execute and deliver such other documents and
instruments, in form and substance reasonably satisfactory to the other Parties,
and shall take such other action, in each case as any other Party may reasonably
have requested (at the cost and expense of the Company which, by countersigning
this Agreement, agrees to pay such reasonable costs and expenses), to effectuate
and carry out the provisions of this Agreement, including by recording or filing
in such places as the requesting party may deem desirable, this Agreement or
such other documents or instruments.
In no event will the Revolving Facility Lenders or the AXEL
Facility Lenders consent to any amendment of the provisions of the Revolving
Credit Agreement or the AXEL Credit Agreement, respectively, or to any payment
consistent with an amendment thereof or a change thereto, or enter into any
other agreement with the Company or any of its Subsidiaries that would have the
effect of (i) changing (to earlier dates) any dates upon which payments of
principal or interest are due on loans or letter of credit reimbursement
obligations, (ii) reducing the percentage specified in the definition of
"Requisite Lenders" in the Revolving Credit Agreement or the AXEL Credit
Agreement, or (iii) changing any mandatory prepayments or commitment reductions
of the Revolving Credit Agreement or the AXEL Credit Agreement in a manner that
disproportionately disadvantages one Class relative to the other Class, or
confers additional rights on one Class which would be adverse to the other
Class, in each case without the prior written consent of Requisite Obligees.
Each Secured Party agrees that to the extent either Credit Agreement is amended
in accordance with the terms of this Agreement and the Credit Agreements to
increase the commitments and/or Secured Obligations outstanding thereunder, such
Secured Obligations shall be entitled to share in the benefits of the Guaranties
and the Security Documents on a pro rata basis.
XIII-9
<PAGE>
The Revolving Facility Agent agrees to deliver to the AXEL Facility
Agent upon execution thereof any amendment, waiver or modification of the
Revolving Credit Agreement, and the AXEL Facility Agent agrees to deliver to the
Revolving Facility Agent any amendment, waiver or modification of the AXEL
Credit Agreement.
Subject to clause (h) below, without further written consent or
authorization from Secured Parties, Collateral Agent may execute any documents
or instruments necessary to (a) release any Lien encumbering any item of
Collateral that is the subject of a sale or other disposition of assets
permitted by the Revolving Credit Agreement and the AXEL Credit Agreement, or to
which Requisite Obligees have otherwise consented, or (b) release any Subsidiary
Guarantor from the Subsidiary Guaranty if all the capital stock of such
Subsidiary Guarantor is sold to any Person pursuant to a sale or other
disposition permitted hereunder or to which Requisite Obligees have otherwise
consented; provided, however, that nothing herein shall require or permit
-------- -------
Collateral Agent to release any such entity which prior to such sale is a
Subsidiary Guarantor from the Subsidiary Guaranty if any of the Financing
Agreements require that such entity be party to the Subsidiary Guaranty after
such sale. Such termination and release shall be without prejudice to the rights
of the Collateral Agent to charge and be reimbursed for any expenditure which it
may incur in connection therewith. The proceeds of any disposition of Collateral
released in accordance with this Section are not required to be delivered to the
Collateral Agent or deposited in the Collateral Accounts pursuant to Section 3.
Any release of the Collateral by the Collateral Agent from the Liens
created by the Security Documents (other than in connection with the exercise of
remedies with respect to such Collateral under a Security Document pursuant to
instructions from Requisite Obligees) that is not permitted pursuant to the
Revolving Credit Agreement and the AXEL Credit Agreement, or any release of a
New Subsidiary by the Collateral Agent from the Subsidiary Guaranty that is not
permitted pursuant to the Revolving Credit Agreement and the AXEL Credit
Agreement, shall require the prior written consent of the Requisite Obligees
(except for the release of all or substantially all of the Collateral, in which
case the prior written consent of all of the Revolving Facility Lenders and all
of the AXEL Facility Lenders are required; it being understood that an increase
in the amount of any Indebtedness of the Company secured ratably by the
Collateral shall not be deemed to be a release of the Collateral).
Each of the Parties on its own behalf and on behalf of other Secured
Parties, and each of the Interest Rate Exchangers, hereby covenants and agrees
that it (a) will not accept any guarantee of any of the Secured Obligations by
any Subsidiary or Affiliate of the Company unless such Subsidiary or Affiliate
guarantees the payment of all the Secured Obligations and (b) will not take any
security interest in or lien on any assets of the Company or any of its
Subsidiaries to secure the payment or performance of any of the Secured
Obligations unless all the Secured Parties are granted a pari passu security
interest in or lien on such assets and the instrument creating such lien becomes
a Security Document for all purposes of this Agreement.
XIII-10
<PAGE>
No Secured Party may require the Collateral Agent to take or refrain
from taking any action hereunder or under any of the Security Documents or with
respect to any of the Collateral except as and to the extent expressly set forth
in this Agreement.
Disclaimers, Indemnity, Etc.
---------------------------
The Collateral Agent shall have no duties or responsibilities to the
Secured Parties except those expressly set forth in this Agreement, the Security
Documents and the Guaranties and the Collateral Agent shall not by reason of
this Agreement, the Security Documents or the Guaranties be a trustee for any
Secured Party or have any other fiduciary obligation to any Secured Party
(including any obligation under the Trust Indenture Act of 1939, as amended).
The Collateral Agent shall not be responsible to any Secured Party for any
recitals, statements, representations or warranties contained in this Agreement,
the Revolving Credit Agreement, the AXEL Credit Agreement and the Loan Documents
(as defined in each of the Revolving Credit Agreement and the AXEL Credit
Agreement; collectively, the "Financing Agreements") or in any certificate or
other document referred to or provided for in, or received by any of them under,
any of the Financing Agreements, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of any of the Financing Agreements or
any other document referred to or provided for therein or any Lien under the
Security Documents or the perfection or priority of any such Lien or the value
or condition of the Collateral or the title of the Loan Parties to the
Collateral or for any failure by any Loan Party to perform any of its
obligations under any of the Financing Agreements. The Collateral Agent may
employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. Neither the Collateral Agent nor any of its directors,
officers, employees or agents shall be liable or responsible for any action
taken or omitted to be taken by it or them hereunder or in connection herewith,
except for its or their own gross negligence or willful misconduct.
The Collateral Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telex, telecopy,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel to the Company or any
Subsidiary of the Company), independent accountants and other experts selected
by the Collateral Agent. The Collateral Agent shall not be deemed to have
actual, constructive, direct or indirect notice or knowledge of the occurrence
of any Acceleration unless and until the Collateral Agent shall have received a
Notice of Acceleration. The Collateral Agent shall have no obligation whatsoever
either prior to or after receiving a Notice of Acceleration to inquire whether
an Acceleration has, in fact, occurred and shall be entitled to rely
conclusively, and shall be fully protected in so relying, on any Notice of
Acceleration certificate so furnished to it. As to any matters not expressly
provided for by this Agreement, the Collateral Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance with
XIII-11
<PAGE>
instructions signed by Requisite Obligees, and such instructions of Requisite
Obligees, and any action taken or failure to act pursuant thereto, shall be
binding on all of the Secured Parties.
The Revolving Facility Lenders and the AXEL Facility Lenders
(collectively, the "Paying Indemnifying Parties") agree that such Secured
Parties shall indemnify the Collateral Agent, its Affiliates and their
respective directors, officers, employees and agents in its capacity as
Collateral Agent, ratably in accordance with the amount of the Secured
Obligations held by such Secured Parties to the extent neither reimbursed by any
Loan Party nor reimbursed out of any proceeds, recoveries or payments under any
Security Documents or the Guaranties, for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Collateral Agent in any way relating to or arising
out of any of the Financing Agreements or any other document contemplated by or
referred to therein or the transactions contemplated thereby or the enforcement
of any of the terms of any thereof; provided, however, that no such Secured
Party shall be liable for any of the foregoing to the extent they arise from the
gross negligence or willful misconduct of the Collateral Agent.
The Collateral Agent shall, notwithstanding anything to the contrary in
Section 6(c) hereof, in all cases be fully justified in failing or refusing to
act hereunder unless it shall be further indemnified to its satisfaction by the
Parties against any and all liability and expense that may be incurred by it by
reason of taking or continuing to take any such action.
The Collateral Agent may deem and treat the payee of any promissory
note or other evidence of indebtedness relating to the Secured Obligations as
the owner thereof for all purposes hereof unless and until a written notice of
the assignment or transfer thereof, signed by such payee and in form
satisfactory to the Collateral Agent, shall have been filed with the Collateral
Agent. Any request, authority or consent of any Person who at the time of making
such request or giving such authority or consent is the holder of any such note
or other evidence of indebtedness shall be conclusive and binding on any
subsequent holder, transferee or assignee of such note or other evidence of
indebtedness and of any note or notes or other evidences of indebtedness issued
in exchange therefor.
Except as expressly provided herein, in the Security Documents or in
the Guaranties, the Collateral Agent shall have no duty to take any affirmative
steps with respect to the collection of amounts payable in respect of the
Collateral or under the Guaranties. The Collateral Agent shall incur no
liability (absent gross negligence or willful misconduct) as a result of any
sale of any Collateral at any private sale.
(i) The Collateral Agent may resign at any time by giving at least 30
days notice thereof to the Parties (such resignation to take effect as
hereinafter provided) and the Collateral Agent may be removed as Collateral
Agent at any time by Requisite Obligees. In the event of any such resignation or
removal of the Collateral Agent, Requisite Obligees shall
XIII-12
<PAGE>
thereupon have the right to appoint a successor Collateral Agent which
appointment shall, unless an Event of Default has occurred and is continuing, be
subject to the approval of the Company. If no successor Collateral Agent shall
have been so appointed by Requisite Obligees and shall have accepted such
appointment within 30 days after the notice of the intent of the Collateral
Agent to resign, then the retiring Collateral Agent may, on behalf of the other
Parties, appoint a successor Collateral Agent. Any successor Collateral Agent
appointed pursuant to this clause (i) shall be a bank party to the Revolving
Credit Agreement or the AXEL Credit Agreement or a commercial bank organized
under the laws of the United States of America or any state thereof and having a
combined capital and surplus of at least $250,000,000.
(ii) Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Collateral Agent, and the retiring or
removed Collateral Agent shall thereupon be discharged from its duties and
obligations hereunder. After any retiring or removed Collateral Agent's
resignation or removal hereunder as Collateral Agent, the provisions of this
Section 6 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Collateral Agent.
Definitions.
-----------
"Acceleration" shall mean any of the Revolving Credit Agreement
Obligations or the AXEL Credit Agreement Obligations have been declared, or have
become, immediately due and payable, or the commitments to extend credit of the
Revolving Facility Lenders or the AXEL Facility Lenders shall have been
terminated under Section 8 or Section 7 of the Revolving Credit Agreement or the
AXEL Credit Agreement, respectively.
"Actionable Default" shall mean (i) any failure of the Company to pay
upon its final stated maturity, the Revolving Credit Agreement Obligations or
the AXEL Credit Agreement Obligations or (ii) any breach or default by the
Company under the Revolving Credit Agreement or the AXEL Credit Agreement if the
effect of such breach or default is to cause, or to permit the Revolving
Facility Lenders or the AXEL Facility Lenders then to cause the Revolving Credit
Agreement Obligations or the AXEL Credit Agreement Obligations to become or be
declared due prior to their stated maturity.
"AXEL Credit Agreement Obligations" shall mean all obligations of every
nature of Company and its Subsidiaries from time to time owed to the AXEL
Facility Lenders, the AXEL Facility Agent or any of them under the Loan
Documents (as defined in the AXEL Credit Agreement).
"Class" shall mean each class of lenders under the Revolving Credit
Agreement and the AXEL Credit Agreement, with there being two separate classes
of lenders, i.e., (i) lenders under
----
XIII-13
<PAGE>
the Revolving Credit Agreement and (ii) the lenders under the AXEL Credit
Agreement.
"Collateral" shall mean all the properties and assets of whatever
nature, tangible or intangible, now owned or existing or hereafter acquired or
arising, of any of the Loan Parties on or in which the Collateral Agent has been
granted a Lien pursuant to any of the Security Documents.
"Collateral Agent Obligations" shall mean all indemnity, reimbursement
and payment obligations of the Company and any Subsidiary to the Collateral
Agent under this Agreement, any Security Document or the Guaranties.
"Event of Default" shall mean any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which Company is
the Defaulting Party and which results in the designation of an Early
Termination Date (as such terms are defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate
Agreement.
"L/C Current Obligations" shall mean, at any time of determination, the
sum of the amounts referred to in clauses (b) and (c) of the definition of L/C
Obligations.
"L/C Obligations" shall mean, at any time of determination, the sum of
(a) the aggregate then undrawn and unexpired amount of then outstanding Letters
of Credit, (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to the Revolving Credit Agreement, and
(c) all interest which has accrued in respect of drawings that have been made
under Letters of Credit and which is then unpaid.
"Lender Interest Rate Agreement Obligations" shall mean all obligations
of every nature of Company from time to time owed to Interest Rate Exchangers or
any of them under the Lender Interest Rate Agreements, including without
limitation payments for early termination thereof.
"Letter of Credit" shall mean a letter of credit issued by the Issuing
Lender under the Revolving Credit Agreement.
"Notice of Acceleration" shall mean a notice by the Revolving Facility
Agent in the case of the Revolving Facility Lenders or the AXEL Facility Agent
in case of AXEL Facility Lenders, in each case delivered to the Collateral Agent
stating that an Acceleration has occurred.
"Requisite AXEL Facility Lenders" shall mean "Requisite Lenders" as
defined in the AXEL Credit Agreement.
XIII-14
<PAGE>
"Requisite Obligees" shall mean (i) (A) unless an Acceleration shall
have occurred and be continuing, the Requisite Revolving Facility Lenders and
the Requisite AXEL Facility Lenders, and (B) if an Acceleration has occurred and
is continuing, Secured Parties holding more than 50% in amount of the Revolving
Credit Agreement Obligations and the AXEL Credit Agreement Obligations or (ii)
after payment in full of all Revolving Credit Agreement Obligations and all AXEL
Credit Agreement Obligations, the holders of a majority of the aggregate
notional amount (or, with respect to any Lender Interest Rate Agreement that has
been terminated in accordance with its terms, the amount then due and payable
(exclusive of expenses and similar payments but including any early termination
payments then due) under such Lender Interest Rate Agreement) under all Lender
Interest Rate Agreements..
"Requisite Revolving Facility Lenders" shall mean "Requisite Lenders"
as defined in the Revolving Credit Agreement.
"Revolving Credit Agreement Obligations" shall mean all obligations of
every nature of Company and its Subsidiaries from time to time owed to Revolving
Facility Agent, the Revolving Facility Lenders, the Issuing Lender or any of
them under the Loan Documents (as defined in the Revolving Credit Agreement),
including, without limitation, the L/C Obligations.
"Secured Obligations" shall mean the Revolving Credit Agreement
Obligations, the AXEL Credit Agreement Obligations and the Lender Interest Rate
Agreement Obligations.
Miscellaneous.
-------------
All notices and other communications provided for herein shall
be in writing and may be personally served, telecopied, telexed or sent by
United States mail and shall be deemed to have been given when delivered in
person, upon receipt of telecopy or telex, or four Business Days after deposit
in the United States mail, registered or certified, with postage prepaid and
properly addressed. For the purposes hereof, the addresses of the parties hereto
(until notice of a change thereof is delivered as provided in this Section 8(a))
shall be as set forth under each party's name on the signature pages hereof.
This Agreement, the Security Documents and the Guaranties may be
modified or waived only by an instrument or instruments in writing signed by
Collateral Agent and Requisite Obligees and, if applicable, the Loan Party
signatory to this Agreement or any such Collateral Document.
This Agreement shall be binding upon and inure to the benefit of the
Collateral Agent, each other Party and each Secured Party and their respective
successors and assigns.
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute
XIII-15
<PAGE>
this Agreement by signing any such counterpart.
This Agreement shall become effective as to the Revolving Facility
Lenders and the Revolving Facility Agent upon execution thereof by Revolving
Facility Agent and as to the AXEL Facility Lenders and the AXEL Facility Agent
upon execution by AXEL Facility Agent thereof.
Upon receipt by the Collateral Agent of evidence satisfactory to it of
the termination of all commitments to extend credit which would constitute
Secured Obligations and the indefeasible payment in full of all Secured
Obligations (including, without limitation, the reasonable compensation,
expenses and disbursements of the Collateral Agent) and expiration or
cancellation of all Letters of Credit, this Agreement shall terminate and the
Collateral Agent, at the request and expense of the Company, will execute and
deliver to the Company a proper instrument or instruments acknowledging the
satisfaction and termination of the Collateral Documents and of this Agreement,
and will duly assign, transfer and deliver to the Company all of the rights and
moneys at the time held by the Collateral Agent under the Collateral Documents
and hereunder, provided that Section 6(c) of this Agreement shall survive, and
--------
remain operative and in full force and effect, regardless of the termination of
this Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
By countersigning or otherwise accepting the terms of this Agreement,
the Company and each other Loan Party acknowledges and consents to and agrees to
perform and be bound by each of the provisions hereof stated to be applicable to
it.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY LOAN PARTY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH LOAN PARTY, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO SUCH LOAN PARTY AT ITS ADDRESSES PROVIDED ON THE
APPLICABLE SIGNATURE PAGE HERETO; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE
(III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH LOAN PARTY
IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE
XIII-16
<PAGE>
CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT
COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH LOAN PARTY IN THE COURTS
OF ANY OTHER JURISDICTION; AND (VI) AGREE THAT THE PROVISIONS OF THIS SECTION
8(i) RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-
1402 OR OTHERWISE.
EACH LOAN PARTY, COLLATERAL AGENT AND EACH PARTY HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including without limitation
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each Loan Party, Collateral Agent and each Party acknowledges
that this waiver is a material inducement to enter into a business relationship,
that each has already relied on this waiver in entering into this Agreement, and
that each will continue to rely on this waiver in their related future dealings.
Each Loan Party, Collateral Agent and each Party further warrants and represents
that it has reviewed this waiver with its legal counsel and that it knowingly
and voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SECTION 8(j) AND EXECUTED BY EACH OF THE PARTIES HERETO), AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.
XIII-17
<PAGE>
Each Loan Party, by its execution of this Agreement in the space
provided below, hereby accepts and agrees to be bound by the foregoing
provisions of this Agreement.
COMPANY:
SEALY MATTRESS COMPANY
By:
Name:
Title:
Notice Address:
HOLDINGS:
SEALY CORPORATION
By:
Name:
Title:
Notice Address:
<PAGE>
SUBSIDIARIES:
[NAME OF SUBSIDIARY]
By:
Name:
Title:
Notice Address:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Collateral Agent, Revolving Facility
Agent and AXEL Facility Agent
By:
Name:
Title:
Notice Address:
<PAGE>
EXHIBIT XIV
[FORM OF COMPANY PLEDGE AGREEMENT]
COMPANY PLEDGE AGREEMENT
This COMPANY PLEDGE AGREEMENT (this "AGREEMENT") is dated as of December
18, 1997 and entered into by and between SEALY MATTRESS COMPANY, an Ohio
corporation ("PLEDGOR"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("MORGAN GUARANTY"), as Collateral Agent for and representative of (in such
capacity herein called "COLLATERAL AGENT") the Secured Parties (as hereinafter
defined) and any Interest Rate Exchangers (as hereinafter defined).
RECITALS
A. Pledgor is the legal and beneficial owner of (i) the shares of stock
(the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto and
----------
issued by the corporations named therein and (ii) the indebtedness (the
"PLEDGED DEBT") described in Part B of said Schedule I and issued by the
----------
obligors named therein.
B. Sealy Corporation, a Delaware Corporation ("HOLDINGS"), the financial
institutions from time to time parties thereto (the "CREDIT AGREEMENT
LENDERS"), Goldman Sachs Credit Partners L.P. ("GSCP"), as arranger and
syndication agent (in such capacity, "CA SYNDICATION AGENT"), Morgan Guaranty,
as administrative agent (in such capacity, "CA ADMINISTRATIVE AGENT"), and
Bankers Trust Company ("BTCO"), as documentation agent (in such capacity, "CA
DOCUMENTATION AGENT") have entered into a Credit Agreement dated as of December
18, 1997 (said Credit Agreement, as it may hereafter be amended, restated,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT") with Pledgor pursuant to which Credit Agreement Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Pledgor.
C. Pledgor, Holdings, the financial institutions from time to time parties
thereto (the "AXEL LENDERS"), GSCP, as arranger and syndication agent (in such
capacity, "AXEL SYNDICATION AGENT"), Morgan Guaranty, as administrative agent
(in such capacity, "AXEL ADMINISTRATIVE AGENT"), and BTCo., as documentation
agent (in such capacity, "AXEL DOCUMENTATION AGENT") and have entered into an
AXEL Credit Agreement dated as of December 18, 1997 (said AXEL Credit Agreement,
as it may hereafter be amended, restated, supplemented or otherwise modified
from time to time, being the "AXEL CREDIT AGREEMENT"; the Credit Agreement
Lenders, the CA Syndication Agent, the CA Administrative Agent, the CA
Documentation Agent, the AXEL Lenders, the AXEL Syndication Agent, the AXEL
Administrative Agent, and the AXEL Documentation Agent each being a "SECURED
PARTY" and collectively the "SECURED PARTIES") pursuant to which AXEL Lenders
have made certain commitments, subject to
XIV-1
<PAGE>
the terms and conditions set forth in the AXEL Credit Agreement, to extend
certain credit facilities to Pledgor.
D. Pledgor may from time to time enter into one or more Interest Rate
Agreements (collectively, the "LENDER INTEREST RATE AGREEMENTS") with one or
more Credit Agreement Lenders or their Affiliates or AXEL Lenders or their
Affiliates (in such capacity, collectively, "INTEREST RATE EXCHANGERS") in
accordance with the terms of the Financing Agreements (as hereinafter defined),
and it is desired that the obligations of Pledgor under the Lender Interest Rate
Agreements, including without limitation the obligation of Pledgor to make
payments, if any, thereunder in the event of early termination thereof, together
with all obligations of Pledgor under the Financing Agreements and any other
Loan Documents (as hereinafter defined), be secured hereunder.
E. It is a condition precedent to the initial extensions of credit by
Secured Parties under the Financing Agreements that Pledgor shall have granted
the security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and to induce (i) the CA
Administrative Agent, the CA Syndication Agent and the Credit Agreement Lenders
to enter into the Credit Agreement, (ii) the Credit Agreement Lenders to make
their respective loans to, and issue Letters of Credit for the account of, the
Pledgor, (iii) the AXEL Administrative Agent, the AXEL Syndication Agent and the
AXEL Lenders to enter into the AXEL Loan Agreement, (iv) the AXEL Lenders to
make their respective loans to the Pledgor and (v) to induce Interest Rate
Exchangers to enter into the Lender Interest Rate Agreements, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Pledgor hereby agrees with Collateral Agent as follows:
SECTION 1. DEFINED TERMS
-------------
(a) Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to such terms in the Credit
Agreement;
(b) The following terms shall have the following meanings:
"ACCELERATION" shall mean any of the Credit Agreement Obligations or the
AXEL Credit Agreement Obligations have been declared, or have become,
immediately due and payable, or the commitments to extend credit of the Credit
Agreement Lenders or the AXEL Lenders shall have been terminated under Section 8
of the Credit Agreement or Section 7 of the AXEL Credit Agreement, respectively.
"ADDITIONAL PLEDGED SHARES" has the meaning assigned to that term in
Section 2(c) of this Agreement.
"AGREEMENT" means this Company Pledge Agreement dated as of December 18,
1997, as it may be amended, supplemented or otherwise modified from time to
time.
XIV-2
<PAGE>
"AXEL COMMITMENTS" means the "Commitments" as defined in the AXEL Credit
Agreement.
"AXEL CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"AXEL OBLIGATIONS" shall mean "Obligations" as defined in the AXEL
Credit Agreement.
"COLLATERAL ACCOUNTS" shall mean "Collateral Accounts" as defined in the
Intercreditor Agreement.
"COMMITMENTS" means the Credit Agreement Commitments and the AXEL
Commitments.
"CREDIT AGREEMENT" has the meaning assigned to that term in the recitals
to this Agreement.
"CREDIT AGREEMENT COMMITMENTS" shall mean the "Commitments" as defined
in the Credit Agreement.
"CREDIT AGREEMENT OBLIGATIONS" shall mean the "Obligations" as defined
in the Credit Agreement.
"EVENT OF DEFAULT" means any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which Company is
the Defaulting Party and which results in the designation of an Early
Termination Date (as such terms are defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate
Agreement.
"FINANCING AGREEMENT" means the Credit Agreement or the AXEL Credit
Agreement, and "Financing Agreements" means the Credit Agreement and the AXEL
Credit Agreement, collectively.
"FINANCING AGREEMENT OBLIGATIONS" means Credit Agreement Obligations and
AXEL Obligations.
"HOLDINGS" has the meaning assigned to that term in the recitals to this
Agreement.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated as of
December 18, 1997, by and among CA Administrative Agent, AXEL Administrative
Agent and Collateral Agent.
"INTEREST RATE EXCHANGERS" has the meaning assigned to that term in the
recitals to this Agreement.
XIV-3
<PAGE>
"LENDER INTEREST RATE AGREEMENT" has the meaning assigned to that term in
the recitals to this Agreement.
"LOAN" means any "Loan" as defined in any Financing Agreement, and
"LOANS" means all such Loans collectively.
"LOAN DOCUMENT" means any "Loan Document" as defined in any Financing
Agreement, and "LOAN DOCUMENTS" means all such Loan Documents collectively.
"NEW PLEDGED SHARES" has the meaning assigned to that term in Section 2(e)
of this Agreement.
"PLEDGE AMENDMENT" has the meaning assigned to that term in Section 7 of
this Agreement.
"PLEDGED COLLATERAL" has the meaning assigned to that term in Section 2 of
this Agreement.
"PLEDGED DEBT" has the meaning assigned to that term in the recitals of
this Agreement.
"PLEDGED SHARES" has the meaning assigned to that term in the recitals to
this Agreement.
"PLEDGOR" has the meaning assigned to that term in the introduction of
this Agreement.
"POTENTIAL EVENT OF DEFAULT" means any "Potential Event of Default" as
defined in any Financing Agreement.
"REQUISITE AXEL LENDERS" means "Requisite Lenders" as defined in the
AXEL Credit Agreement.
"REQUISITE CREDIT AGREEMENT LENDERS" means "Requisite Lenders" as
defined in the Credit Agreement.
"REQUISITE LENDERS" means (A) unless an Acceleration shall have occurred
and be continuing, the Requisite Credit Agreement Lenders and the Requisite AXEL
Lenders, and (B) if an Acceleration has occurred and is continuing, Secured
Parties holding more than 50% of the Financing Agreement Obligations.
"REQUISITE OBLIGEES" has the meaning assigned to that term in Section
17(a) of this Agreement.
"SECURED OBLIGATIONS" has the meaning assigned to that term in Section 3
of this Agreement.
"SECURED PARTIES" has the meaning assigned to that term in the recitals to
this Agreement.
XIV-4
<PAGE>
SECTION 2. PLEDGE OF SECURITY
------------------
Pledgor hereby pledges and assigns to Collateral Agent, and hereby grants to
Collateral Agent a security interest in, all of Pledgor's right, title and
interest in and to the following (the "PLEDGED COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any
financial intermediary pertaining to the Pledged Shares, and all dividends,
cash, warrants, rights, instruments and other property or proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares; provided, however, that to
-------- -------
the extent the issuer of any of the Pledged Shares is a controlled foreign
corporation (used hereinafter as such term is defined in Section 957(a) or a
successor provision of the Internal Revenue Code), Pledgor shall only be
required to pledge Pledged Shares of, certificates representing Pledged
Shares of, and such interests pertaining to Pledged Shares of such issuer
possessing up to but not exceeding 65% of the voting power of all classes of
capital stock entitled to vote of such issuer, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Pledged Shares;
(b) the Pledged Debt and the instruments evidencing the Pledged Debt,
and all interest, cash, instruments and other property or proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock
of any issuer of the Pledged Shares from time to time acquired by Pledgor in
any manner (which shares shall be deemed to be part of the Pledged Shares),
the certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in
the entries on the books of any financial intermediary pertaining to such
additional shares (all such shares, securities, warrants, options, rights,
certificates, instruments and interests collectively being "ADDITIONAL
PLEDGED SHARES"), and all dividends, cash, warrants, rights, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Additional Pledged Shares; provided, however, that to the extent that the
-------- -------
issuer of any Additional Pledged Shares is a controlled foreign corporation,
Pledgor shall only be required to pledge Additional Pledged Shares of such
issuer possessing up to but not exceeding 65% of the voting power of all
classes of capital stock entitled to vote of such issuer, and all dividends,
cash, warrants, rights, instruments and other property or proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Additional Pledged Shares;
(d) all additional indebtedness from time to time owed to Pledgor by
any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash,
XIV-5
<PAGE>
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of such indebtedness;
(e) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any
Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of Pledgor (which shares shall be deemed to
be part of the Pledged Shares), the certificates or other instruments
representing such shares, securities, warrants, options or other rights and
any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to such shares (all such shares, securities,
warrants, options, rights, certificates, instruments and interests
collectively being "NEW PLEDGED SHARES"), and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares, securities, warrants, options or
other rights; provided, however, that in the event that any such direct
-------- -------
Subsidiary is a controlled foreign corporation, Pledgor shall only be
required to pledge New Pledged Shares of such Subsidiary possessing up to
but not exceeding 65% of the voting power of all classes of capital stock
entitled to vote of such Subsidiary, and all dividends, cash, warrants,
rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of such New Pledged Shares;
(f) all indebtedness from time to time owed to Pledgor by any Person
that, after the date of this Agreement, becomes, as a result of any
occurrence, a Subsidiary of Pledgor, and all interest, cash, instruments and
other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness; and
(g) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or
received when Pledged Collateral or proceeds are sold, exchanged, collected
or otherwise disposed of, whether such disposition is voluntary or
involuntary, and includes, without limitation, proceeds of any indemnity or
guaranty payable to Pledgor or Collateral Agent from time to time with
respect to any of the Pledged Collateral.
SECTION 3. SECURITY FOR OBLIGATIONS.
------------------------
This Agreement secures, and the Pledged Collateral is collateral security
for, the prompt payment or performance in full when due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
(S)362(a)), of all obligations and liabilities of every nature of Pledgor now or
hereafter existing under or arising out of or in connection with any Financing
Agreements and any other Loan Documents and the Lender Interest Rate Agreements
and all extensions or renewals thereof, whether for principal, interest
(including without limitation interest that, but for the filing of a petition in
bankruptcy with respect to Pledgor, would accrue on such obligations),
reimbursement
XIV-6
<PAGE>
of amounts drawn under Letters of Credit, payments for early termination of
Lender Interest Rate Agreements, fees, expenses, indemnities or otherwise,
whether voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from Collateral Agent or any Secured Party or Interest
Rate Exchanger as a preference, fraudulent transfer or otherwise, and all
obligations of every nature of Pledgor now or hereafter existing under this
Agreement (all such obligations of Pledgor being the "SECURED OBLIGATIONS").
SECTION 4. DELIVERY OF PLEDGED COLLATERAL.
------------------------------
All certificates or instruments representing or evidencing the Pledged
Collateral shall be delivered to and held by or on behalf of Collateral Agent
pursuant hereto and shall be in suitable form for transfer by delivery or, as
applicable, shall be accompanied by Pledgor's endorsement, where necessary, or
duly executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to Collateral Agent. Upon the occurrence and
during the continuance of an Event of Default, Collateral Agent shall have the
right, without notice to Pledgor, to transfer to or to register in the name of
Collateral Agent or any of its nominees any or all of the Pledged Collateral,
subject only to the revocable rights specified in Section 8(a). In addition,
upon the occurrence and during the continuance of an Event of Default,
Collateral Agent shall have the right at any time to exchange certificates or
instruments representing or evi dencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
------------------------------
Pledgor represents and warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
---------------------------------------------
Shares have been duly authorized and validly issued and are fully paid and
non-assessable. All of the Pledged Debt has been duly authorized,
authenticated or issued, and delivered and is the legal, valid and binding
obligation of the issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares constitute
---------------------------------
the percentage of the issued and outstanding shares of stock of each issuer
thereof set forth on Schedule I annexed hereto, and there are no outstanding
----------
warrants, options or other rights to purchase, or other agreements
outstanding with respect to, or property that is now or hereafter
convertible into, or that requires the issuance or sale of, any Pledged
Shares. The Pledged Debt constitutes all of the issued and outstanding
intercompany indebtedness evidenced by a promissory note of the respective
issuers thereof owing to Pledgor.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
-------------------------------
beneficial owner of the Pledged Collateral free and clear of any Lien except
for the security interest created by this Agreement.
SECTION 6. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL; ETC.
--------------------------------------------------------------
XIV-7
<PAGE>
Pledgor shall:
(a) not, except as expressly permitted by the Financing Agreements, (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create
or suffer to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest under this Agreement, or (iii)
permit any issuer of Pledged Shares to merge or consolidate unless all the
outstanding capital stock of the surviving or resulting corporation is, upon
such merger or consolidation, pledged hereunder and no cash, securities or
other property is distributed in respect of the outstanding shares of any
other constituent corporation provided that if the surviving or resulting
--------
corporation upon any such merger or consolidation involving an issuer of
Pledged Shares which is a controlled foreign corporation is a controlled
foreign corporation, then Pledgor shall only be required to pledge
outstanding capital stock of such surviving or resulting corporation
possessing up to but not exceeding 65% of the voting power of all classes of
capital stock of such issuer entitled to vote; provided that in the event
--------
Pledgor makes an Asset Sale permitted by the Financing Agreements and the
assets subject to such Asset Sale are Pledged Shares, Collateral Agent shall
release the Pledged Shares that are the subject of such Asset Sale to
Pledgor free and clear of the lien and security interest under this
Agreement concurrently with the consummation of such Asset Sale; provided,
--------
further that, as a condition precedent to such release, Collateral Agent
-------
shall have received evidence reasonably satisfactory to it that arrangements
reasonably satisfactory to it have been made for delivery to Collateral
Agent of the Net Asset Sale Proceeds of such Asset Sale in the event and to
the extent that all or any portion of such Net Asset Sale Proceeds are
required to be applied to prepay the Loans under the Financing Agreements;
(b) (i) cause each issuer of Pledged Shares not to issue any stock or
other securities in addition to or in substitution for the Pledged Shares
issued by such issuer, except to Pledgor, (ii) pledge hereunder, immediately
upon its acquisition (directly or indirectly) thereof, any and all
additional shares of stock or other securities of each issuer of Pledged
Shares, and (iii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all shares of stock of any Person
that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of Pledgor; provided, that notwithstanding
--------
anything contained in this clause (b) to the contrary, Pledgor shall only be
required to pledge the outstanding capital stock of a foreign controlled
corporation possessing up to but not exceeding 65% of the voting power of
all classes of capital stock of such controlled foreign corporation entitled
to vote;
(c) (i) pledge hereunder, immediately upon their issuance, any and all
instruments or other evidences of additional indebtedness from time to time
owed to Pledgor by any obligor on the Pledged Debt, and (ii) pledge
hereunder, immediately upon their issuance, any and all instruments or other
evidences of indebtedness from time to time owed to Pledgor by any Person
that after the date of this Agreement becomes, as a result of any
occurrence, a Subsidiary of Pledgor; and
XIV-8
<PAGE>
(d) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged
Collateral, except to the extent the validity thereof is being contested in
good faith.
SECTION 7. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that Collateral Agent may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable Collateral Agent to exercise and enforce its rights
and remedies hereunder with respect to any Pledged Collateral. Without limiting
the generality of the foregoing, Pledgor will: (i) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices as Collateral Agent may reasonably request, in order to
perfect and preserve the security interests granted or purported to be granted
hereby and (ii) at Collateral Agent's reasonable request, appear in and defend
any action or proceeding that may affect Pledgor's title to or Collateral
Agent's security interest in all or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of stock or other securities required to be pledged hereunder as provided
in Section 6(b) or (c), promptly (and in any event within five Business Days)
deliver to Collateral Agent a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"),
-----------
in respect of the additional Pledged Shares or Pledged Debt to be pledged
pursuant to this Agreement. Pledgor hereby authorizes Collateral Agent to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares or Pledged Debt listed on any Pledge Amendment delivered to Collateral
Agent shall for all purposes hereunder be considered Pledged Collateral;
provided that the failure of Pledgor to execute a Pledge Amendment with respect
--------
to any additional Pledged Shares or Pledged Debt pledged pursuant to this
Agreement shall not impair the security interest of Collateral Agent therein or
otherwise adversely affect the rights and remedies of Collateral Agent hereunder
with respect thereto.
SECTION 8. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof
for any purpose not inconsistent with the terms of this Agreement or the
Financing Agreements;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends and
interest paid in respect of the Pledged Collateral; provided, however, that
-------- -------
any and all dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral, shall be, and shall forthwith be delivered to Collateral Agent
to hold as, Pledged Collateral and shall, if received by Pledgor, be
received in trust for the benefit of Collateral Agent, be segregated
XIV-9
<PAGE>
from the other property or funds of Pledgor and be forthwith delivered to
Collateral Agent as Pledged Collateral in the same form as so received (with
all necessary endorsements); provided, that Pledgor shall not be required to
--------
deliver the outstanding capital stock of a foreign controlled corporation
paid as a dividend or interest to the Pledgor, if Collateral Agent would
hold as Pledged Collateral outstanding capital stock of such controlled
foreign corporation possessing greater than 65% of the voting power of all
classes of capital stock of such controlled foreign corporation entitled to
vote; and
(iii) Collateral Agent shall promptly execute and deliver (or cause to
be executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the voting and other
consensual rights which it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends, principal or interest payments which it
is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of Default:
(i) upon written notice from Collateral Agent to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 8(a)(i) shall cease,
and all such rights shall thereupon become vested in Collateral Agent who
shall thereupon have the sole right to exercise such voting and other
consensual rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 8(a)(ii) shall cease, and all such rights shall
thereupon become vested in Collateral Agent who shall thereupon have the
sole right to receive and hold as Pledged Collateral such dividends and
interest payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 8(b) shall be (A) forthwith (and in any event within two Business
Days) deposited by the Pledgor to the exact form received, duly endorsed by
the Pledgor to the Collateral Agent if required, in a Collateral Account
maintained under the sole dominion and control of the Collateral Agent for
the account of the Secured Parties only as provided in Section 15, (B) until
so turned over in accordance with the preceding subsection (A), all such
amounts and proceeds received by Grantor shall be received in trust for the
benefit of Collateral Agent hereunder -- and shall be segregated from other
funds of Pledgor.
(c) In order to permit Collateral Agent to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
8(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 8(a)(ii) or Section 8(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Collateral Agent all such proxies, dividend payment orders and other instruments
as Collateral Agent may from time to time reasonably request and (ii) without
limiting the effect of the immediately preceding clause (i), Pledgor hereby
grants to Collateral Agent an irrevocable proxy to vote the Pledged Shares and
to
XIV-10
<PAGE>
exercise all other rights, powers, privileges and remedies to which a holder
of the Pledged Shares would be entitled (including, without limitation, giving
or withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence and during the continuance of an Event of Default
and which proxy shall only terminate upon the payment in full of the Secured
Obligations.
SECTION 9. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
-------------------------------------------
Pledgor hereby irrevocably appoints Collateral Agent as Pledgor's attorney-
in-fact, with full authority in the place and stead of Pledgor and in the name
of Pledgor, Collateral Agent or otherwise, from time to time, upon the
occurrence and during the continuance of an Event of Default, in Collateral
Agent's reasonable discretion to take any action and to execute any instrument
that Collateral Agent may reasonably deem necessary or advisable to accomplish
the purposes of this Agreement, including without limitation:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor to the extent allowed under applicable law;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any proceedings
that Collateral Agent may reasonably deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the
rights of Collateral Agent with respect to any of the Pledged Collateral.
SECTION 10. COLLATERAL AGENT MAY PERFORM.
----------------------------
If Pledgor fails to perform any agreement contained herein, Collateral Agent
may itself perform, or cause performance of, such agreement, and the reasonable
expenses of Collateral Agent incurred in connection therewith shall be payable
by Pledgor under Section 16(b).
SECTION 11. STANDARD OF CARE.
----------------
The powers conferred on Collateral Agent hereunder are solely to protect its
interest in the Pledged Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Pledged Collateral in its possession and the
XIV-11
<PAGE>
accounting for moneys actually received by it hereunder, Collateral Agent shall
have no duty as to any Pledged Collateral, it being understood that Collateral
Agent shall have no responsibility for (a) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Pledged Collateral, whether or not Collateral Agent has or is
deemed to have knowledge of such matters, (b) taking any necessary steps (other
than steps taken in accordance with the standard of care set forth above to
maintain possession of the Pledged Collateral) to preserve rights against any
parties with respect to any Pledged Collateral, (c) taking any necessary steps
to collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Collateral
Agent accords its own property consisting of negotiable securities.
XIV-12
<PAGE>
SECTION 12. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Collateral Agent may exercise in respect of the Pledged Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE")
(whether or not the Code applies to the affected Pledged Collateral), and
Collateral Agent may also in its sole discretion, without notice except as
specified below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange or broker's board or at any
of Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Collateral Agent may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Pledged Collateral.
Collateral Agent or any Secured Party or Interest Rate Exchanger may be the
purchaser of any or all of the Pledged Collateral at any such sale and
Collateral Agent, as agent for and representative of Secured Parties and
Interest Rate Exchangers (but not any Secured Party or Secured Parties or
Interest Rate Exchanger or Interest Rate Exchangers in its or their respective
individual capacities unless Requisite Obligees shall otherwise agree in
writing), shall be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Pledged Collateral
sold at any such public sale, to use and apply any of the Secured Obligations as
a credit on account of the purchase price for any Pledged Collateral payable by
Collateral Agent at such sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of Pledgor,
and Pledgor hereby waives (to the extent permitted by applicable law) all rights
of redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Collateral Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. Collateral
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Pledgor hereby
waives any claims against Collateral Agent arising by reason of the fact that
the price at which any Pledged Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale,
even if Collateral Agent accepts the first offer received and does not offer
such Pledged Collateral to more than one offeree. If the proceeds of any sale
or other disposition of the Pledged Collateral are insufficient to pay all the
Secured Obligations, Pledgor shall be liable for the deficiency and the
reasonable fees of any attorneys employed by Collateral Agent to collect such
deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions contained in
the Securities Act and applicable state securities laws, Collateral Agent may be
compelled, with respect to any sale of all or any part of the Pledged Collateral
conducted without prior registration or qualification of such Pledged Collateral
under the Securities Act and/or such state securities laws, to limit purchasers
to those who will agree, among other things, to acquire the Pledged Collateral
for their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable than those obtainable through a public sale
without such restrictions (including, without limitation, a public
XIV-13
<PAGE>
offering made pursuant to a registration statement under the Securities Act)
and, notwithstanding such circumstances, Pledgor agrees that any such private
sale shall be deemed to have been made in a commercially reasonable manner and
that Collateral Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
(c) If Collateral Agent determines to exercise its right to sell any or all
of the Pledged Collateral, upon written request, Pledgor shall and shall cause
each issuer of any Pledged Shares to be sold hereunder from time to time to
furnish to Collateral Agent all such information as Collateral Agent may
reasonably request in order to determine the number of shares and other
instruments included in the Pledged Collateral which may be sold by Collateral
Agent in exempt transactions under the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder, as the same
are from time to time in effect.
SECTION 13. PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT.
----------------------------------------------
In addition to the rights of the Collateral Agent and the Secured Parties
specified in Section 8(b) with respect to payment of Accounts, if an Event of
Default shall occur and be continuing, upon request of the Collateral Agent, all
proceeds received by the Pledgor consisting of cash, checks and other near-cash
items shall be held by the Pledgor in trust for the Collateral Agent and the
Secured Parties, segregated from other funds of the Pledgor, and shall,
forthwith upon receipt by the Pledgor, be turned over to the Collateral Agent in
the exact form received by the Pledgor (duly indorsed by the Pledgor to the
Collateral Agent, if required) and held by the Collateral Agent in a Collateral
Account maintained under the Intercreditor Agreement. All proceeds while held
by the Collateral Agent in a Collateral Account (or by the Pledgor in trust for
the Collateral Agent and the Secured Parties) shall continue to be held as
collateral security for all the Secured Obligations and shall not constitute
payment thereof until applied as provided in Section 15.
SECTION 14. APPLICATION OF PROCEEDS.
-----------------------
All proceeds held in any Collateral Account and all other proceeds received
by Collateral Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Collateral shall be applied as
provided in subsection 3 of the Intercreditor Agreement.
SECTION 15. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.
-----------------------------------------------
This Agreement shall create a continuing security interest in the Pledged
Collateral and shall (a) remain in full force and effect until the payment in
full of all Secured Obligations (other than inchoate indemnification obligations
with respect to claims, losses or liabilities which have not yet arisen and are
not yet due and payable), the cancellation or termination of the Commitments and
the cancellation or expiration of all outstanding Letters of Credit, (b) be
binding upon Pledgor, its successors and assigns, and (c) inure, together with
the rights and remedies of Collateral Agent
XIV-14
<PAGE>
hereunder, to the benefit of Collateral Agent and its successors, transferees
and assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 10.1 of the Credit Agreement and
subsection 10.1 of the AXEL Credit Agreement, any Secured Party may assign or
otherwise transfer any Loans held by it to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to herein or otherwise. Upon the payment in full of all Secured
Obligations (other than inchoate indemnification obligations with respect to
claims, losses or liabilities which have not yet arisen and are not yet due and
payable), the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Pledged Collateral
shall revert to Pledgor. Upon any such termination Collateral Agent will, at
Pledgor's expense, execute and deliver to Pledgor such documents as Pledgor
shall reasonably request to evidence such termination in accordance with the
terms of the Intercreditor Agreement and Pledgor shall be entitled to the
return, upon its request and at its expense, against receipt and without
recourse to Collateral Agent, of such of the Pledged Collateral as shall not
have been sold or otherwise applied pursuant to the terms hereof.
SECTION 16. COLLATERAL AGENT AS ADMINISTRATIVE AGENT.
----------------------------------------
(a) Collateral Agent has been appointed to act as Collateral Agent hereunder
by CA Administrative Agent on behalf of the Credit Agreement Lenders and AXEL
Administrative Agent on behalf of the AXEL Lenders pursuant to Intercreditor
Agreement and, by their acceptance of the benefits hereof, Interest Rate
Exchangers and shall be entitled to the benefits of the Intercreditor Agreement.
Collateral Agent shall be obligated, and shall have the right hereunder, to make
demands, to give notices, to exercise or refrain from exercising any rights, and
to take or refrain from taking any action (including, without limitation, the
release or substitution of Pledged Collateral), solely in accordance with this
Agreement and the Intercreditor Agreement; provided that Collateral Agent shall
--------
exercise, or refrain from exercising, any remedies provided for in Section 12 in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Financing Agreement Obligations under the Financing Agreements
and any other Loan Documents, the holders of a majority of the aggregate
notional amount (or, with respect to any Lender Interest Rate Agreement that has
been terminated in accordance with its terms, the amount then due and payable
(exclusive of expenses and similar payments but including any early termination
payments then due) under such Lender Interest Rate Agreement) under all Lender
Interest Rate Agreements (Requisite Lenders or, if applicable, such holders
being referred to herein as "REQUISITE OBLIGEES"). In furtherance of the
foregoing provisions of this Section 18(a), each Interest Rate Exchanger, by its
acceptance of the benefits hereof, agrees that it shall have no right
individually to realize upon any of the Pledged Collateral hereunder, it being
understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Collateral Agent for the benefit
of and Interest Rate Exchangers in accordance with the terms of this Section
18(a).
(b) Collateral Agent shall at all times be the same Person that is appointed
Collateral Agent under the Intercreditor Agreement. The Collateral Agent may
resign and a successor Collateral Agent may be appointed in the manner provided
in the Intercreditor Agreement. Upon the acceptance of any appointment as
Collateral Agent by a successor Collateral Agent, that successor Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
XIV-15
<PAGE>
privileges and duties of the retiring or removed Collateral Agent under this
Agreement, and the retiring or removed Collateral Agent under this Agreement
shall promptly (i) transfer to such successor Collateral Agent all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Collateral Agent under this
Agreement, and (ii) execute and deliver to such successor Collateral Agent such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Collateral Agent of the security interests created hereunder, whereupon such
retiring or removed Collateral Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Collateral
Agent's resignation or removal hereunder as Collateral Agent, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Collateral Agent hereunder.
SECTION 17. AMENDMENTS; ETC.
---------------
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by Pledgor therefrom, shall in any
event be effective unless the same shall be in writing and signed by Collateral
Agent and, in the case of any such amendment or modification, by Pledgor. Any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
SECTION 18. NOTICES.
-------
Any notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Collateral Agent or Pledgor shall not be
--------
effective until received. For the purposes hereof, the address of each party
hereto shall be as provided in subsection 10.8 of the Credit Agreement or
subsection 10.8 of the AXEL Credit Agreement, as applicable, or as set forth
under such party's name on the signature pages hereof or such other address as
shall be designated by such party in a written notice delivered to the other
parties hereto.
SECTION 19. SEVERABILITY.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 20. HEADINGS.
--------
XIV-16
<PAGE>
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
SECTION 21. GOVERNING LAW; TERMS.
--------------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-
1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT
THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Financing Agreements, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined.
SECTION 22. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
[Remainder of page intentionally left blank]
XIV-17
<PAGE>
IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
SEALY MATTRESS COMPANY
By: ________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent
By: ________________________________
Name:
Title:
XIV-18
<PAGE>
SCHEDULE I
Attached to and forming a part of the Company Pledge Agreement dated as of
December 18, 1997 between Sealy Mattress Company, as Pledgor, and Morgan
Guaranty Trust Company of New York, as Collateral Agent.
PART A
================================================================================
PERCENTAGE OF
STOCK NUMBER OUTSTANDING
CLASS OF CERTIFICATE PAR OF SHARES
STOCK ISSUER STOCK NOS. VALUE SHARES PLEDGED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
================================================================================
PART B
============================================================
AMOUNT OF
DEBT ISSUER INDEBTEDNESS
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
============================================================
XIV-19
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, [199_][200_], is delivered
pursuant to Section 6(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Company Pledge Agreement dated as of December 18, 1997, between the undersigned
and Morgan Guaranty Trust Company of New York, as Collateral Agent (the "PLEDGE
AGREEMENT," capitalized terms defined therein being used herein as therein
defined), and that the [Pledged Shares] [Pledged Debt] listed on this Pledge
Amendment shall be deemed to be part of the [Pledged Shares] [Pledged Debt] and
shall become part of the Pledged Collateral and shall secure all Secured
Obligations.
SEALY MATTRESS COMPANY
By: ___________________________________
Name:
Title:
================================================================================
PERCENTAGE OF
CLASS STOCK NUMBER OUTSTANDING
OF CERTIFICATE PAR OF SHARES PLEDGED
STOCK ISSUER STOCK NOS. VALUE SHARES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
================================================================================
============================================================
AMOUNT OF
DEBT ISSUER INDEBTEDNESS
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
============================================================
XIV-20
<PAGE>
EXHIBIT XV
[FORM OF COMPANY SECURITY AGREEMENT]
COMPANY SECURITY AGREEMENT
This COMPANY SECURITY AGREEMENT (this "AGREEMENT") is dated as of December
18, 1997 and entered into by and between SEALY MATTRESS COMPANY, an Ohio
corporation ("GRANTOR"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("MORGAN GUARANTY"), as Collateral Agent for and representative of (in such
capacity, herein called "COLLATERAL AGENT") the Secured Parties (as
hereinafter defined) and any Interest Rate Exchangers (as hereinafter defined).
RECITALS
A. Grantor, Sealy Corporation, a Delaware Corporation ("HOLDINGS") the
financial institutions from time to time parties thereto (the "CREDIT AGREEMENT
LENDERS"), Goldman Sachs Credit Partners L.P. ("GSCP"), as arranger and
syndication agent (in such capacity, "CA SYNDICATION AGENT"), Morgan Guaranty,
as administrative agent (in such capacity, "CA ADMINISTRATIVE AGENT"), and
Bankers Trust Company ("BTCO."), as documentation agent (in such capacity,
"CA DOCUMENTATION AGENT") have entered into a Credit Agreement dated as of
December 18, 1997 (said Credit Agreement, as it may hereafter be amended,
restated, supplemented or otherwise modified from time to time, being the
("CREDIT AGREEMENT") pursuant to which Credit Agreement Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Grantor.
B. Grantor, Holdings, the financial institutions from time to time parties
thereto (the "AXEL LENDERS"), GSCP, as arranger and syndication agent (in such
capacity the "AXEL SYNDICATION AGENT"), Morgan Guaranty, as administrative
agent (in such capacity "AXEL ADMINISTRATIVE AGENT"), and BTCo., as
documentation agent (in such capacity "AXEL DOCUMENTATION AGENT") have entered
into an AXEL Credit Agreement dated as of December 18, 1997 (said AXEL Credit
Agreement, as it may hereafter be amended, restated, supplemented or otherwise
modified from time to time, being the "AXEL CREDIT AGREEMENT"; the Credit
Agreement Lenders, the CA Syndication Agent, the CA Administrative Agent, the CA
Documentation Agent, the AXEL Lenders, the AXEL Syndication Agent, the AXEL
Administrative Agent, and the AXEL Documentation Agent each being a "SECURED
PARTY" and collectively the "SECURED PARTIES") pursuant to which AXEL Lenders
have made certain commitments, subject to the terms and conditions set forth in
the AXEL Credit Agreement, to extend certain credit facilities to Grantor.
C. Grantor may from time to time enter into one or more Interest Rate
Agreements (collectively, the "LENDER INTEREST RATE AGREEMENTS") with one or
more CA Lenders or their Affiliates or AXEL Lenders or their Affiliates (in such
capacity, collectively, "INTEREST RATE EXCHANGERS") in accordance with the
terms of the Financing Agreements (as hereinafter defined),
XV-1
<PAGE>
and it is desired that the obligations of Grantor under the Lender Interest Rate
Agreements, including without limitation the obligation of Grantor to make
payments, if any, thereunder in the event of early termination thereof, together
with all obligations of Grantor under the Financing Agreements and any other
Loan Documents (as hereinafter defined), be secured hereunder.
D. It is a condition precedent to the initial extensions of credit by
Secured Parties under the Financing Agreements that Grantor shall have granted
the security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and to induce (i) the CA
Administrative Agent, the CA Syndication Agent and the Credit Agreement Lenders
to enter into the Credit Agreement, (ii) the Credit Agreement Lenders to make
their respective loans to, and issue Letters of Credit for the account of, the
Grantor, (iii) the AXEL Administrative Agent, the AXEL Syndication Agent and the
AXEL Lenders to enter into the AXEL Loan Agreement, (iv) the AXEL Lenders to
make their respective loans to the Grantor and (v) to induce Interest Rate
Exchangers to enter into the Lender Interest Rate Agreements and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Grantor hereby agrees with the Collateral Agent as follows:
1. DEFINED TERMS.
-------------
(a) Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to such terms in the Credit
Agreement;
(b) The following terms shall have the following meanings:
"ACCELERATION" shall mean any of the Credit Agreement Obligations or the
AXEL Credit Agreement Obligations have been declared, or have become,
immediately due and payable, or the commitments to extend credit of the Credit
Agreement Lenders or the AXEL Lenders shall have been terminated under Section 8
of the Credit Agreement or Section 7 of the AXEL Credit Agreement, respectively.
"ACCOUNTS" has the meaning assigned to that term in Section 2 of this
Agreement.
"AGREEMENT" means this Company Security Agreement dated as of December 18,
1997, as it may be amended, supplemented or otherwise modified from time to
time.
"ASSIGNED AGREEMENT" has the meaning assigned to that term in Section 2 of
this Agreement.
"AXEL COMMITMENTS" shall mean the "Commitments" as defined in the AXEL
Credit Agreement.
"AXEL CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
XV-2
<PAGE>
"AXEL OBLIGATIONS" shall mean the "Obligations" as defined in the AXEL
Credit Agreement.
"COLLATERAL" has the meaning assigned to that term in Section 2 of this
Agreement.
"COLLATERAL ACCOUNTS" shall mean "Collateral Accounts" as defined in the
Intercreditor Agreement.
"COMMITMENTS" means the Credit Agreement Commitments and the AXEL
Commitments.
"CREDIT AGREEMENT" has the meaning assigned to that term in the recitals
to this Agreement.
"CREDIT AGREEMENT COMMITMENTS" shall mean the "Commitments" as defined
in the Credit Agreement.
"CREDIT AGREEMENT OBLIGATIONS" shall mean the "Obligations" as defined
in the Credit Agreement.
"EQUIPMENT" has the meaning assigned to that term in Section 2 of this
Agreement.
"EVENT OF DEFAULT" means any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which Company is
the Defaulting Party and which results in the designation of an Early
Termination Date (as such terms are defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate
Agreement.
"FINANCING AGREEMENT" means either the Credit Agreement or the AXEL Credit
Agreement, and "Financing Agreements" means the Credit Agreement and the AXEL
Credit Agreement, collectively.
"FINANCING AGREEMENT OBLIGATIONS" means Credit Agreement Obligations and
AXEL Obligations.
"GRANTOR" has the meaning assigned to that term in the introduction of
this Agreement.
"HOLDINGS" has the meaning assigned to that term in the recitals to this
Agreement.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated as of
December 18, 1997, by and among CA Administrative Agent, AXEL Administrative
Agent and Collateral Agent.
"INTEREST RATE EXCHANGERS" has the meaning assigned to that term in the
recitals to this Agreement.
XV-3
<PAGE>
"INVENTORY" has the meaning assigned to that term in Section 2 of this
Agreement.
"LENDER INTEREST RATE AGREEMENT" has the meaning assigned to that term in
the recitals to this Agreement.
"LOAN" means any "Loan" as defined in any Financing Agreement, and
"LOANS" means all such Loans collectively.
"LOAN DOCUMENT" means any "Loan Document" as defined in any Financing
Agreement, and "LOAN DOCUMENTS" means all such Loan Documents collectively.
"NEGOTIABLE DOCUMENT OF TITLE" has the meaning assigned to that term in
Section 2 of this Agreement.
"POTENTIAL EVENT OF DEFAULT" means any "Potential Event of Default" as
defined in any Financing Agreement.
"RELATED CONTRACTS" has the meaning assigned to that term in Section 2 of
this Agreement.
"REQUISITE AXEL LENDERS" means "Requisite Lenders" as defined in the
AXEL Credit Agreement.
"REQUISITE CREDIT AGREEMENT LENDERS" means "Requisite Lenders" as
defined in the Credit Agreement.
"REQUISITE LENDERS" means (A) unless an Acceleration shall have occurred
and be continuing, the Requisite Credit Agreement Lenders and the Requisite AXEL
Lenders, and (B) if an Acceleration has occurred and is continuing, Secured
Parties holding more than 50% of the Financing Agreement Obligations.
"REQUISITE OBLIGEES" has the meaning assigned to that term in Section 23
of this Agreement.
"SECURED OBLIGATIONS" has the meaning assigned to that term in Section 2
of this Agreement.
"SECURED PARTIES" has the meaning assigned to that term in the recitals to
this Agreement.
2. GRANT OF SECURITY.
-----------------
Grantor hereby assigns to Collateral Agent and hereby grants to Collateral
Agent, a security interest in, all of Grantor's right, title and interest in and
to the following, in each case whether now or hereafter existing or in which
Grantor now has or hereafter acquires an interest and wherever the same may be
located (the "COLLATERAL"):
XV-4
<PAGE>
(a) all equipment in all of its forms, all parts thereof and all
accessions thereto (any and all such equipment, parts and accessions being
the "EQUIPMENT");
(b) all inventory in all of its forms (including, but not limited to,
(i) all goods held by Grantor for sale or lease or to be furnished under
contracts of service or so leased or furnished, (ii) all raw materials, work
in process, finished goods, and materials used or consumed in the
manufacture, packing, shipping, advertising, selling, leasing, furnishing or
production of such inventory or otherwise used or consumed in Grantor's
business, (iii) all goods in which Grantor has an interest in mass or a
joint or other interest or right of any kind, and (iv) all goods which are
returned to or repossessed by Grantor) and all accessions thereto and
products thereof (all such inventory, accessions and products being the
"INVENTORY") and all negotiable and non-negotiable documents of title
(including without limitation warehouse receipts, dock receipts and bills of
lading) issued by any Person covering any Inventory (any such negotiable
document of title being a "NEGOTIABLE DOCUMENT OF TITLE");
(c) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any
kind and all rights in, to and under all security agreements, leases and
other contracts securing or otherwise relating to any such accounts,
contract rights, chattel paper, documents, instruments, general intangibles
or other obligations (any and all such accounts, contract rights, chattel
paper, documents, instruments, general intangibles and other obligations
being the "ACCOUNTS", and any and all such security agreements, leases and
other contracts being the "RELATED CONTRACTS");
(d) all agreements and contracts to which Grantor is a party as of the
date hereof or becomes a party after the date hereof, as each such agreement
may be amended, supplemented or otherwise modified from time to time (said
agreements, as so amended, supplemented or otherwise modified, being
referred to herein individually as an "ASSIGNED AGREEMENT" and collectively
as the "ASSIGNED AGREEMENTS"), including (i) all rights of Grantor to
receive moneys due or to become due under or pursuant to the Assigned
Agreements, (ii) all rights of Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreements,
(iii) all claims of Grantor for damages arising out of any breach of or
default under the Assigned Agreements, and (iv) all rights of Grantor to
terminate, amend, supplement, modify or exercise rights or options under the
Assigned Agreements, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder;
(e) all deposit accounts, including without limitation all deposit
accounts maintained with Collateral Agent;
(f) all tradesecrets, licenses, copyrights, registrations and franchise
rights, and all goodwill associated with any of the foregoing;
(g) to the extent not included in any other paragraph of this Section
2, all other general intangibles (including without limitation tax refunds,
rights to payment or
XV-5
<PAGE>
performance, choses in action and judgments taken on any rights or claims
included in the Collateral);
(h) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products
thereof;
(i) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(j) all proceeds, products, rents and profits of or from any and all of
the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Collateral Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss
or damage to or otherwise with respect to any of the foregoing Collateral.
For purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary or
involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and Grantor shall not be deemed to have granted a security
interest in, any of Grantor's rights or interests in any license, contract or
agreement to which Grantor is a party or any of its rights or interests
thereunder to the extent, but only to the extent, that such a grant would, under
the terms of such license, contract or agreement or otherwise, result in a
breach of the terms of, or constitute a default under any license, contract or
agreement to which Grantor is a party (other than to the extent that any such
term would be rendered ineffective pursuant to Section 9-318(4) of the Uniform
Commercial Code of any relevant jurisdiction or any other applicable law
(including the Bankruptcy Code) or principles of equity); provided, that
--------
immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and Grantor shall be deemed to have
granted a security interest in, all such rights and interests as if such
provision had never been in effect.
3. SECURITY FOR OBLIGATIONS.
------------------------
This Agreement secures, and the Collateral is collateral security for, the
prompt payment or performance in full when due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
the payment of amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
(S)362(a)), of all obligations and liabilities of every nature, of Grantor now
or hereafter existing under or arising out of or in connection with any
Financing Agreement and any other Loan Documents and the Lender Interest Rate
Agreements and all extensions or renewals thereof, whether for principal,
interest (including without limitation interest that, but for the filing of a
petition in bankruptcy with respect to Grantor, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit, payments
for early termination of Lender Interest Rate Agreements, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or
XV-6
<PAGE>
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Collateral Agent or any Secured
Party or Interest Rate Exchanger as a preference, fraudulent transfer or
otherwise and all obligations of every nature of Grantor now or hereafter
existing under this Agreement (all such obligations of Grantor being the
"SECURED OBLIGATIONS").
4. GRANTOR REMAINS LIABLE.
----------------------
Anything contained herein to the contrary notwithstanding, (a) Grantor shall
remain liable under any contracts and agreements included in the Collateral, to
the extent set forth therein, to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by Collateral Agent of any of its rights hereunder shall not
release Grantor from any of its duties or obligations under the contracts and
agreements included in the Collateral, and (c) Collateral Agent shall not have
any obligation or liability under any contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Collateral Agent be obligated
to perform any of the obligations or duties of Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
Grantor represents and warrants as follows:
(a) Ownership of Collateral. Except for the security interest created
-----------------------
by this Agreement, Grantor owns the Collateral free and clear of any Lien
subject to Liens permitted by the Financing Agreements.
(b) Location of Equipment and Inventory. All of the Equipment and
-----------------------------------
Inventory is, as of the date hereof, located at the places specified in
Schedule 5(b) annexed hereto.
-------------
(c) Negotiable Documents of Title. No Negotiable Documents of Title
-----------------------------
are outstanding with respect to any of the Inventory (other than in respect
of (i) Inventory with an aggregate value not in excess of $1,000,000 or (ii)
Inventory which, in the ordinary course of business, is in transit either
(A) from a supplier to Grantor, (B) between the locations specified in
Schedule 5(b) hereto, or (C) to customers of Grantor).
-------------
(d) Office Locations; Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where Grantor keeps its records
regarding the Accounts and all originals of all chattel paper that evidence
Accounts is, and has been for the four month period preceding the date
hereof, located at the places indicated on Schedule 5d. Grantor has not in
-----------
the past done, and does not now do, business under any other name (including
any trade-name or fictitious business name) except for those names set forth
on Schedule 5d.
-----------
XV-7
<PAGE>
6. FURTHER ASSURANCES.
------------------
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that Collateral Agent may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable Collateral Agent to exercise and enforce its rights
and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, Grantor will: (i) mark conspicuously each item of
chattel paper included in the Accounts, each Related Contract and, at the
reasonable request of Collateral Agent, each of its records pertaining to the
Collateral, with a legend, in form and substance reasonably satisfactory to
Collateral Agent, indicating that such Collateral is subject to the security
interest granted hereby, (ii) at the reasonable request of Collateral Agent,
deliver and pledge to Collateral Agent hereunder all promissory notes and other
instruments (excluding checks) and all original counterparts of chattel paper
constituting Collateral, duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance reasonably
satisfactory to Collateral Agent, (iii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as Collateral Agent may reasonably request, in order to perfect and
preserve the security interests granted or purported to be granted hereby, (iv)
after the acquisition by Grantor of any item of Equipment which is covered by a
certificate of title under a statute of any jurisdiction under the law of which
indication of a security interest on such certificate is required as a condition
of perfection thereof, upon the reasonable request of Collateral Agent, execute
and file with the registrar of motor vehicles or other appropriate authority in
such jurisdiction an application or other document requesting the notation or
other indication of the security interest created hereunder on such certificate
of title, (v) upon the reasonable request of Collateral Agent, deliver to
Collateral Agent copies of all such applications or other documents filed during
such calendar quarter and copies of all such certificates of title issued during
such calendar quarter indicating the security interest created hereunder in the
items of Equipment covered thereby, and (vi) at Collateral Agent's reasonable
request, appear in and defend any action or proceeding that may affect Grantor's
title to or Collateral Agent's security interest in all or any part of the
Collateral.
(b) Grantor hereby authorizes Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of Grantor to the extent permitted by
applicable law. Grantor agrees that a carbon, photographic or other
reproduction of this Agreement or of a financing statement signed by Grantor
shall be sufficient as a financing statement and may be filed as a financing
statement in any and all jurisdictions.
7. CERTAIN COVENANTS OF GRANTOR.
----------------------------
Grantor shall:
(a) notify Collateral Agent of any change in Grantor's name, identity
or corporate structure within 30 days of such change;
XV-8
<PAGE>
(b) give Collateral Agent 30 days' written notice following any change
in Grantor's chief place of business, chief executive office or residence or
the office where Grantor keeps its records regarding the Accounts and all
originals of all chattel paper that evidence Accounts;
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to
the extent the validity thereof is being contested in good faith.
8. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
---------------------------------------------------------
Grantor shall:
(a) keep the Equipment and Inventory at the places therefor specified
on Schedule 5(b) annexed hereto or, upon 30 days' written notice to
-------------
Collateral Agent following any change in location, at such other places in
jurisdictions where all action that Collateral Agent may reasonably request,
in order to perfect and protect any security interest granted or purported
to be granted hereby, or to enable Collateral Agent to exercise and enforce
its rights and remedies hereunder, with respect to such Equipment and
Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in working
order, ordinary wear and tear and damage by casualty excepted, and in
accordance with Grantor's past practices, and shall forthwith make or cause
to be made all repairs, replacements and other improvements in connection
therewith that are necessary in the Grantor's reasonable business judgment
to such end;
(c) keep correct and accurate records of the Inventory, itemizing and
describing the kind, type and quantity of Inventory, Grantor's cost therefor
and (where applicable) the current list prices for the Inventory;
(d) if any Inventory is in possession or control of any of Grantor's
agents or processors, upon the occurrence of an Event of Default, instruct
such agent or processor to hold all such Inventory for the account of
Collateral Agent and subject to the instructions of Collateral Agent; and
(e) promptly upon the issuance and delivery to Grantor of any
Negotiable Document of Title (other than any one or more Negotiable
Documents of Title covering (i) Inventory with an aggregate value not in
excess of $1,000,000 or (ii) Inventory which, in the ordinary course of
business, is in transit either (A) from a supplier to Grantor, (B) between
the locations specified in Schedule 5(b) hereto, or (C) to customers of
-------------
Grantor), deliver such Negotiable Document of Title to Collateral Agent.
XV-9
<PAGE>
9. INSURANCE.
---------
Grantor shall, at its own expense, maintain insurance with respect to the
Equipment and Inventory in accordance with the terms of the Financing
Agreements.
10. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED CONTRACTS.
----------------------------------------------------------------
(a) Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts and
Related Contracts, and all originals of all chattel paper that evidence
Accounts, at the location therefor specified in Section 5 or, upon 30 days'
written notice to Collateral Agent following any change in location, at such
other location in a jurisdiction where all action that Collateral Agent may
request, in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder, with respect to such Accounts and
Related Contracts shall have been taken. Promptly upon the reasonable request
of Collateral Agent, Grantor shall deliver to Collateral Agent complete and
correct copies of each Related Contract.
(b) Grantor shall, maintain (i) complete records of each Account, including
records of all payments received, credits granted and merchandise returned, and
(ii) all documentation relating thereto in accordance with prudent business
practices.
(c) Except as otherwise provided in this subsection (c), Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
Grantor under the Accounts and Related Contracts. In connection with such
collections, Grantor shall take such action as Grantor or Collateral Agent may
deem necessary or advisable to enforce collection of amounts due or to become
due under the Accounts; provided, however, that Collateral Agent shall have the
-------- -------
right at any time, upon the occurrence and during the continuation of an Event
of Default and upon written notice to Grantor of its intention to do so, to
notify the account debtors or obligors under any Accounts of the assignment of
such Accounts to Collateral Agent and to direct such account debtors or obligors
to make payment of all amounts due or to become due to Grantor thereunder
directly to Collateral Agent, to notify each Person maintaining a lockbox or
similar arrangement to which account debtors or obligors under any Accounts have
been directed to make payment to remit all amounts representing collections on
checks and other payment items from time to time sent to or deposited in such
lockbox or other arrangement directly to Collateral Agent and, upon such
notification and at the expense of Grantor, to enforce collection of any such
Accounts and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as Grantor might have done. After receipt
by Grantor of the notice from Collateral Agent referred to in the proviso to
-------
the preceding sentence, (i) any payments of Accounts, received by the Grantor
shall be forthwith (and in any event within two Business Days) deposited by the
Grantor in the exact form received, duly indorsed by the Grantor to the
Collateral Agent if required, in a Collateral Account maintained under the sole
dominion and control of the Collateral Agent, subject to withdrawal by the
Collateral Agent for the account of the Secured Parties only as provided in
Section 21, (ii) until so turned over in accordance with the preceding
subsection (i), all amounts and proceeds (including checks and other
instruments) received by Grantor in respect of the Accounts and the Related
XV-10
<PAGE>
Contracts shall be received in trust for the benefit of Collateral Agent
hereunder and shall be segregated from other funds of Grantor and (iii) Grantor
shall not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
11. DEPOSIT ACCOUNTS.
----------------
Upon the occurrence and during the continuation of an Event of Default,
Collateral Agent may exercise dominion and control over, and refuse to permit
further withdrawals (whether of money, securities, instruments or other
property) from any deposit accounts maintained with Collateral Agent
constituting part of the Collateral.
12. LICENSE OF COPYRIGHTS, ETC.
--------------------------
Grantor hereby assigns, transfers and conveys to Collateral Agent, effective
upon the occurrence of any Event of Default, the nonexclusive right and license
to use all copyrights or technical processes owned or used by Grantor that
relate to the Collateral and any other collateral granted by Grantor as security
for the Secured Obligations, together with any goodwill associated therewith,
all to the extent necessary to enable Collateral Agent to use, possess and
realize on the Collateral and to enable any successor or assign to enjoy the
benefits of the Collateral. This right and license shall inure to the benefit
of all successors, assigns and transferees of Collateral Agent and its
successors, assigns and transferees, whether by voluntary conveyance, operation
of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise. Such right and license is granted free of charge, without
requirement that any monetary payment whatsoever be made to Grantor.
13. TRANSFERS AND OTHER LIENS.
-------------------------
Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Financing
Agreements; or
(b) except for the security interest created by this Agreement and
Liens permitted by the Financing Agreements, create or suffer to exist any
Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any Person.
14. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
-------------------------------------------
Grantor hereby irrevocably appoints Collateral Agent as Grantor's attorney-
in-fact, with full authority in the place and stead of Grantor and in the name
of Grantor, Collateral Agent or otherwise, from time to time, upon the
occurrence and continuance of an Event of Default, in Collateral Agent's
reasonable discretion to take any action and to execute any instrument that
Collateral Agent may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement, including without limitation:
XV-11
<PAGE>
(a) to obtain and adjust insurance required to be maintained by Grantor
or paid to Collateral Agent pursuant to Section 9;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any proceedings
that Collateral Agent may reasonably deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Collateral Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Financing Agreements) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Collateral Agent
in its reasonable discretion, any such payments made by Collateral Agent to
become obligations of Grantor to Collateral Agent, due and payable
immediately without demand;
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and other
documents relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though Collateral Agent were the absolute owner thereof for
all purposes, and to do, at Collateral Agent's option and Grantor's expense,
at any time or from time to time, all acts and things that Collateral Agent
reasonably deems necessary to protect, preserve or realize upon the
Collateral and Collateral Agent's security interest therein in order to
effect the intent of this Agreement, all as fully and effectively as Grantor
might do.
15. COLLATERAL AGENT MAY PERFORM.
----------------------------
If Grantor fails to perform any agreement contained herein, Collateral Agent
may itself perform, or cause performance of, such agreement, and the reasonable
expenses of Collateral Agent incurred in connection therewith shall be payable
by Grantor under Section 17.
XV-12
<PAGE>
16. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Collateral Agent, each Secured Party and
each Interest Rate Exchanger from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including without limitation
enforcement of this Agreement), except to the extent such claims, losses or
liabilities result from Collateral Agent's or such Secured Party's or Interest
Rate Exchanger's gross negligence or willful misconduct as determined by a court
of competent jurisdiction.
(b) Grantor agrees to pay to Collateral Agent promptly following written
demand the amount of any and all reasonable costs and reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, that Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights of
Collateral Agent hereunder, or (iv) the failure by Grantor to perform or observe
any of the provisions hereof.
(c) The obligations of Grantor in this Section 17 shall survive the
termination of this Agreement and the discharge of Grantor's other obligations
under this Agreement, the Interest Rate Agreements, the Financing Agreements and
any other Loan Documents.
17. STANDARD OF CARE.
----------------
The powers conferred on Collateral Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, Collateral Agent shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral. Collateral Agent shall be deemed
to have exercised reasonable care in the custody and preservation of Collateral
in its possession if such Collateral is accorded treatment substantially equal
to that which Collateral Agent accords its own property.
XV-13
<PAGE>
18. REMEDIES.
--------
If any Event of Default shall have occurred and be continuing, Collateral
Agent may exercise in respect of the Collateral, in addition to all other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Uniform Commercial Code as
in effect in any relevant jurisdiction (the "CODE") (whether or not the Code
applies to the affected Collateral), and also may (a) require Grantor to, and
Grantor hereby agrees that it will at its expense and upon request of Collateral
Agent forthwith, assemble all or part of the Collateral as directed by
Collateral Agent and make it available to Collateral Agent at a place to be
designated by Collateral Agent that is reasonably convenient to both parties,
(b) enter onto the property where any Collateral is located and take possession
thereof with or without judicial process, (c) prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or otherwise
prepare the Collateral for disposition in any manner to the extent Collateral
Agent deems appropriate, (d) take possession of Grantor's premises or place
custodians in exclusive control thereof, remain on such premises and use the
same and any of Grantor's equipment for the purpose of completing any work in
process, taking any actions described in the preceding clause (c) and collecting
any Secured Obligation, and (e) without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or private
sale, at any of Collateral Agent's offices or elsewhere, for cash, on credit or
for future delivery, at such time or times and at such price or prices and upon
such other terms as Collateral Agent may deem commercially reasonable.
Collateral Agent or any Secured Party or Interest Rate Exchanger may be the
purchaser of any or all of the Collateral at any such sale and Collateral Agent,
as agent for and representative of Secured Parties and Interest Rate Exchangers
(but not any Secured Party or Secured Parties or Interest Rate Exchanger or
Interest Rate Exchangers in its or their respective individual capacities unless
Requisite Obligees shall otherwise agree in writing), shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Secured Obligations as a credit on account of the purchase
price for any Collateral payable by Collateral Agent at such sale. Each
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of Grantor, and Grantor hereby waives (to the extent
permitted by applicable law) all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Grantor agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to Grantor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice of sale
having been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Grantor hereby waives any claims against Collateral Agent arising by
reason of the fact that the price at which any Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale, even if Collateral Agent accepts the first offer received and does
not offer such Collateral to more than one offeree. If the proceeds of any sale
or other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the reasonable fees
of any attorneys employed by Collateral Agent to collect such deficiency.
19. PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT.
----------------------------------------------
XV-14
<PAGE>
In addition to the rights of the Collateral Agent and the Secured Parties
specified in Section 10 with respect to payments of Accounts, if an Event of
Default shall occur and be continuing, upon request of the Collateral Agent, all
proceeds received by the Grantor consisting of cash, checks and other near-cash
items shall be held by the Grantor in trust for the Collateral Agent and the
Secured Parties, segregated from other funds of the Grantor, and shall,
forthwith upon receipt by the Grantor, be turned over to the Collateral Agent in
the exact form received by the Grantor (duly indorsed by the Grantor to the
Collateral Agent, if required) and held by the Collateral Agent in a Collateral
Account maintained under the Intercreditor Agreement. All proceeds while held
by the Collateral Agent in a Collateral Account (or by the Borrower in trust for
the Collateral Agent and the Secured Parties) shall continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in subsection 21.
20. APPLICATION OF PROCEEDS.
-----------------------
Except as expressly provided elsewhere in this Agreement, all proceeds held
in any Collateral Account and all other proceeds received by Collateral Agent in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral shall be applied as provided in subsection 3 of the
Intercreditor Agreement.
21. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.
-----------------------------------------------
This Agreement shall create a continuing security interest in the Collateral
and shall (a) remain in full force and effect until the payment in full of the
Secured Obligations (other than inchoate indemnification obligations with
respect to claims, losses or liabilities which have not yet arisen and are not
yet due and payable), the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of Collateral Agent hereunder, to the benefit of Collateral
Agent and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement and subsection 10.1 of the AXEL Credit
Agreement, any Secured Party may assign or otherwise transfer any Loans held by
it to any other Person, and such other Person shall thereupon become vested with
all the benefits in respect thereof granted to Secured Parties herein or
otherwise. Upon the payment in full of all Secured Obligations (other than
inchoate indemnification obligations with respect to claims, losses or
liabilities which have not yet arisen and are not yet due and payable), the
cancellation or termination of the Commitments and the cancellation or
expiration of all outstanding Letters of Credit, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to Grantor.
Upon any such termination Collateral Agent will, at Grantor's expense, execute
and deliver to Grantor such documents as Grantor shall reasonably request to
evidence such termination in accordance with the terms of the Intercreditor
Agreement.
XV-15
<PAGE>
22. COLLATERAL AGENT AS ADMINISTRATIVE AGENT.
----------------------------------------
(a) Collateral Agent has been appointed to act as Collateral Agent hereunder
by CA Administrative Agent on behalf of the Credit Agreement Lenders and AXEL
Administrative Agent on behalf of the AXEL Lenders pursuant to the Intercreditor
Agreement and, by their acceptance of the benefits hereof, Interest Rate
Exchangers, and shall be entitled to the benefits of the Intercreditor
Agreement. Collateral Agent shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Collateral), solely in
accordance with this Agreement and the Intercreditor Agreement; provided that
--------
Collateral Agent shall exercise, or refrain from exercising, any remedies
provided for in Section 21 in accordance with the instructions of (i) Requisite
Lenders or (ii) after payment in full of all Financing Agreement Obligations
under the Financing Agreements and any other Loan Documents, the holders of a
majority of the aggregate notional amount (or, with respect to any Lender
Interest Rate Agreement that has been terminated in accordance with its terms,
the amount then due and payable (exclusive of expenses and similar payments but
including any early termination payments then due) under such Lender Interest
Rate Agreement) under all Lender Interest Rate Agreements (Requisite Lenders or,
if applicable, such holders being referred to herein as "REQUISITE OBLIGEES").
In furtherance of the foregoing provisions of this Section 23(a), each Interest
Rate Exchanger, by its acceptance of the benefits hereof, agrees that it shall
have no right individually to realize upon any of the Collateral hereunder, it
being understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Collateral Agent for the benefit
of Secured Parties and Interest Rate Exchangers in accordance with the terms of
this Section 23(a).
(b) Collateral Agent shall at all times be the same Person that is appointed
Collateral Agent under the Intercreditor Agreement. The Collateral Agent may
resign and a successor Collateral Agent may be appointed in the manner provided
in the Intercreditor Agreement. Upon the acceptance of any appointment as
Collateral Agent by a successor Collateral Agent, that successor Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Collateral Agent under this
Agreement, and the retiring or removed Collateral Agent under this Agreement
shall promptly (i) transfer to such successor Collateral Agent all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Collateral Agent under this
Agreement, and (ii) execute and deliver to such successor Collateral Agent such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Collateral Agent of the security interests created hereunder, whereupon such
retiring or removed Collateral Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Collateral
Agent's resignation or removal hereunder as Collateral Agent, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Collateral Agent hereunder.
XV-16
<PAGE>
23. AMENDMENTS; ETC.
---------------
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by Grantor therefrom, shall in any
event be effective unless the same shall be in writing and signed by Collateral
Agent and, in the case of any such amendment or modification, by Grantor. Any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
24. NOTICES.
-------
Any notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Collateral Agent and Grantor shall not be
--------
effective until received. For the purposes hereof, the address of each party
hereto shall be as provided in subsection 10.8 of the Credit Agreement or
subsection 10.8 of the AXEL Credit Agreement, as applicable, or as set forth
under such party's name on the signature pages hereof or such other address as
shall be designated by such party in a written notice delivered to the other
parties hereto.
25. SEVERABILITY.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
XV-17
<PAGE>
26. HEADINGS.
--------
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
27. GOVERNING LAW; TERMS.
--------------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-
1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT
THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the
Credit Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code
in the State of New York are used herein as therein defined.
SECTION 26. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
[Remainder of page intentionally left blank]
XV-18
<PAGE>
IN WITNESS WHEREOF, Grantor and Collateral Agent have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
SEALY MATTRESS COMPANY
By:
----------------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent
By:
----------------------------------
Name:
Title:
XV-19
<PAGE>
SCHEDULE 5(b)
TO COMPANY SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
XV-20
<PAGE>
EXHIBIT XVI
[FORM OF COMPANY PATENT AND TRADEMARK SECURITY AGREEMENT]
COMPANY PATENT AND TRADEMARK SECURITY AGREEMENT
This COMPANY PATENT AND TRADEMARK SECURITY AGREEMENT (this "AGREEMENT") is
dated as of December 18, 1997 and entered into by and among SEALY MATTRESS
COMPANY, an Ohio corporation ("COMPANY")(Company being referred to herein as a
"GRANTOR"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN
GUARANTY"), as Collateral Agent for and representative of (in such capacity
herein called "COLLATERAL AGENT") the Secured Parties (as hereinafter defined)
and any Interest Rate Exchangers (as hereinafter defined).
RECITALS
(A) Grantor, Sealy Corporation, a Delaware Corporation ("HOLDINGS"), the
financial institutions from time to time parties thereto (the "CREDIT AGREEMENT
LENDERS"), Goldman Sachs Credit Partners L.P. ("GSCP"), as arranger and
syndication agent (in such capacity, "CA SYNDICATION AGENT"), Morgan Guaranty,
as administrative agent (in such capacity, "CA ADMINISTRATIVE AGENT"), and
Bankers Trust Company ("BTCO."), as documentation agent (in such capacity,
"CA DOCUMENTATION AGENT") have entered into a Credit Agreement dated as of
December 18, 1997 (said Credit Agreement, as it may hereafter be amended,
restated, supplemented or otherwise modified from time to time, being the
"CREDIT AGREEMENT") pursuant to which Credit Agreement Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Grantor.
B. Grantor, Holdings, the financial institutions from time to time parties
thereto (the "AXEL LENDERS"), GSCP, as arranger and syndication agent (in such
capacity, "AXEL SYNDICATION AGENT"), Morgan Guaranty, as administrative agent
(in such capacity, "AXEL ADMINISTRATIVE AGENT"), and BTCo. as documentation
agent (in such capacity, "AXEL DOCUMENTATION AGENT") have entered into an AXEL
Credit Agreement dated as of December 18, 1997 (said AXEL Credit Agreement, as
it may hereafter be amended, restated, supplemented or otherwise modified from
time to time, being the "AXEL CREDIT AGREEMENT"; the Credit Agreement Lenders,
the CA Syndication Agent, the CA Administrative Agent, the CA Documentation
Agent, the AXEL Lenders, the AXEL Syndication Agent, the AXEL Administrative
Agent, and the AXEL Documentation Agent each being a "SECURED PARTY" and
collectively the "SECURED PARTIES") pursuant to which AXEL Lenders have made
certain commitments, subject to the terms and conditions set forth in the AXEL
Credit Agreement, to extend certain credit facilities to Grantor.
C. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreements (collectively, the "LENDER
INTEREST RATE AGREEMENTS") with one or more CA Lenders or their Affiliates or
AXEL Lenders or their Affiliates (in such
XVI-1
<PAGE>
capacity, collectively, "INTEREST RATE EXCHANGERS") in accordance with the terms
of the Financing Agreements (as hereinafter defined), and it is desired that the
obligations of Company under the Lender Interest Rate Agreements, including
without limitation the obligation of Company to make payments thereunder in the
event of early termination thereof (all such obligations being the "INTEREST
RATE OBLIGATIONS"), together with all obligations of Company under the Financing
Agreements and any other Loan Documents (as hereinafter defined), be secured
hereunder.
D. Grantor has and may in the future have rights, title and interests in
and to various Patents and other related Collateral (as such terms are
hereinafter defined).
E. Grantor owns and uses in its business, and will in the future adopt and
so use, various intangible assets, including trademarks, service marks, designs,
logos, indicia, tradenames, corporate names, company names, business names,
fictitious business names, trade styles and/or other source and/or business
identifiers and applications pertaining thereto (collectively, the
"TRADEMARKS").
F. Collateral Agent desires Grantor to grant to it a lien on and security
interest in all of Grantor's existing and future Patents, existing and future
Trademarks, all registrations that have been or may hereafter be issued or
applied for thereon in the United States and any state thereof (the
"REGISTRATIONS"), all common law and other rights in and to the Trademarks in
the United States and any state thereof (the "TRADEMARK RIGHTS"), all goodwill
of Grantor's business symbolized by the Trademarks and associated therewith,
including without limitation the documents and things described in Section 2(b)
(the "ASSOCIATED GOODWILL"), any other Collateral and all proceeds of the
Patents, the Trademarks, the Registrations, the Trademark Rights, the Associated
Goodwill and any other Collateral, and Grantor agrees to grant to Collateral
Agent a secured and protected interest in the Trademarks, the Registrations, the
Trademark Rights, the Associated Goodwill, any other Collateral and all the
proceeds thereof as provided herein.
G. Pursuant to the Company Security Agreement, Grantor has granted to
Collateral Agent a lien on and security interest in, among other assets, all
Grantor's equipment, inventory, accounts and general intangibles relating to the
products and services sold or delivered under or in connection with the
Trademarks such that, upon the occurrence and during the continuation of an
Event of Default, Collateral Agent would be able to exercise its remedies
consistent with the Security Agreement, this Agreement and applicable law to
foreclose upon Grantor's business and use the Trademarks, the Registrations and
the Trademark Rights in conjunction with the continued operation of such
business, maintaining substantially the same product and service specifications
and quality as maintained by Grantor, and benefit from the Associated Goodwill.
H. It is a condition precedent to the initial extensions of credit by
Secured Parties under the Credit Agreement that Grantor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and to induce (i) the CA
Administrative Agent, the CA Syndication Agent and the Credit Agreement Lenders
to enter into the Credit Agreement, (ii) the Credit Agreement Lenders to make
their respective loans to, and issue Letters of Credit for the account of, the
Grantor, (iii) the AXEL Administrative Agent, the AXEL
XVI-2
<PAGE>
Syndication Agent and the AXEL Lenders to enter into the AXEL Loan Agreement,
(iv) the AXEL Lenders to make their respective loans to the Grantor, and (v) to
induce Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Grantor hereby agrees with the
Collateral Agent as follows:
1. DEFINED TERMS.
-------------
(a) Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to such terms in the Credit
Agreement;
(b) The following terms shall have the following meanings:
"ACCELERATION" shall mean any of the Credit Agreement Obligations or the
AXEL Credit Agreement Obligations have been declared, or have become,
immediately due and payable, or the commitments to extend credit of the Credit
Agreement Lenders or the AXEL Lenders shall have been terminated under Section 8
of the Credit Agreement or Section 7 of the AXEL Credit Agreement, respectively.
"AGREEMENT" means this Company Security Agreement dated as of December 18,
1997, as it may be amended, supplemented or otherwise modified from time to
time.
"ASSOCIATED GOODWILL" has the meaning assigned to that term in the
recitals to this Agreement.
"AXEL COMMITMENTS" shall mean the "Commitments" as defined in the AXEL
Credit Agreement.
"AXEL CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"AXEL LENDERS" has the meaning assigned to that term in the recitals to
this Agreement.
"AXEL OBLIGATIONS" shall mean the "Obligations" as defined in the AXEL
Credit Agreement.
"AXEL SYNDICATION AGENT" has the meaning assigned to that term in the
recitals to this Agreement.
"COLLATERAL" has the meaning assigned to that term in Section 5 of this
Agreement.
"COLLATERAL ACCOUNTS" shall mean "Collateral Accounts" as defined in the
Intercreditor Agreement.
"COLLATERAL AGENT" has the meaning assigned to that term in the
introduction.
XVI-3
<PAGE>
"COMMITMENTS" means the Credit Agreement Commitments and the AXEL
Commitments.
"CREDIT AGREEMENT" has the meaning assigned to that term in the recitals
to this Agreement.
"CREDIT AGREEMENT COMMITMENTS" shall mean the "Commitments" as defined
in the Credit Agreement.
"CREDIT AGREEMENT OBLIGATIONS" shall mean the "Obligations" as defined
in the Credit Agreement.
"EVENT OF DEFAULT" means any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which Company is
the Defaulting Party and which results in the designation of an Early
Termination Date (as such terms are defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate
Agreement.
"FINANCING AGREEMENT" means the Credit Agreement or the AXEL Credit
Agreement, and "FINANCING AGREEMENTS" means the Credit Agreement and the AXEL
Credit Agreement, collectively.
"FINANCING AGREEMENT OBLIGATIONS" means Credit Agreement Obligations and
AXEL Obligations.
"GRANTOR" has the meaning assigned to that term in the introduction of
this Agreement.
"HOLDINGS" has the meaning assigned to that term in the recitals to this
Agreement.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated as of
December 18, 1997, by and among CA Administrative Agent, AXEL Administrative
Agent and Collateral Agent.
"INTEREST RATE EXCHANGERS" has the meaning assigned to that term in the
recitals to this Agreement.
"INTEREST RATE OBLIGATIONS" has the meaning assigned to that term in the
recitals to this Agreement.
"LENDER INTEREST RATE AGREEMENT" has the meaning assigned to that term in
the recitals to this Agreement.
"LOAN" means any "Loan" as defined in any Financing Agreement, and
"LOANS" means all such Loans collectively.
XVI-4
<PAGE>
"LOAN DOCUMENT" means any "Loan Document" as defined in any Financing
Agreement, and "LOAN DOCUMENTS" means all such Loan Documents collectively.
"MATERIAL PATENT" has the meaning assigned to that term in Section 5 of
this Agreement.
"MATERIAL TRADEMARK PROPERTY" has the meaning assigned to that term in
Section 5 of this Agreement.
"PATENTS" has the meaning assigned to that term in Section 2 of this
Agreement.
"PERMITTED PATENT LIENS" has the meaning assigned to that term in Section
5 of this Agreement.
"PERMITTED TRADEMARK LIENS" has the meaning assigned to that term in
Section 5 of this Agreement.
"POTENTIAL EVENT OF DEFAULT" means any "Potential Event of Default" as
defined in any Financing Agreement.
"REGISTRATIONS" has the meaning assigned to that term in the recitals to
this Agreement.
"REQUISITE AXEL LENDERS" means "Requisite Lenders" as defined in the
AXEL Credit Agreement.
"REQUISITE CREDIT AGREEMENT LENDERS" means "Requisite Lenders" as
defined in the Credit Agreement.
"REQUISITE LENDERS" means (A) unless an Acceleration shall have occurred
and be continuing, the Requisite Credit Agreement Lenders and the Requisite AXEL
Lenders, and (B) if an Acceleration has occurred and is continuing, Secured
Parties holding more than 50% of the Financing Agreement Obligations.
"REQUISITE OBLIGEES" has the meaning assigned to that term in Section 19
of this Agreement.
"SECURED OBLIGATIONS" has the meaning assigned to that term in Section 3
of this Agreement.
"SECURED PARTIES" has the meaning assigned to that term in the recitals to
this Agreement.
"TRADEMARKS" has the meaning assigned to that term in the recitals to this
Agreement.
"TRADEMARK RIGHTS" has the meaning assigned to that term in the recitals
to this Agreement.
XVI-5
<PAGE>
2. GRANT OF SECURITY.
-----------------
Grantor hereby grants to Collateral Agent a security interest in all of
Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):
A. each of the U.S. Trademarks and rights and interests in Trademarks
which are presently, or in the future may be, owned, held (whether pursuant
to a license or otherwise) or used by Grantor, in whole or in part
(including without limitation the U.S. Trademarks specifically identified in
Schedule I), and including all Trademark Rights with respect thereto and all
----------
federal and state Registrations therefor heretofore or hereafter granted or
applied for, the right (but not the obligation) to file for registration
claims under any state or federal trademark law or regulation and to apply
for, renew and extend the Trademarks, Registrations and Trademark Rights,
the right (but not the obligation) to sue or bring opposition or
cancellation proceedings in the name of Grantor or in the name of Collateral
Agent or otherwise for past, present and future infringements of the
Trademarks, Registrations or Trademark Rights and all rights (but not
obligations) corresponding thereto in the United States, and the Associated
Goodwill; it being understood that the rights and interests included herein
shall include, without limitation, all rights and interests pursuant to
licensing or other contracts in favor of Grantor pertaining to any
Trademarks, Registrations or Trademark Rights presently or in the future
owned, held or used by third parties but, in the case of third parties which
are not Affiliates of Grantor, only to the extent permitted by such
licensing or other contracts or otherwise permitted by applicable law and,
if not so permitted under any such contracts and applicable law, only with
the consent of such third parties;
B. the following documents and things in Grantor's possession, or
subject to Grantor's right to possession, related to (Y) the production,
sale and delivery by Grantor, or by any Affiliate, licensee or subcontractor
of Grantor, of products or services sold or delivered by or under the
authority of Grantor in connection with the Trademarks, Registrations or
Trademark Rights (which products and services shall, for purposes of this
Agreement, be deemed to include, without limitation, products and services
sold or delivered pursuant to merchandising operations utilizing any
Trademarks, Registrations or Trademark Rights); or (Z) any retail or other
merchandising operations conducted under the name of or in connection with
the Trademarks, Registrations or Trademark Rights by Grantor or any
Affiliate, licensee or subcontractor of Grantor:
i. all lists and ancillary documents that identify and describe
any of Grantor's customers, or those of its Affiliates, licensees or
subcontractors, for products sold and services delivered under or in
connection with the Trademarks or Trademark Rights, including without
limitation any lists and ancillary documents that contain a customer's
name and address, the name and address of any of its warehouses,
branches or other places of business, the identity of the Person or
Persons having the principal responsibility on a customer's behalf for
ordering
XVI-6
<PAGE>
products or services of the kind supplied by Grantor, or the
credit, payment, discount, delivery or other sale terms applicable to
such customer, together with information setting forth the total
purchases, by brand, product, service, style, size or other criteria,
and the patterns of such purchases;
ii. all product and service specification documents and
production and quality control manuals used in the manufacture or
delivery of products and services sold or delivered under or in
connection with the Trademarks or Trademark Rights;
iii. all documents which reveal the name and address of any source
of supply, and any terms of purchase and delivery, for any and all
materials, components and services used in the production of products
and services sold or delivered under or in connection with the
Trademarks or Trademark Rights; and
iv. all documents constituting or concerning the then current or
proposed advertising and promotion by Grantor or its Affiliates,
licensees or subcontractors of products and services sold or delivered
under or in connection with the Trademarks or Trademark Rights
including, without limitation, all documents which reveal the media
used or to be used and the cost for all such advertising conducted
within the described period or planned for such products and services;
and
(c) all patents and patent applications and rights and interests in
U.S. patents and patent applications that are presently, or in the future
may be, owned, held (whether pursuant to a license or otherwise) or used by
Grantor in whole or in part (including, without limitation, the U.S. patents
and patent applications listed in Schedule II annexed hereto, all rights
-----------
(but not obligations) corresponding thereto (including without limitation
the right (but not the obligation) to sue for past, present and future
infringements in the name of Grantor or in the name of Collateral Agent),
and all re-issues, divisions, continuations, renewals, extensions and
continuations-in-part thereof (all of the foregoing being collectively
referred to as the "PATENTS"); it being understood that the rights and
interests granted hereby shall include, without limitation, all rights and
interests pursuant to licensing or other contracts in favor of Grantor
pertaining to any Patent presently or in the future owned, held or used by
third parties but, in the case of third parties which are not Affiliates of
Grantor, only to the extent permitted by such licensing or other contracts
or otherwise permitted by applicable law and, if not so permitted under any
such contracts and applicable law, only with the consent of such third
parties;
(d) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon;
(e) to the extent not included in the foregoing clauses (a) - (d), all
general intangibles relating to the Collateral; and
XVI-7
<PAGE>
(f) all proceeds, products, and profits (including without limitation
license royalties and proceeds of infringement suits) of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Collateral Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss
or damage to or otherwise with respect to any of the foregoing Collateral.
For purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary or
involuntary.
3. SECURITY FOR OBLIGATIONS.
------------------------
This Agreement secures, and the Collateral is collateral security for, the
prompt payment or performance in full when due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
without limitation the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. (S)362(a)), of all Secured Obligations with respect to Grantor. "SECURED
OBLIGATIONS" means all obligations and liabilities of every nature of Company
now or hereafter existing under or arising out of or in connection with any
Financing Agreements and any other Loan Documents and any Lender Interest Rate
Agreement, and in each case together with all extensions or renewals thereof,
whether for principal, interest (including without limitation interest that, but
for the filing of a petition in bankruptcy with respect to Grantor, would accrue
on such obligations), reimbursement of amounts drawn under Letters of Credit,
payments for early termination of Lender Interest Rate Agreements, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Collateral
Agent or any Secured Party or Interest Rate Exchanger as a preference,
fraudulent transfer or otherwise, and all obligations of every nature of Grantor
now or hereafter existing under this Agreement.
4. GRANTOR REMAINS LIABLE.
----------------------
Anything contained herein to the contrary notwithstanding, (a) Grantor shall
remain liable under any contracts and agreements included in the Collateral, to
the extent set forth therein, to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by Collateral Agent of any of its rights hereunder shall not
release Grantor from any of its duties or obligations under the contracts and
agreements included in the Collateral, and (c) Collateral Agent shall not have
any obligation or liability under any contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Collateral Agent be obligated
to perform any of the obligations or duties of Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
XVI-8
<PAGE>
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
Grantor represents and warrants as follows:
(a) OWNERSHIP OF COLLATERAL. Except as expressly permitted by the
Financing Agreements and for the security interest and conditional
assignment created by this Agreement (other than ownership and other rights
reserved by third party owners with respect to each Material Trademark
Property and each Material Patent that Grantor is licensed to use), Grantor
is the legal and beneficial owner of the entire right, title and interest in
and to (i) each Material Trademark Property, free and clear of any Lien
other than Liens of mechanics, materialmen, attorneys and other similar
liens imposed by laws in the ordinary course of business in connection with
the establishment, creation or application for registration of any
Trademarks, Registrations or Trademark Rights for sums not yet delinquent or
being contested in good faith (such Liens being referred to herein as
"PERMITTED TRADEMARK LIENS"), and (ii) each Material Patent, free and
clear of any Lien other than Liens of mechanics, materialmen, attorneys and
other similar liens imposed by law in the ordinary course of business in
connection with the establishment, creation or application for any Patent
for sums not yet delinquent or being contested in good faith (such Liens
being referred to herein as "PERMITTED PATENT LIENS"). Except such as may
have been filed in favor of Collateral Agent relating to this Agreement or
except as permitted by the Financing Agreements, no effective financing
statement or other instrument similar in effect covering all or any part of
the Collateral is on file in any filing or recording office, including the
United States Patent and Trademark Office.
(b) DESCRIPTION OF COLLATERAL. A true and complete list of all
Registrations, tradenames, corporate names, fictitious business names and
Trademark license agreements owned, held (whether pursuant to a license or
otherwise) or used by Grantor, in whole or in part, as of the date of this
Agreement is set forth in Schedule I annexed hereto. Each Registration,
----------
tradename, corporate name, fictitious business name and Trademark license
designated on Schedule I annexed hereto as a Material Trademark Property,
----------
and each other Trademark, Registration or Trademark Right hereafter arising
or otherwise owned, held or used by Grantor that is material to any of
Grantor's business or operations is referred to herein as a "MATERIAL
TRADEMARK PROPERTY". A true and complete list of all Patents owned or held
(whether pursuant to a license or otherwise) by Grantor, in whole or in
part, as of the date of this Agreement is set forth in Schedule II annexed
-----------
hereto. Each Patent designated on Schedule II annexed hereto as a Material
-----------
Patent and each other Patent hereafter arising or otherwise owned or held by
Grantor that is material to any of Grantor's business or operations is
referred to herein as a "MATERIAL PATENT".
(c) VALIDITY AND ENFORCEABILITY OF COLLATERAL. Each Material Trademark
Property and each Material Patent is subsisting and had not been adjudged
invalid or unenforceable, in whole or in part and Grantor is not aware of
any pending or threatened claim by any third party that any Material
Trademark Property or any Material Patent is invalid or unenforceable or
that the use of any Material Trademark Property or any Material Patent
violates the rights of any third person.
XVI-9
<PAGE>
(d) PERFECTION. This Agreement together with the filing of UCC
financing statements naming Grantor as "debtor", naming secured party as
"Collateral Agent" and describing the Collateral in the filing offices set
forth on Schedule III annexed hereto and the recording of this Agreement
------------
with the United States Patent and Trademark Office, creates a valid,
perfected and First Priority security interest in the U.S. Collateral
(subject only to Permitted Patent Liens and Permitted Trademark Liens)
securing the payment of the Secured Obligations, and all filings and other
actions necessary to perfect and protect such security interest under the
laws of the United States or any State thereof have been or will promptly
following execution hereof be duly made or taken.
(e) OTHER INFORMATION. All information hereto, herein or hereafter
supplied to Collateral Agent by or on behalf of Grantor with respect to the
Collateral is accurate and complete in all material respects.
6. FURTHER ASSURANCES; NEW TRADEMARKS, REGISTRATIONS AND TRADEMARK RIGHTS; NEW
---------------------------------------------------------------------------
PATENTS AND PATENT APPLICATIONS; CERTAIN INSPECTION RIGHTS.
----------------------------------------------------------
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action that Collateral Agent may reasonably request, in
order to perfect and protect any security interest or conditional assignment
granted or purported to be granted hereby or to enable Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Grantor will: (i)
at the reasonable request of Collateral Agent, mark conspicuously each of its
records pertaining to the Collateral with a legend, in form and substance
reasonably satisfactory to Collateral Agent indicating that such Collateral is
subject to the security interest granted hereby, (ii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as Collateral Agent may reasonably request, in order to
perfect and preserve the security interests granted or purported to be granted
hereby, (iii) use its best efforts to obtain any necessary consents of third
parties to the grant and perfection of a security interest to Collateral Agent
with respect to any Collateral, and (iv) at Collateral Agent's request, appear
in and defend any action or proceeding that would reasonably be expected to
affect Grantor's title to or Collateral Agent's security interest in all or any
part of the Collateral.
(b) Grantor hereby authorizes Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of Grantor to the extent permitted by
applicable law. Grantor agrees that a carbon, photographic or other
reproduction of this Agreement or of a financing statement signed by Grantor
shall be sufficient as a financing statement and may be filed as a financing
statement in any and all jurisdictions.
(c) Grantor will furnish to Collateral Agent from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Collateral Agent may reasonably
request, all in reasonable detail.
XVI-10
<PAGE>
(d) If Grantor shall obtain rights to any new Trademarks, Registrations or
Trademark Rights, or to any patentable inventions, or become entitled to the
benefit of any U.S. patent application or patent or any reissue, division,
continuation, renewal, extension, or continuation-in-part of any Patent or any
improvement in any Patent, the provisions of this Agreement shall automatically
apply thereto. Once per calendar year, Grantor shall notify Collateral Agent in
writing of any Registrations or Patents acquired by Grantor during such calendar
year and of any Registrations or Patents issued or applications for Registration
or Patents made during such calendar year, which notice shall state whether such
Registration constitutes a Material Trademark Property or whether such Patent
constitutes a Material Patent. Concurrently with the filing of an application
for Registration for any Trademark, or an application for any Patent the Grantor
shall execute, deliver and record in all places where this Agreement is recorded
an appropriate Patent and Trademark Security Agreement, substantially in the
form hereof, with appropriate insertions, or an amendment to this Agreement, in
form and substance reasonably satisfactory to Collateral Agent, pursuant to
which Grantor shall grant a security interest to the extent of its interest in
such Registration or Patent as provided herein to Collateral Agent unless so
doing would, in the reasonable judgment of Grantor, after due inquiry, result in
the grant of a Patent or Registration in the name of Collateral Agent, in which
event Grantor shall give written notice to Collateral Agent as soon as
reasonably practicable and the filing shall instead be undertaken as soon as
practicable but in no case later than immediately following the grant of such
Patent or Registration.
(e) No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for
either (i) the grant by Grantor of the security interest and conditional
assignment granted hereby, (ii) the execution, delivery or performance of this
Agreement by grantor, or (iii) the perfection of or the exercise by Collateral
Agent of its rights and remedies hereunder (except as may have been taken by or
at the direction of Grantor).
7. CERTAIN COVENANTS OF GRANTOR.
----------------------------
Grantor shall:
(a) notify Collateral Agent of any change in Grantor's name, identity
or corporate structure within 30 days of such change;
(b) give Collateral Agent 30 days' written notice following any change
in Grantor's chief place of business or chief executive office or the office
where Grantor keeps its records regarding the Collateral;
(c) pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to
the extent the validity thereof is being contested in good faith;
(d) not sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Financing
Agreements;
XVI-11
<PAGE>
(e) except for Permitted Patent Liens and Permitted Trademark Liens and
the security interest and conditional assignment created by this Agreement,
not create or suffer to exist any Lien upon or with respect to any of the
Collateral to secure the indebtedness or other obligations of any Person
other than Liens permitted by the Financing Agreements;
(f) diligently keep reasonable records respecting the Collateral and at
all times keep at least one complete set of its records concerning
substantially all of the Patents and Registrations at its chief executive
office or principal place of business;
(g) take all steps reasonably necessary in Grantor's business judgment
to protect the secrecy of all trade secrets relating to the products and
services sold or delivered under or in connection with the Patents,
Trademarks and Trademark Rights;
(h) use proper statutory notice in connection with its use of each
Material Patent and Material Trademark Property to the extent reasonably
necessary for the protection of such Material Patent or Material Trademark
Property; and
(i) use consistent standards of high quality (which may be consistent
with Grantor's past practices or with Grantor's business judgment) in the
manufacture, sale and delivery of products and services sold or delivered
under or in connection with the Patents, Trademarks, Registrations and
Trademark Rights, including, to the extent applicable, in the operation and
maintenance of its merchandising operations.
8. AMOUNTS PAYABLE IN RESPECT OF THE COLLATERAL.
--------------------------------------------
Except as otherwise provided in this Section 8, Grantor shall continue to
collect, at its own expense, all amounts due or to become due to Grantors in
respect of the Collateral or any portion thereof. In connection with such
collections, each Grantor may take (and, at Collateral Agent's direction, shall
take) such action as Grantor may deem necessary or advisable to enforce
collection of such amounts; provided, however, that Collateral Agent shall have
-------- -------
the right at any time, upon the occurrence and during the continuation of an
Event of Default and upon written notice to Grantor of its intention to do so,
to notify the obligors with respect to any such amounts of the existence of the
security interest and the conditional assignment created hereby, and to direct
such obligors to make payment of all such amounts directly to Collateral Agent,
and, upon such notification and at the expense of Grantor, to enforce collection
of any such amounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Grantor might have done.
After receipt by Grantor of the notice from Collateral Agent referred to in the
proviso to the preceding sentence, (i) all amounts and proceeds (including
checks and other instruments) received by Grantor in respect of amounts due to
Grantor in respect of Collateral or any portion thereof received by the Grantor
shall be forthwith (and in any event within two Business Days) deposited by the
Grantor in the exact form received, duly indorsed by the Grantor to the
Collateral Agent if required, in a Collateral Account maintained under the sole
dominion and control of the Collateral Agent, subject to withdrawal by the
Collateral Agent for the account of Secured Parties only as provided in Section
16, (ii) until so turned over in accordance with the preceding subsection (i),
all such amounts and proceeds received by Grantor shall be received in trust for
the benefit of Collateral Agent hereunder- and shall be segregated from other
funds of Grantor and (iii) Grantor shall not
XVI-12
<PAGE>
adjust, settle or compromise the amount or payment of any such amount or release
wholly or partly any obligor with respect thereto or allow any credit or
discount thereon.
9. PATENT OR TRADEMARK APPLICATIONS AND LITIGATION.
-----------------------------------------------
(a) Grantor shall have the duty diligently, to prosecute any trademark
application relating to any Material Trademark Property that is pending as of
the date of this Agreement, to make federal application on any existing or
future registerable but unregistered Material Trademark Property (whenever it is
commercially reasonable in the reasonable judgement of Grantor to do so), and to
file and prosecute opposition and cancellation proceedings, renew Registrations
and do any and all acts which are necessary or desirable to preserve and
maintain all rights in all Material Trademark Properties; provided, however,
-------- -------
that Grantor shall not be obligated to prosecute or apply for registration of
any Trademark or Registration that Grantor determines in its reasonable business
judgment is no longer necessary or desirable in the conduct of its business.
Any expenses incurred in connection therewith shall be borne solely by Grantor.
Grantor shall not abandon any Material Trademark Property; provided, however,
-------- -------
that Grantor shall not be obligated to maintain any Trademark or Registration
that Grantor determines in its reasonable business judgment is no longer
necessary or desirable in the conduct of its business.
(b) Grantor shall have the duty diligently to prosecute any patent
application relating to any Material Patent that is pending as of the date of
this Agreement and to do any and all acts which are necessary or desirable to
preserve and maintain all rights in all Material Patents; provided, however,
-------- -------
that Grantor shall not be obligated to prosecute or maintain any Patent that
Grantor determines in its reasonable business judgment is no longer necessary or
desirable in the conduct of its business. Any expenses incurred in connection
therewith shall be borne solely by Grantor. Grantor shall not, as to any
patentable invention or Patent that constitutes or could constitute a Material
Patent, abandon any pending patent application or any Patent without the prior
written consent of Collateral Agent; provided, however, that Grantor shall not
-------- -------
be obligated to prosecute or maintain any Patent that Grantor determines in its
reasonable business judgment is no longer necessary or desirable in the conduct
of its business.
(c) Except as provided in Section 9(e), Grantor shall have the right to
commence and prosecute in its own name, as real party in interest, for its own
benefit and at its own expense, such suits, proceedings or other actions for
infringement, unfair competition, dilution or other damage as are in its
reasonable business judgment necessary to protect the Collateral. Collateral
Agent shall provide, at Grantor's expense, all reasonable and necessary
cooperation in connection with any such suit, proceeding or action including,
without limitation, joining as a necessary party.
(d) Grantor shall promptly, following its becoming aware thereof, notify
Collateral Agent of the institution of, or of any adverse determination in, any
proceeding (whether in the United States Patent and Trademark Office or any
federal, state, local or foreign court) described in subsection 9(a), 9(b) or
9(c) or regarding Grantor's claim of ownership in or right to use any of the
Trademarks, Registrations or Trademark Rights, its right to register the same,
or its right to keep and maintain such Registration. Grantor shall provide to
Collateral Agent any information with respect thereto requested by Collateral
Agent.
XVI-13
<PAGE>
(e) Anything contained herein to the contrary notwithstanding, upon the
occurrence and during the continuation of an Event of Default, Collateral Agent
shall have the right (but not the obligation) to bring suit, in the name of
Grantor, Collateral Agent or otherwise, to enforce any Patent, Trademark,
Registration, Trademark Right, Associated Goodwill and any license thereunder,
in which event Grantor shall, at the request of Collateral Agent, do any and all
lawful acts and execute any and all documents required by Collateral Agent in
aid of such enforcement and Grantor shall promptly, upon demand, reimburse and
indemnify Collateral Agent as provided in Section 17 in connection with the
exercise of its rights under this Section 9. To the extent that Collateral
Agent shall elect not to bring suit to enforce any Patent, Trademark,
Registration, Trademark Right Associated Goodwill or any license thereunder as
provided in this Section 9(e), Grantor agrees to use all reasonable measures,
whether by action, suit, proceeding or otherwise, to prevent the infringement of
any of the Patents, Trademarks, Registrations, Trademark Rights or Associated
Goodwill by others and for that purpose agrees to diligently maintain in
accordance with reasonable business practice any action, suit or proceeding
against any Person so infringing necessary to prevent such infringement.
10. NON-DISTURBANCE AGREEMENTS, ETC.
--------------------------------
If and to the extent that Grantor is permitted to license the Collateral,
Collateral Agent shall enter into a non-disturbance agreement or other similar
arrangement, at Grantor's request and expense, with Grantor and any licensee of
any Collateral permitted hereunder in form and substance reasonably satisfactory
to Collateral Agent pursuant to which (a) Collateral Agent shall agree not to
disturb or interfere with such licensee's rights under its license agreement
with Grantor so long as such licensee is not in default thereunder and (b) such
licensee shall acknowledge and agree that the Collateral licensed to it is
subject to the security interest and conditional assignment created in favor of
Collateral Agent and the other terms of this Agreement.
11. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
-------------------------------------------
Grantor hereby irrevocably appoints Collateral Agent as Grantor's attorney-
in-fact, with full authority in the place and stead of Grantor and in the name
of Grantor, Collateral Agent or otherwise, from time to time, upon the
occurrence and during the continuance of an Event of Default, in Collateral
Agent's reasonable discretion to take any action and to execute any instrument
that Collateral Agent may reasonably deem necessary or advisable to accomplish
the purposes of this Agreement, including without limitation:
(a) to endorse Grantor's name on all applications, documents, papers
and instruments necessary for Collateral Agent in the use or maintenance of
the Collateral;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (b) above;
XVI-14
<PAGE>
(d) to file any claims or take any action or institute any proceedings
that Collateral Agent may reasonably deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Collateral Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Financing Agreements) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Collateral Agent
in its sole discretion, any such payments made by Collateral Agent to become
obligations of Grantor to Collateral Agent, due and payable immediately
without demand; and
(f) upon the occurrence and during the continuance of an Event of
Default, (i) to execute and deliver any of the assignments or documents
requested by Collateral Agent pursuant to Section 14(b), (ii) to grant or
issue an exclusive or non-exclusive license to the Collateral or any portion
thereof to any Person, and (iii) otherwise generally to sell, transfer,
pledge, make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though Collateral Agent were the
absolute owner thereof for all purposes, and to do, at Collateral Agent's
option and Grantor's expense, at any time or from time to time, all acts and
things that Collateral Agent deems necessary to protect, preserve or realize
upon the Collateral and Collateral Agent's security interest therein in
order to effect the intent of this Agreement, all as fully and effectively
as Grantor might do.
12. COLLATERAL AGENT MAY PERFORM.
----------------------------
If Grantor fails to perform any agreement contained herein, Collateral Agent
may itself perform, or cause performance of, such agreement, and the reasonable
expenses of Collateral Agent incurred in connection therewith shall be payable
by Grantor under Section 17.
13. STANDARD OF CARE.
----------------
The powers conferred on Collateral Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for monies actually received by
it hereunder, Collateral Agent shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral. Collateral Agent shall be deemed
to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Collateral Agent accords its own property.
XVI-15
<PAGE>
14. REMEDIES.
--------
If any Event of Default shall have occurred and be continuing:
XVI-16
<PAGE>
(a) Collateral Agent may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code as in effect in any relevant jurisdiction
(the "CODE") (whether or not the Code applies to the affected Collateral),
and also may (i) require Grantor to, and Grantor hereby agrees that it will
at its expense and upon request of Collateral Agent forthwith, assemble all
or part of the Collateral as directed by Collateral Agent and make it
available to Collateral Agent at a place to be designated by Collateral
Agent that is reasonably convenient to both parties, (ii) enter onto the
property where any Collateral is located and take possession thereof with or
without judicial process, (iii) prior to the disposition of the Collateral,
store the Collateral or otherwise prepare the Collateral for disposition in
any manner to the extent Collateral Agent deems appropriate, (iv) take
possession of Grantor's premises or place custodians in exclusive control
thereof, remain on such premises and use the same for the purpose of taking
any actions described in the preceding clause (iii) and collecting any
Secured Obligation, (v) exercise any and all rights and remedies of Grantor
under or in connection with the contracts related to the Collateral or
otherwise in respect of the Collateral, including without limitation any and
all rights of Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of, such contracts, and (vi) without
notice except as specified below, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of Collateral Agent's
offices or elsewhere, for cash, on credit or for future delivery, at such
time or times and at such price or prices and upon such other terms as
Collateral Agent may deem commercially reasonable. Collateral Agent or any
Secured Party or Interest Rate Exchanger may be the purchaser of any or all
of the Collateral at any such sale and Collateral Agent, as agent for and
representative of Secured Parties and Interest Rate Exchangers (but not any
Secured Party or Secured Parties or Interest Rate Exchanger or Interest Rate
Exchangers in its or their respective individual capacities unless Requisite
Obligees, (shall otherwise agree in writing), shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price
for all or any portion of the Collateral sold at any such public sale, to
use and apply any of the Secured Obligations as a credit on account of the
purchase price for any Collateral payable by Collateral Agent at such sale.
Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of Grantor, and Grantor hereby waives
(to the extent permitted by applicable law) all rights of redemption, stay
and/or appraisal which it now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted. Grantor
agrees that, to the extent notice of sale shall be required by law, at least
ten days' notice to Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. Collateral Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Collateral Agent
may adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned. Grantor
hereby waives any claims against Collateral Agent arising by reason of the
fact that the price at which any Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a
public sale, even if Collateral Agent accepts the first offer received and
does not offer such Collateral to more than one offeree. If the proceeds of
any sale or other disposition of the Collateral are insufficient to pay all
the Secured Obligations, Grantor shall be liable for the
XVI-17
<PAGE>
deficiency and the reasonable fees of any attorneys employed by Collateral
Agent to collect such deficiency.
(b) Upon written demand from Collateral Agent, Grantor shall execute
and deliver to Collateral Agent an assignment or assignments of the Patents,
Trademarks, Registrations, Trademark Rights and the Associated Goodwill and
such other documents as are requested by Collateral Agent. Grantor agrees
that such an assignment and/or recording shall be applied to reduce the
Secured Obligations outstanding only to the extent that Collateral Agent (or
any Secured Party) receives cash proceeds in respect of the sale of, or
other realization upon, the Collateral.
(c) Within five Business Days after written notice from Collateral
Agent, Grantor shall make available to Collateral Agent, to the extent
within Grantor's power and authority, such personnel in Grantor's employ on
the date of such Event of Default as Collateral Agent may reasonably
designate, by name, title or job responsibility, to permit Grantor to
continue, directly or indirectly, to produce, advertise and sell the
products and services sold or delivered by Grantor under or in connection
with the Patents, Trademarks, Registrations and Trademark Rights, such
persons to be available to perform their prior functions on Collateral
Agent's behalf and to be compensated by Collateral Agent at Grantor's
expense on a per diem, pro-rata basis consistent with the salary and benefit
structure applicable to each as of the date of such Event of Default.
15. PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT.
----------------------------------------------
In addition to the rights of the Collateral Agent and the Secured Parties
specified in Section 8 with respect to payments of Accounts, if an Event of
Default shall occur and be continuing, upon request of the Collateral Agent, all
proceeds received by the Grantor consisting of cash, checks and other near-cash
items shall be held by the Grantor in trust for the Collateral Agent and the
Secured Parties, segregated from other funds of the Grantor, and shall,
forthwith upon receipt by the Grantor, be turned over to the Collateral Agent in
the exact form received by the Grantor (duly indorsed by the Grantor to the
Collateral Agent, if required) and held by the Collateral Agent in a Collateral
Account maintained under the Intercreditor Agreement. All proceeds while held
by the Collateral Agent in a Collateral Account (or by the Grantor in trust for
the Collateral Agent and the Secured Parties) shall continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in Section 16.
16. APPLICATION OF PROCEEDS.
-----------------------
Except as expressly provided elsewhere in this Agreement, all proceeds held
in any Collateral Account and all other proceeds received by Collateral Agent in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral shall be applied as provided in subsection 3 of the
Intercreditor Agreement.
XVI-18
<PAGE>
17. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Collateral Agent, each Secured Party and
each Interest Rate Exchanger from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including without limitation
enforcement of this Agreement), except to the extent such claims, losses or
liabilities result from Collateral Agent's or such Secured Party's or Interest
Rate Exchanger's gross negligence or willful misconduct as finally determined by
a court of competent jurisdiction.
(b) Grantor agrees to pay to Collateral Agent promptly following written
demand the amount of any and all costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Collateral
Agent may incur in connection with (i) the administration of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Collateral Agent hereunder, or (iv) the
failure by Grantor to perform or observe any of the provisions hereof.
(c) The obligations of Grantor in this Section 17 shall survive the
termination of this Agreement and the discharge of Grantor's other obligations
under this Agreement, the Interest Rate Agreements, the Credit Agreement and the
other Loan Documents.
18. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.
-----------------------------------------------
This Agreement shall create a continuing security interest in, and a
conditional assignment of the Collateral effective upon the occurrence and
during the continuance of an Event of Default and shall (a) remain in full force
and effect until the payment in full of the Secured Obligations (other than
inchoate indemnification obligations with respect to claims, losses or
liabilities which have not yet arisen and are not yet due and payable), the
cancellation or termination of the Commitments and the cancellation or
expiration of all outstanding Letters of Credit, (b) be binding upon Grantor and
its respective successors and assigns, and (c) inure, together with the rights
and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 10.1 of
the Credit Agreement and subsection 10.1 of the AXEL Credit Agreement, any
Secured Party may assign or otherwise transfer any Loans held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Secured Parties herein or otherwise. Upon
the payment in full of all Secured Obligations (other than inchoate
indemnification obligations with respect to claims, losses or liabilities which
have not yet arisen and are not yet due and payable), the cancellation or
termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit, the security interest and conditional assignment
granted hereby shall terminate and all rights to the Collateral shall revert to
Grantor. Upon any such termination Collateral Agent will, at Grantor's expense,
execute and deliver to Grantor such documents as Grantor shall reasonably
request to evidence such termination in accordance with the terms of the
Intercreditor Agreement.
XVI-19
<PAGE>
19. COLLATERAL AGENT AS ADMINISTRATIVE AGENT.
----------------------------------------
(a) Collateral Agent has been appointed to act as Collateral Agent hereunder
by CA Administrative Agent on behalf of the Credit Agreement Lenders and AXEL
Administrative Agent on behalf of the AXEL Lenders pursuant to the Intercreditor
Agreement and, by their acceptance of the benefits hereof, Interest Rate
Exchangers, and shall be entitled to the benefits of the Intercreditor
Agreement. Collateral Agent shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely in
accordance with this Agreement and the Intercreditor Agreement; provided that
--------
Collateral Agent shall exercise, or refrain from exercising, any remedies
provided for in Section 14 in accordance with the instructions of (i) Requisite
Lenders or (ii) after payment in full of all Financing Agreement Obligations
under the Financing Agreements and any other Loan Documents, the holders of a
majority of the aggregate notional amount (or, with respect to any Lender
Interest Rate Agreement that has been terminated in accordance with its terms,
the amount then due and payable (exclusive of expenses and similar payments but
including any early termination payments then due) under such Lender Interest
Rate Agreement) under all Lender Interest Rate Agreements (Requisite Lenders or,
if applicable, such holders being referred to herein as "REQUISITE OBLIGEES").
In furtherance of the foregoing provisions of this Section 19(a), each Interest
Rate Exchanger, by its acceptance of the benefits hereof, agrees that it shall
have no right individually to realize upon any of the Collateral hereunder, it
being understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Collateral Agent for the benefit
of Secured Parties and Interest Rate Exchangers in accordance with the terms of
this Section 19(a).
(b) Collateral Agent shall at all times be the same Person that is appointed
Collateral Agent under the Intercreditor Agreement. The Collateral Agent may
resign and a successor Collateral Agent may be appointed in the manner provided
in the Intercreditor Agreement. Upon the acceptance of any appointment as
Collateral Agent by a successor Collateral Agent, that successor Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Collateral Agent under this
Agreement, and the retiring or removed Collateral Agent under this Agreement
shall promptly (i) transfer to such successor Collateral Agent all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Collateral Agent under this
Agreement, and (ii) execute and deliver to such successor Collateral Agent such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Collateral Agent of the security interests created hereunder, whereupon such
retiring or removed Collateral Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Collateral
Agent's resignation or removal hereunder as Collateral Agent, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Collateral Agent hereunder.
XVI-20
<PAGE>
20. AMENDMENTS; ETC.
---------------
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by Grantor therefrom, shall in any
event be effective unless the same shall be in writing and signed by Collateral
Agent and, in the case of any such amendment or modification, by Grantor. Any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
21. NOTICES.
-------
Any notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Collateral Agent or Grantor shall not be
--------
effective until received. For the purposes hereof, the address of each party
hereto shall be provided in subsection 10.8 of the Credit Agreement or
subsection 10.8 of the AXEL Credit Agreement, as applicable, or as set forth
under such party's name on the signature pages hereof or such other address as
shall be designated by such party in a written notice delivered to the other
parties hereto.
22. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Collateral Agent in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
23. SEVERABILITY.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
24. HEADINGS.
--------
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
XVI-21
<PAGE>
25. GOVERNING LAW; TERMS.
--------------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-
1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT
THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the
Credit Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code
in the State of New York are used herein as therein defined.
26. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
[Remainder of page intentionally left blank]
XVI-22
<PAGE>
IN WITNESS WHEREOF, Grantor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
SEALY MATTRESS COMPANY
By: ________________________________
Name: __________________________
Title:__________________________
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Collateral Agent
By: ________________________________
Name: __________________________
Title:__________________________
XVI-23
<PAGE>
SCHEDULE I
TO
COMPANY PATENT AND TRADEMARK SECURITY AGREEMENT
REGISTERED UNITED STATES TRADEMARK REGISTRATION REGISTRATION
OWNER DESCRIPTION NUMBER DATE
------------- ----------------------- ------------ ------------
XVI-24
<PAGE>
SCHEDULE II
TO
COMPANY PATENT AND SECURITY AGREEMENT
PATENTS ISSUED
--------------
Patent No. Issue Date Invention
---------- ---------- ---------
PATENTS PENDING
---------------
Applicant's Date Application
Name Filed No. Invention Inventor
----------- ----- ----------- --------- --------
XVI-25
<PAGE>
SCHEDULE III
TO
COMPANY PATENT AND TRADEMARK SECURITY AGREEMENT
FILING OFFICES
--------------
XVI-26
<PAGE>
EXHIBIT XVII
[FORM OF SUBSIDIARY GUARANTY]
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY is entered into as of December 18, 1997 by
THE UNDERSIGNED (each a "GUARANTOR" and collectively, "GUARANTORS") in favor
of and for the benefit of MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN
GUARANTY"), as collateral agent for and representative of (in such capacity
herein called "GUARANTIED PARTY") the Secured Parties (as hereinafter defined)
and any Interest Rate Exchangers (as hereinafter defined), and, subject to
subsection 3.12, for the benefit of the other Beneficiaries (as hereinafter
defined).
RECITALS
A. Sealy Mattress Company, an Ohio corporation ("COMPANY"), Sealy
Corporation, a Delaware corporation ("HOLDINGS"), the financial institutions
from time to time parties thereto (the "CREDIT AGREEMENT LENDERS"), Goldman
Sachs Credit Partners L.P. ("GSCP"), as arranger and syndication agent (in
such capacity, "CA SYNDICATION AGENT"), Morgan Guaranty, as administrative
agent (in such capacity, "CA ADMINISTRATIVE AGENT"), and Bankers Trust Company
("BTCO."), as documentation agent (in such capacity, "CA DOCUMENTATION
AGENT") have entered into a Credit Agreement dated as of December 18, 1997
(said Credit Agreement, as it may hereafter be amended, restated, supplemented
or otherwise modified from time to time, being the ("CREDIT AGREEMENT")
pursuant to which Credit Agreement Lenders have made certain commitments,
subject to the terms and conditions set forth in the Credit Agreement, to extend
certain credit facilities to Company.
B. Company, Holdings, the financial institutions from time to time
parties thereto(the "AXEL LENDERS"), GSCP, as arranger and syndication agent
(in such capacity, "AXEL SYNDICATION AGENT"), Morgan Guaranty, as
administrative agent (in such capacity, "AXEL ADMINISTRATIVE AGENT"), and
BTCo., as documentation agent (in such capacity, "AXEL DOCUMENTATION AGENT")
have entered into an AXEL Credit Agreement dated as of December 18, 1997 (said
AXEL Credit Agreement, as it may hereafter be amended, restated, supplemented or
otherwise modified from time to time, being the "AXEL CREDIT AGREEMENT"; the
Credit Agreement Lenders, the CA Syndication Agent, the CA Administrative Agent,
CA Documentation Agent, the AXEL Lenders, the AXEL Syndication Agent, the AXEL
Administrative Agent, and the AXEL Documentation Agent each being a "SECURED
PARTY" and collectively the "SECURED PARTIES") pursuant to which AXEL Lenders
have made certain commitments, subject to the terms and conditions set forth in
the AXEL Credit Agreement, to extend certain credit facilities to Company.
C. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"LENDER INTEREST RATE AGREEMENTS") with or one or more Credit Agreement
Lenders or their Affiliates or AXEL Lenders
XVII-1
<PAGE>
or their Affiliates (in such capacity, collectively, "INTEREST RATE EXCHANGERS")
in accordance with the terms of the Financing Agreements (as hereinafter
defined), and it is desired that the obligations of Company under the Lender
Interest Rate Agreements, including without limitation the obligation of Company
to make payments thereunder in the event of early termination thereof (all such
obligations being the "INTEREST RATE OBLIGATIONS"), together with all
obligations of Company under the Financing Agreements and any other Loan
Documents (as hereinafter defined), be guarantied hereunder.
D. A portion of the proceeds of the Loans (as hereinafter defined)
may be advanced to Guarantors and thus the Guarantied Obligations (as
hereinafter defined) are being incurred for and will inure to the benefit of
Guarantors (which benefits are hereby acknowledged).
E. It is a condition precedent to the making of the initial Loans
under the Financing Agreements that Company's obligations thereunder be
guarantied by Guarantors.
F. Guarantors are willing irrevocably and unconditionally to
guaranty such obligations of Company.
NOW, THEREFORE, in consideration of the premises and to induce (i) the
CA Administrative Agent, the CA Syndication Agent and the Credit Agreement
Lenders to enter into the Credit Agreement, (ii) the Credit Agreement Lenders to
make their respective loans to, and issue Letters of Credit for the account of,
the Company, (iii) the AXEL Administrative Agent, the AXEL Syndication Agent and
the AXEL Lenders to enter into the AXEL Loan Agreement and (iv) the AXEL Lenders
to make their respective loans to the Company, and (v) to induce Interest Rate
Exchangers to enter into the Lender Interest Rate Agreements and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Guarantors hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
---------------------
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to such terms in the
Credit Agreement;
(b) The following terms shall have the following meanings:
"ACCELERATION" shall mean any of the Credit Agreement Obligations or
the AXEL Credit Agreement Obligations have been declared, or have become,
immediately due and payable, or the commitments to extend credit of the Credit
Agreement Lenders or the AXEL Lenders shall have been terminated under Section 8
of the Credit Agreement or Section 7 of the AXEL Credit Agreement, respectively.
XVII-2
<PAGE>
"ADDITIONAL GUARANTOR" has the meaning assigned to that term ins
subsection 3.12.
"ADJUSTED MAXIMUM AMOUNT" has the meaning assigned to that term ins
subsection 2.2.
"AGGREGATE PAYMENTS" has the meaning assigned to that term ins
subsection 2.2.
"AXEL COMMITMENTS" shall mean the "Commitments" as defined in the
AXEL Credit Agreement.
"AXEL CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"AXEL OBLIGATIONS" shall mean the "Obligations" as defined in the
AXEL Credit Agreement.
"BENEFICIARIES" means Guarantied Party, Secured Parties and any
Interest Rate Exchangers.
"COLLATERAL ACCOUNTS" shall mean "Collateral Accounts" as defined
in the Intercreditor Agreement.
"COMMITMENTS" means the Credit Agreement Commitments and the AXEL
Commitments.
"CONTRIBUTING GUARANTORS" has the meaning assigned to that term ins
subsection 2.2.
"CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"CREDIT AGREEMENT COMMITMENTS" shall mean the "Commitments" as
defined in the Credit Agreement.
"CREDIT AGREEMENT OBLIGATIONS" shall mean the "Obligations" as
defined in the Credit Agreement.
"EVENT OF DEFAULT" means any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which Company is
the Defaulting Party and which results in the designation of an Early
Termination Date (as such terms are defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate
Agreement.
XVII-3
<PAGE>
"FAIR SHARE" has the meaning assigned to that term ins subsection
2.2.
"FINANCING AGREEMENT" means either the Credit Agreement or the AXEL
Credit Agreement, and "Financing Agreements" means the Credit Agreement and
the AXEL Credit Agreement, collectively.
"FINANCING AGREEMENT OBLIGATIONS" means Credit Agreement Obligations
and AXEL Obligations.
"FRAUDULENT TRANSFER LAWS" has the meaning assigned to that term ins
subsection 2.2.
"FAIR SHARE SHORTFALL" has the meaning assigned to that term ins
subsection 2.2.
"FUNDING GUARANTOR" has the meaning assigned to that term ins
subsection 2.2.
"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Subsidiary Guaranty dated as of December 18,
1997, as it may be amended, supplemented or otherwise modified from time to
time.
"GRANTOR" has the meaning assigned to that term in the introduction
of this Agreement.
"HOLDINGS" has the meaning assigned to that term in the recitals to
this Agreement.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated
as of December 18, 1997, by and among CA Administrative Agent, AXEL
Administrative Agent and Collateral Agent.
"INTEREST RATE EXCHANGERS" has the meaning assigned to that term in
the recitals to this Agreement.
"LENDER INTEREST RATE AGREEMENT" has the meaning assigned to that
term in the recitals to this Agreement.
"LOAN" means any "Loan" as defined in any Financing Agreement, and
"LOANS" means all such Loans collectively.
XVII-4
<PAGE>
"LOAN DOCUMENT" means any "Loan Document" as defined in any
Financing Agreement, and "LOAN DOCUMENTS" means all such Loan Documents
collectively.
"POTENTIAL EVENT OF DEFAULT" means any "Potential Event of
Default" as defined in any Financing Agreement.
"REQUISITE AXEL LENDERS" means "Requisite Lenders" as defined in
the AXEL Credit Agreement.
"REQUISITE CREDIT AGREEMENT LENDERS" means "Requisite Lenders" as
defined in the Credit Agreement.
"REQUISITE LENDERS" means (A) unless an Acceleration shall have
occurred and be continuing, the Requisite Credit Agreement Lenders and the
Requisite AXEL Lenders, and (B) if an Acceleration has occurred and is
continuing, Secured Parties holding more than 50% of the Financing Agreement
Obligations.
"REQUISITE OBLIGEES" has the meaning assigned to that term in
subsection 3.14 of this Agreement.
"SECURED PARTIES" has the meaning assigned to that term in the
recitals to this Agreement.
"PAYMENT IN FULL", "PAID IN FULL" or any similar term means
payment in full of the Guarantied Obligations (other than inchoate
indemnification obligations with respect to claims, losses or liabilities which
have not yet arisen and are not yet due and payable), including without
limitation all principal, interest, costs, fees and expenses (including, without
limitation, reasonable legal fees and expenses) of Beneficiaries as required
under the Loan Documents and the Lender Interest Rate Agreements.
1.2 INTERPRETATION. References to "Sections" and "subsections"
--------------
shall be to Sections and subsections, respectively, of this Guaranty unless
otherwise specifically provided.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Subject to the
--------------------------------------
provisions of subsection 2.2(a), Guarantors jointly and severally hereby
irrevocably and unconditionally guaranty, as primary obligors and not merely as
sureties, the due and punctual payment in full of all Guarantied Obligations
when the same shall become due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)). The term "GUARANTIED
OBLIGATIONS" is used herein in its most comprehensive sense and includes:
XVII-5
<PAGE>
(a) any and all Financing Agreement Obligations of Company and any and
all Interest Rate Obligations, in each case now or hereafter made, incurred or
created, whether absolute or contingent, liquidated or unliquidated, whether due
or not due, and however arising under or in connection with any Financing
Agreement and any other Loan Documents and the Lender Interest Rate Agreements,
including those arising under successive borrowing transactions under any
Financing Agreement which shall either continue the Financing Agreement
Obligations of Company or from time to time renew them after they have been
satisfied and including interest which, but for the filing of a petition in
bankruptcy with respect to Company, would have accrued on any Guarantied
Obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding; and
(b) those expenses set forth in subsection 2.9 hereof.
2.2 LIMITATION ON AMOUNT GUARANTIED; CONTRIBUTION BY GUARANTORS.
-----------------------------------------------------------
(a) Anything contained in this Guaranty to the contrary notwithstanding, if any
Fraudulent Transfer Law (as hereinafter defined) is determined by a court of
competent jurisdiction to be applicable to the obligations of any Guarantor
under this Guaranty, such obligations of such Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that would not
render its obligations hereunder subject to avoidance as a fraudulent transfer
or conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "FRAUDULENT
TRANSFER LAWS"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (x) in respect of intercompany indebtedness to Company or other
affiliates of Company to the extent that such indebtedness would be discharged
in an amount equal to the amount paid by such Guarantor hereunder and (y) under
any guaranty of Subordinated Indebtedness which guaranty contains a limitation
as to maximum amount similar to that set forth in this subsection 2.2(a),
pursuant to which the liability of such Guarantor hereunder is included in the
liabilities taken into account in determining such maximum amount) and after
giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
reimbursement, indemnification or contribution of such Guarantor pursuant to
applicable law or pursuant to the terms of any agreement (including without
limitation any such right of contribution under subsection 2.2(b) or under the
Holdings Guaranty as contemplated by subsection 2.2(b)).
(b) Guarantors under this Guaranty, and Holdings under the Holdings
Guaranty, together desire to allocate among themselves (collectively, the
"CONTRIBUTING GUARANTORS"), in a fair and equitable manner, their obligations
arising under this Guaranty and the Holdings Guaranty. Accordingly, in the
event any payment or distribution is made on any date by any Guarantor under
this Guaranty or Holdings under the Holdings Guaranty (a "FUNDING GUARANTOR")
that exceeds its Fair Share (as defined below) as of such date, that Funding
Guarantor shall be entitled to a contribution from each of the other
Contributing Guarantors in the amount of such other Contributing Guarantor's
Fair Share Shortfall (as defined below) as of such date, with the result that
all such contributions will cause each Contributing Guarantor's Aggregate
Payments (as defined below) to
XVII-6
<PAGE>
equal its Fair Share as of such date. "FAIR SHARE" means, with respect to a
Contributing Guarantor as of any date of determination, an amount equal to (i)
the ratio of (x) the Adjusted Maximum Amount (as defined below) with respect to
such Contributing Guarantor to (y) the aggregate of the Adjusted Maximum Amounts
with respect to all Contributing Guarantors multiplied by (ii) the aggregate
---------- --
amount paid or distributed on or before such date by all Funding Guarantors
under this Guaranty and the Holdings Guaranty in respect of the obligations
guarantied. "FAIR SHARE SHORTFALL" means, with respect to a Contributing
Guarantor as of any date of determination, the excess, if any, of the Fair Share
of such Contributing Guarantor over the Aggregate Payments of such Contributing
Guarantor. "ADJUSTED MAXIMUM AMOUNT" means, with respect to a Contributing
Guarantor as of any date of determination, the maximum aggregate amount of the
obligations of such Contributing Guarantor under this Guaranty or the Holdings
Guaranty, as applicable, determined as of such date, in the case of any
Guarantor, in accordance with subsection 2.2(a); provided that, solely for
--------
purposes of calculating the "Adjusted Maximum Amount" with respect to any
Contributing Guarantor for purposes of this subsection 2.2(b), any assets or
liabilities of such Contributing Guarantor arising by virtue of any rights to
subrogation, reimbursement or indemnification or any rights to or obligations of
contribution hereunder or under subsection 2.2 of the Holdings Guaranty shall
not be considered as assets or liabilities of such Contributing Guarantor.
"AGGREGATE PAYMENTS" means, with respect to a Contributing Guarantor as of any
date of determination, an amount equal to (i) the aggregate amount of all
payments and distributions made on or before such date by such Contributing
Guarantor in respect of this Guaranty or the Holdings Guaranty, as applicable
(including, without limitation, in respect of this subsection 2.2(b) or
subsection 2.2 of the Holdings Guaranty) minus (ii) the aggregate amount of all
-----
payments received on or before such date by such Contributing Guarantor from the
other Contributing Guarantors as contributions under this subsection 2.2(b) or
subsection 2.2 of the Holdings Guaranty. The amounts payable as contributions
hereunder and under subsection 2.2 of the Holdings Guaranty shall be determined
as of the date on which the related payment or distribution is made by the
applicable Funding Guarantor. The allocation among Contributing Guarantors of
their obligations as set forth in this subsection 2.2(b) and subsection 2.2 of
the Holdings Guaranty shall not be construed in any way to limit the liability
of any Contributing Guarantor hereunder or under the Holdings Guaranty. Holdings
is a third party beneficiary to the contribution agreement set forth in this
subsection 2.2(b).
2.3 PAYMENT BY GUARANTORS; APPLICATION OF PAYMENTS. Subject to the
----------------------------------------------
provisions of subsection 2.2(a), Guarantors hereby jointly and severally agree,
in furtherance of the foregoing and not in limitation of any other right which
any Beneficiary may have at law or in equity against any Guarantor by virtue
hereof, that upon the failure of Company to pay any of the Guarantied
Obligations when and as the same shall become due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)),
Guarantors will promptly following written demand pay, or cause to be paid, in
cash, to Guarantied Party for the ratable benefit of Beneficiaries, an amount
equal to the sum of the unpaid principal amount of all Guarantied Obligations
then due as aforesaid, accrued and unpaid interest on such Guarantied
Obligations (including, without limitation, interest which, but for the filing
of a petition in bankruptcy with respect to Company, would have accrued on such
Guarantied Obligations, whether or not a claim is allowed against Company for
such interest in the related bankruptcy proceeding) and all other Guarantied
Obligations then owed to Beneficiaries as
XVII-7
<PAGE>
aforesaid. All such payments shall be applied promptly from time to time by
Guarantied Party as provided in subsection 3 of the Intercreditor Agreement.
2.4 LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that its
--------------------------------
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guarantied Obligations. In furtherance of the foregoing and without limiting
the generality thereof, each Guarantor agrees as follows:
A. This Guaranty is a guaranty of payment when due and not of
collectibility.
B. The obligations of each Guarantor hereunder are independent of
the obligations of Company under the Loan Documents or the Lender Interest Rate
Agreements and the obligations of any other guarantor (including any other
Guarantor) of the obligations of Company under the Loan Documents or the Lender
Interest Rate Agreements, and a separate action or actions may be brought and
prosecuted against such Guarantor whether or not any action is brought against
Company or any of such other guarantors and whether or not Company is joined in
any such action or actions.
C. Payment by any Guarantor of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge any
Guarantor's liability for any portion of the Guarantied Obligations which has
not been paid. Without limiting the generality of the foregoing, if Guarantied
Party is awarded a judgment in any suit brought to enforce any Guarantor's
covenant to pay a portion of the Guarantied Obligations, such judgment shall not
be deemed to release such Guarantor from its covenant to pay the portion of the
Guarantied Obligations that is not the subject of such suit, and such judgment
shall not, except to the extent satisfied by such Guarantor, limit, affect,
modify or abridge any other Guarantor's liability hereunder in respect of the
Guarantied Obligations.
D. Any Beneficiary, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or enforceability of
this Guaranty or giving rise to any reduction, limitation, impairment, discharge
or termination of any Guarantor's liability hereunder, from time to time may (i)
renew, extend, accelerate, increase the rate of interest on, or otherwise change
the time, place, manner or terms of payment of the Guarantied Obligations, (ii)
settle, compromise, release or discharge, or accept or refuse any offer of
performance with respect to, or substitutions for, the Guarantied Obligations or
any agreement relating thereto and/or subordinate the payment of the same to the
payment of any other obligations; (iii) request and accept other guaranties of
the Guarantied Obligations and take and hold security for the payment of this
Guaranty or the Guarantied Obligations; (iv) release, surrender, exchange,
substitute, compromise, settle, rescind, waive, alter, subordinate or modify,
with or without consideration, any security for payment of the Guarantied
Obligations, any other guaranties of the Guarantied
XVII-8
<PAGE>
Obligations, or any other obligation of any Person (including any other
Guarantor) with respect to the Guarantied Obligations; (v) enforce and apply any
security now or hereafter held by or for the benefit of such Beneficiary in
respect of this Guaranty or the Guarantied Obligations and direct the order or
manner of sale thereof, or exercise any other right or remedy that such
Beneficiary may have against any such security, in each case as such Beneficiary
in its discretion may determine consistent with the applicable Financing
Agreement or the applicable Lender Interest Rate Agreement and any applicable
security agreement, including foreclosure on any such security pursuant to one
or more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable, and even though such action operates to impair
or extinguish any right of reimbursement or subrogation or other right or remedy
of any Guarantor against Company or any security for the Guarantied Obligations;
and (vi) exercise any other rights available to it under the Loan Documents or
the Lender Interest Rate Agreements.
E. This Guaranty and the obligations of Guarantors hereunder
shall be valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
payment in full of the Guarantied Obligations), including without limitation the
occurrence of any of the following, whether or not any Guarantor shall have had
notice or knowledge of any of them: (i) any failure or omission to assert or
enforce or agreement or election not to assert or enforce, or the stay or
enjoining, by order of court, by operation of law or otherwise, of the exercise
or enforcement of, any claim or demand or any right, power or remedy (whether
arising under the Loan Documents or the Lender Interest Rate Agreements, at law,
in equity or otherwise) with respect to the Guarantied Obligations or any
agreement relating thereto, or with respect to any other guaranty of or security
for the payment of the Guarantied Obligations; (ii) any rescission, waiver,
amendment or modification of, or any consent to departure from, any of the terms
or provisions (including without limitation provisions relating to events of
default) of any Financing Agreement, any of the other Loan Documents, any of the
Lender Interest Rate Agreements or any agreement or instrument executed pursuant
thereto, or of any other guaranty or security for the Guarantied Obligations, in
each case whether or not in accordance with the terms of such Financing
Agreement or such Loan Document, such Lender Interest Rate Agreement or any
agreement relating to such other guaranty or security; (iii) the application of
payments received from any source (other than payments received pursuant to the
other Loan Documents or any of the Lender Interest Rate Agreements or from the
proceeds of any security for the Guarantied Obligations, except to the extent
such security also serves as collateral for indebtedness other than the
Guarantied Obligations) to the payment of indebtedness other than the Guarantied
Obligations, even though any Beneficiary might have elected to apply such
payment to any part or all of the Guarantied Obligations; (iv) any Beneficiary's
consent to the change, reorganization or termination of the corporate structure
or existence of Holdings or any of its Subsidiaries and to any corresponding
restructuring of the Guarantied Obligations; (v) any failure to perfect or
continue perfection of a security interest in any collateral which secures any
of the Guarantied Obligations; (vi) any defenses, set-offs or
XVII-9
<PAGE>
counterclaims which Company may allege or assert against any Beneficiary in
respect of the Guarantied Obligations, including but not limited to failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury; and (vii) any other act or thing
or omission, or delay to do any other act or thing, which may or might in any
manner or to any extent vary the risk of any Guarantor as an obligor in respect
of the Guarantied Obligations.
2.5 WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the
---------------------
benefit of Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment
or performance by such Guarantor, to (i) proceed against Company, any other
guarantor (including any other Guarantor) of the Guarantied Obligations or any
other Person, (ii) proceed against or exhaust any security held from Company,
any such other guarantor or any other Person, (iii) proceed against or have
resort to any balance of any deposit account or credit on the books of any
Beneficiary in favor of Company or any other Person, or (iv) pursue any other
remedy in the power of any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of authority
or any disability or other defense of Company including, without limitation, any
defense based on or arising out of the lack of validity or the unenforceability
of the Guarantied Obligations or any agreement or instrument relating thereto or
by reason of the cessation of the liability of Company from any cause other than
payment in full of the Guarantied Obligations;
(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Guarantied Obligations, except behavior which amounts
to bad faith, gross negligence or willful misconduct;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty, (ii) the
benefit of any statute of limitations affecting such Guarantor's liability
hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments
and counterclaims, and (iv) promptness, diligence and any requirement that any
Beneficiary protect, secure, perfect or insure any security interest or lien or
any property subject thereto; and
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including acceptance
of this Guaranty, notices of default under the Financing Agreements, the Lender
Interest Rate Agreements or any agreement or instrument related thereto, notices
of any
XVII-10
<PAGE>
renewal, extension or modification of the Guarantied Obligations or any
agreement related thereto, notices of any extension of credit to Company and
notices of any of the matters referred to in subsection 2.4 and any right to
consent to any thereof.
2.6 CERTAIN CALIFORNIA LAW WAIVERS. As used in this subsection 2.6,
------------------------------
any reference to "the principal" includes Company, and any reference to "the
creditor" includes each Beneficiary. In accordance with Section 2856 of the
California Civil Code:
(a) each Guarantor agrees (i) to waive any and all rights of
subrogation and reimbursement against Company or against any collateral or
security granted by Company for any of the Guarantied Obligations and (ii) to
withhold the exercise of any and all rights of contribution against any other
guarantor of any of the Guarantied Obligations and against any collateral or
security granted by any such other guarantor for any of the Guarantied
Obligations until the Guarantied Obligations shall have been paid in full and
the Commitments shall have terminated and all Letters of Credit shall have
expired or been cancelled, all as more fully set forth in subsection 2.7;
(b) each Guarantor waives any and all other rights and defenses
available to such Guarantor by reason of Sections 2787 to 2855, inclusive, 2899
and 3433 of the California Civil Code, including without limitation any and all
rights or defenses such Guarantor may have by reason of protection afforded to
the principal with respect to any of the Guarantied Obligations, or to any other
guarantor (including any other Guarantor) of any of the Guarantied Obligations
with respect to any of such guarantor's obligations under its guaranty, in
either case pursuant to the antideficiency or other laws of the State of
California limiting or discharging the principal's indebtedness or such
guarantor's obligations, including without limitation Section 580a, 580b, 580d,
or 726 of the California Code of Civil Procedure; and
(c) each Guarantor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for any Guarantied
Obligation, has destroyed such Guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the Code
of Civil Procedure or otherwise; and even though that election of remedies by
the creditor, such as nonjudicial foreclosure with respect to security for an
obligation of any other guarantor (including any other Guarantor) of any of the
Guarantied Obligations, has destroyed such Guarantor's rights of contribution
against such other guarantor.
No other provision of this Guaranty shall be construed as limiting the
generality of any of the covenants and waivers set forth in this subsection 2.6.
In accordance with subsection 3.6 below, this Guaranty shall be governed by, and
shall be construed and enforced in accordance with, the internal laws of the
State of New York, without regard to conflicts of laws principles. This
subsection 2.6 is included solely out of an abundance of caution, and shall not
be construed to mean that any of the above-referenced provisions of California
law are in any way applicable to this Guaranty or to any of the Guarantied
Obligations.
XVII-11
<PAGE>
2.7 GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Each
----------------------------------------------------
Guarantor hereby waives any claim, right or remedy, direct or indirect, that
such Guarantor now has or may hereafter have against Company or any of its
assets in connection with this Guaranty or the performance by such Guarantor of
its obligations hereunder, in each case whether such claim, right or remedy
arises in equity, under contract, by statute (including without limitation under
California Civil Code Section 2847, 2848 or 2849), under common law or otherwise
and including without limitation (a) any right of subrogation, reimbursement or
indemnification that such Guarantor now has or may hereafter have against
Company with respect to the Guarantied Obligations, (b) any right to enforce, or
to participate in, any claim, right or remedy that any Beneficiary now has or
may hereafter have against Company, and (c) any benefit of, and any right to
participate in, any collateral or security now or hereafter held by any
Beneficiary. In addition, until the Guarantied Obligations shall have been
indefeasibly paid in full and the Commitments shall have terminated and all
Letters of Credit shall have expired or been cancelled, each Guarantor shall
withhold exercise of any right of contribution such Guarantor may have against
any other guarantor (including any other Guarantor) of the Guarantied
Obligations (including without limitation any such right of contribution under
California Civil Code Section 2848 or under subsection 2.2(b) or under the
Holdings Guaranty as contemplated by subsection 2.2(b). Each Guarantor further
agrees that, to the extent the waiver or agreement to withhold the exercise of
its rights of subrogation, reimbursement, indemnification and contribution as
set forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or
indemnification such Guarantor may have against Company or against any
collateral or security, and any rights of contribution such Guarantor may have
against any such other guarantor, shall be junior and subordinate to any rights
any Beneficiary may have against Company, to all right, title and interest any
Beneficiary may have in any such collateral or security, and to any right any
Beneficiary may have against such other guarantor. If any amount shall be paid
to any Guarantor on account of any such subrogation, reimbursement,
indemnification or contribution rights at any time when all Guarantied
Obligations shall not have been paid in full, such amount shall be held in trust
for Guarantied Party on behalf of Beneficiaries and shall forthwith be paid over
to Guarantied Party for the benefit of Beneficiaries to be credited and applied
against the Guarantied Obligations, whether matured or unmatured, in accordance
with the terms hereof.
2.8 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of Company
----------------------------------
now or hereafter held by any Guarantor is hereby subordinated in right of
payment to the Guarantied Obligations, and any such indebtedness of Company to
such Guarantor collected or received by such Guarantor after an Event of Default
has occurred and is continuing shall be held in trust for Guarantied Party on
behalf of Beneficiaries and shall forthwith be paid over to Guarantied Party for
the benefit of Beneficiaries to be credited and applied against the Guarantied
Obligations but without affecting, impairing or limiting in any manner the
liability of such Guarantor under any other provision of this Guaranty.
2.9 EXPENSES. Guarantors jointly and severally agree to pay, or
--------
cause to be paid, promptly upon written demand, and to save Beneficiaries
harmless against liability for, any and all reasonable costs and reasonable
expenses (including reasonable fees and reasonable disbursements of counsel and
allocated costs of internal counsel) incurred or expended by any Beneficiary in
connection with the enforcement of or preservation of any rights under this
Guaranty.
XVII-12
<PAGE>
2.10 CONTINUING GUARANTY. This Guaranty is a continuing guaranty and
-------------------
shall remain in effect until all of the Guarantied Obligations shall have been
paid in full and the Commitments shall have terminated and all Letters of Credit
shall have expired or been cancelled. Each Guarantor hereby irrevocably waives
any right (including without limitation any such right arising under California
Civil Code Section 2815) to revoke this Guaranty as to future transactions
giving rise to any Guarantied Obligations.
2.11 AUTHORITY OF GUARANTORS OR COMPANY. It is not necessary for any
----------------------------------
Beneficiary to inquire into the capacity or powers of any Guarantor or Company
or the officers, directors or any agents acting or purporting to act on behalf
of any of them.
2.12 FINANCIAL CONDITION OF COMPANY. Any Loans may be granted to
------------------------------
Company or continued from time to time, and any Lender Interest Rate Agreements
may be entered into from time to time, in each case without notice to or
authorization from any Guarantor regardless of the financial or other condition
of Company at the time of any such grant or continuation or at the time such
Lender Interest Rate Agreement is entered into, as the case may be. No
Beneficiary shall have any obligation to disclose or discuss with any Guarantor
its assessment, or any Guarantor's assessment, of the financial condition of
Company. Each Guarantor has adequate means to obtain information from Company
on a continuing basis concerning the financial condition of Company and its
ability to perform its obligations under the Loan Documents and the Lender
Interest Rate Agreements, and each Guarantor assumes the responsibility for
being and keeping informed of the financial condition of Company and of all
circumstances bearing upon the risk of nonpayment of the Guarantied Obligations.
Each Guarantor hereby waives and relinquishes any duty on the part of any
Beneficiary to disclose any matter, fact or thing relating to the business,
operations or conditions of Company now known or hereafter known by any
Beneficiary.
2.13 RIGHTS CUMULATIVE. The rights, powers and remedies given to
-----------------
Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by virtue
of any statute or rule of law or in any of the other Loan Documents, any of the
Lender Interest Rate Agreements or any agreement between any Guarantor and any
Beneficiary or Beneficiaries or between Company and any Beneficiary or
Beneficiaries. Any forbearance or failure to exercise, and any delay by any
Beneficiary in exercising, any right, power or remedy hereunder shall not impair
any such right, power or remedy or be construed to be a waiver thereof, nor
shall it preclude the further exercise of any such right, power or remedy.
2.14 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY.
-------------------------------------------------------------
(a) So long as any Guarantied Obligations remain outstanding, no Guarantor
shall, without the prior written consent of Guarantied Party acting pursuant to
the instructions of Requisite Obligees (as defined in subsection 3.12), commence
or join with any other Person in commencing any bankruptcy, reorganization or
insolvency proceedings against Company. The obligations of Guarantors under
this Guaranty shall not be reduced, limited, impaired, discharged, deferred,
suspended or terminated by any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Company or by any defense which Company may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such proceeding.
XVII-13
<PAGE>
(b) Each Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guarantied Obligations ceases to accrue by operation of law by reason of
the commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantors and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantors pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Company of any
portion of such Guarantied Obligations. Guarantors will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Guarantied Party, or allow the claim of
Guarantied Party in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied
Obligations are paid by Company, the obligations of Guarantors hereunder shall
continue and remain in full force and effect or be reinstated, as the case may
be, in the event that all or any part of such payment(s) are rescinded or
recovered directly or indirectly from any Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guarantied Obligations for all purposes under this
Guaranty until indefeasibly paid in full.
2.15 SET OFF. In addition to any other rights any Beneficiary may
-------
have under law or in equity, if any amount shall at any time be due and owing by
any Guarantor to any Beneficiary under this Guaranty, such Beneficiary is
authorized at any time or from time to time, without notice (any such notice
being hereby expressly waived), to set off and to appropriate and to apply any
and all deposits (general or special, including but not limited to indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness of such Beneficiary owing to such Guarantor and any other
property of such Guarantor held by any Beneficiary to or for the credit or the
account of such Guarantor against and on account of the Guarantied Obligations
and liabilities of such Guarantor to any Beneficiary under this Guaranty.
2.16 DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR. If all of the
--------------------------------------------
stock of any Guarantor or any of its successors in interest under this Guaranty
shall be sold or otherwise disposed of (including by merger or consolidation) in
an Asset Sale not prohibited by subsection 7.7 of the Credit Agreement or
otherwise consented to by Requisite Lenders, the Guaranty of such Guarantor or
such successor in interest, as the case may be, hereunder shall automatically be
discharged and released without any further action by any Beneficiary or any
other Person effective as of the time of such Asset Sale; provided that, as a
--------
condition precedent to such discharge and release, Guarantied Party shall have
received evidence satisfactory to it that arrangements satisfactory to it have
been made for disposition of the applicable Net Asset Sale Proceeds in
accordance with the requirements of the Credit Agreement.
SECTION 3. MISCELLANEOUS
3.1 SURVIVAL OF WARRANTIES. All agreements, representations and
----------------------
warranties made herein shall survive the execution and delivery of this Guaranty
and the other Loan Documents
XVII-14
<PAGE>
and the Lender Interest Rate Agreements and any increase in the Commitments
under any Financing Agreement.
3.2 NOTICES. Any communications between Guarantied Party and any
-------
Guarantor and any notices or requests provided herein to be given may be given
by mailing the same, postage prepaid, or by telex, facsimile transmission or
cable to each such party at its addresses set forth in the Financing Agreements,
on the signature pages hereof or to such other addresses as each such party may
in writing hereafter indicate. Any notice, request or demand to or upon
Guarantied Party or any Guarantor shall not be effective until received.
3.3 SEVERABILITY. In case any provision in or obligation under this
------------
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
3.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination
----------------------
or waiver of any provision of this Guaranty, and no consent to any departure by
any Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, each Guarantor against whom enforcement of such amendment or
modification is sought. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
3.5 HEADINGS. Section and subsection headings in this Guaranty are
--------
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
3.6 APPLICABLE LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
--------------
GUARANTORS AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
3.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty
----------------------
and shall be binding upon each Guarantor and its respective successors and
assigns. This Guaranty shall inure to the benefit of Beneficiaries and their
respective successors and assigns. No Guarantor shall assign this Guaranty or
any of the rights or obligations of such Guarantor hereunder without the prior
written consent of all Secured Parties. Any Beneficiary may, without notice or
consent, assign its interest in this Guaranty in whole or in part. The terms
and provisions of this Guaranty shall inure to the benefit of any transferee or
assignee of any Loan, and in the event of such transfer or assignment the rights
and privileges herein conferred upon such Beneficiary shall automatically extend
to and be vested in such transferee or assignee, all subject to the terms and
conditions hereof.
3.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR
XVII-15
<PAGE>
RELATING TO THIS GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GUARANTOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 3.2;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GUARANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT;
(V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH GUARANTOR IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 3.8 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT
PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
3.9 WAIVER OF TRIAL BY JURY. EACH GUARANTOR AND, BY ITS ACCEPTANCE
-----------------------
OF THE BENEFITS HEREOF, EACH BENEFICIARY EACH HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS GUARANTY. The scope of this waiver is intended to be all
encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including without limitation
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each Guarantor and, by its acceptance of the benefits hereof,
each Beneficiary, each (i) acknowledges that this waiver is a material
inducement for such Guarantor and Beneficiaries to enter into a business
relationship, that such Guarantor and Beneficiaries have already relied on this
waiver in entering into this Guaranty or accepting the benefits thereof, as the
case may be, and that each will continue to rely on this waiver in their related
future dealings and (ii) further warrants and
XVII-16
<PAGE>
represents that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 3.9 AND EXECUTED BY GUARANTIED
PARTY AND EACH GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. In the
event of litigation, this Guaranty may be filed as a written consent to a trial
by the court.
3.10 NO OTHER WRITING. This writing is intended by Guarantors and
----------------
Beneficiaries as the final expression of this Guaranty and is also intended as a
complete and exclusive statement of the terms of their agreement with respect to
the matters covered hereby. No course of dealing, course of performance or trade
usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty.
3.11 FURTHER ASSURANCES. At any time or from time to time, upon the
------------------
request of Guarantied Party, Guarantors shall execute and deliver such further
documents and do such other acts and things as Guarantied Party may reasonably
request in order to effect fully the purposes of this Guaranty.
3.12 ADDITIONAL GUARANTORS. The initial Guarantors hereunder
---------------------
shall be such of the Subsidiaries of Company as are signatories hereto on the
date hereof. From time to time subsequent to the date hereof, additional
Subsidiaries of Company may become parties hereto, as additional Guarantors
(each an "ADDITIONAL GUARANTOR"), by executing a counterpart of this Guaranty.
Upon delivery of any such counterpart to Collateral Agent, notice of which is
hereby waived by Guarantors, each such Additional Guarantor shall be a Guarantor
and shall be as fully a party hereto as if such Additional Guarantor were an
original signatory hereof. Each Guarantor expressly agrees that its obligations
arising hereunder shall not be affected or diminished by the addition or release
of any other Guarantor hereunder, nor by any election of Collateral Agent not to
cause any Subsidiary of Company to become an Additional Guarantor hereunder.
This Guaranty shall be fully effective as to any Guarantor that is or becomes a
party hereto regardless of whether any other Person becomes or fails to become
or ceases to be a Guarantor hereunder.
3.13 COUNTERPARTS; EFFECTIVENESS. This Guaranty may be executed in
---------------------------
any number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become
effective as to each Guarantor upon the execution of a counterpart hereof by
such Guarantor (whether or not a counterpart hereof shall have been executed by
any other Guarantor) and receipt by Guarantied Party of written or telephonic
notification of such execution and authorization of delivery thereof.
3.14 GUARANTIED PARTY AS COLLATERAL AGENT.
------------------------------------
XVII-17
<PAGE>
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by CA Administrative Agent on behalf of the Credit Agreement Lenders
and by AXEL Administrative Agent on behalf of the AXEL Lenders pursuant to the
Intercreditor Agreement, and, by their acceptance of the benefits hereof,
Interest Rate Exchangers and shall be entitled to the benefits of the
Intercreditor Agreement. Guarantied Party shall be obligated, and shall have
the right hereunder, to make demands, to give notices, to exercise or refrain
from exercising any rights, and to take or refrain from taking any action,
solely in accordance with this Guaranty and the Intercreditor Agreements;
provided that Guarantied Party shall exercise, or refrain from exercising, any
--------
remedies hereunder in accordance with the instructions of (i) Requisite Lenders
or (ii) after payment in full of all Financing Agreement Obligations under the
Financing Agreements and any other Loan Documents, the holders of a majority of
the aggregate notional amount (or, with respect to any Lender Interest Rate
Agreement that has been terminated in accordance with its terms, the amount then
due and payable (exclusive of expenses and similar payments but including any
early termination payments then due) under such Lender Interest Rate Agreement)
under all Lender Interest Rate Agreements (Requisite Lenders or, if applicable,
such holders being referred to herein as "REQUISITE OBLIGEES"). In
furtherance of the foregoing provisions of this subsection 3.14, each Interest
Rate Exchanger, by its acceptance of the benefits hereof, agrees that it shall
have no right individually to enforce this Guaranty, it being understood and
agreed by such Interest Rate Exchanger that all rights and remedies hereunder
may be exercised solely by Guarantied Party for the benefit of Beneficiaries in
accordance with the terms of this subsection 3.14.
(b) Guarantied Party shall at all times be the same Person that is
Collateral Agent under the Intercreditor Agreement. The Collateral Agent may
resign and a successor Collateral Agent may be appointed in the manner provided
in the Intercreditor Agreement. Written notice of resignation by Collateral
Agent pursuant to the Intercreditor Agreement shall also constitute notice of
resignation as Guarantied Party under this Guaranty; removal of Collateral Agent
pursuant to the Intercreditor Agreement shall also constitute removal as
Guarantied Party under this Guaranty; and appointment of a successor Collateral
Agent pursuant to the Intercreditor Agreement shall also constitute appointment
of a successor Guarantied Party under this Guaranty. Upon the acceptance of any
appointment as Collateral Agent by a successor Collateral Agent, that successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Guarantied
Party under this Guaranty, and the retiring or removed Guarantied Party under
this Guaranty shall promptly (i) transfer to such successor Guarantied Party all
sums held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Guarantied Party under this Guaranty, and (ii) take such other actions as may be
necessary or appropriate in connection with the assignment to such successor
Guarantied Party of the rights created hereunder, whereupon such retiring or
removed Guarantied Party shall be discharged from its duties and obligations
under this Guaranty. After any retiring or removed Guarantied Party's
resignation or removal hereunder as Guarantied Party, the provisions of this
Guaranty shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Guaranty while it was Guarantied Party hereunder.
[Remainder of page intentionally left blank]
XVII-18
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Guarantors has caused this
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first written above.
[NAMES OF GUARANTORS]
By: -----------------
Name:
Title:
Notice Address:
_____________________
_____________________
_____________________
XVII-19
<PAGE>
IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of ______________, [199_][200_].
[NAME OF ADDITIONAL GUARANTOR]
By:___________________________
Name:
Title:
Notice Address:
_____________________
_____________________
_____________________
XVII-20
<PAGE>
EXHIBIT XVIII
[FORM OF SUBSIDIARY PLEDGE AGREEMENT]
SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (this "AGREEMENT") is dated as of
December 18, 1997 and entered into by and among THE UNDERSIGNED DIRECT AND
INDIRECT SUBSIDIARIES (each of such undersigned Subsidiaries being a "PLEDGOR"
and collectively "PLEDGORS"; provided that after the Closing Date,
--------
"Pledgors" shall be deemed to include any Additional Pledgors (as hereinafter
defined)) of Sealy Mattress Company, an Ohio corporation ("COMPANY"), and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN GUARANTY"), as Collateral
Agent for and representative of (in such capacity herein called "COLLATERAL
AGENT") the Secured Parties (as hereinafter defined) and any Interest Rate
Exchangers (as hereinafter defined).
RECITALS
A. Pledgors are the legal and beneficial owners of (i) the shares of
stock (the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto
----------
and issued by the corporations named therein and (ii) the indebtedness (the
"PLEDGED DEBT") described in Part B of said Schedule I and issued by the
----------
obligors named therein.
B. Sealy Corporation, a Delaware Corporation ("HOLDINGS"), the
financial institutions from time to time parties thereto (the "CREDIT AGREEMENT
LENDERS"), Goldman Sachs Credit Partners L.P. ("GSCP"), as arranger and
syndication agent (in such capacity, "CA SYNDICATION AGENT"), Morgan Guaranty,
as administrative agent ( in such capacity, "CA ADMINISTRATIVE AGENT"), and
Bankers Trust Company ("BTCO."), as documentation agent (in such capacity "CA
DOCUMENTATION AGENT") have entered into a Credit Agreement dated as of December
18, 1997 (said Credit Agreement, as it may hereafter be amended, restated,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT") with Company pursuant to which Credit Agreement Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Company.
C. Company, Holdings, the financial institutions from time to time
parties thereto (the "AXEL LENDERS"), GSCP, as arranger and syndication agent
(in such capacity the "AXEL SYNDICATION AGENT"), Morgan Guaranty, as
administrative agent (in such capacity "AXEL ADMINISTRATIVE AGENT"), and
BTCo., as documentation agent (in such capacity, "AXEL DOCUMENTATION
AGENT")have entered into an AXEL Credit Agreement dated as of December 18, 1997
(said AXEL Credit Agreement, as it may hereafter be amended, restated,
supplemented or otherwise modified from time to time, being the "AXEL CREDIT
XVIII-1
<PAGE>
AGREEMENT"; the Credit Agreement Lenders, the CA Syndication Agent, the CA
Administrative Agent, the CA Documentation Agent, the AXEL Lenders, the AXEL
Syndication Agent, the AXEL Administrative Agent, and the AXEL Documentation
Agent each being a "SECURED PARTY" and collectively the "SECURED PARTIES")
pursuant to which AXEL Lenders have made certain commitments, subject to the
terms and conditions set forth in the AXEL Credit Agreement, to extend certain
credit facilities to Company.
D. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"LENDER INTEREST RATE AGREEMENTS") with one or more CA Lenders and their
Affiliates or AXEL Lenders and their Affiliates (in such capacity, collectively,
"INTEREST RATE EXCHANGERS").
E. Pledgors have executed and delivered that certain Subsidiary
Guaranty dated as of December 18, 1997 (said Subsidiary Guaranty, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "GUARANTY") in favor of Collateral Agent for the benefit of Secured
Parties and any Interest Rate Exchangers, pursuant to which Pledgors have
guarantied the prompt payment and performance when due of all obligations of
Company under the Financing Agreements and all obligations of Company under the
Lender Interest Rate Agreements, including without limitation the obligation of
Company to make payments, if any, thereunder in the event of early termination
thereof.
F. It is a condition precedent to the initial extensions of credit
by Secured Parties under the Financing Agreements that each Pledgor shall have
granted the security interests and undertaken the obligations contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce (i) the
CA Administrative Agent, the CA Syndication Agent and the Credit Agreement
Lenders to enter into the Credit Agreement, (ii) the Credit Agreement Lenders to
make their respective loans to, and issue Letters of Credit for the account of,
Company, (iii) the AXEL Administrative Agent, the AXEL Syndication Agent and the
AXEL Lenders to enter into the AXEL Loan Agreement, (iv) the AXEL Lenders to
make their respective loans to Company and (v) to induce Interest Rate
Exchangers to enter into the Lender Interest Rate Agreements, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Pledgor hereby agrees with Collateral Agent as follows:
SECTION 1. DEFINED TERMS
-------------
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to such terms in the
Credit Agreement;
(b) The following terms shall have the following meanings:
"ACCELERATION" shall mean any of the Credit Agreement Obligations or
the AXEL Credit Agreement Obligations have been declared, or have become,
immediately due and payable, or the commitments to extend credit of the Credit
Agreement Lenders or the
XVIII-2
<PAGE>
AXEL Lenders shall have been terminated under Section 8 of the Credit Agreement
or Section 7 of the AXEL Credit Agreement, respectively.
"ADDITIONAL PLEDGED SHARES" has the meaning assigned to that term in
Section 2(c) of this Agreement.
"AGREEMENT" means this Company Pledge Agreement dated as of December
18, 1997, as it may be amended, supplemented or otherwise modified from time to
time.
"AXEL COMMITMENTS" shall mean the "Commitments" as defined in the
AXEL Credit Agreement.
"AXEL CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"AXEL OBLIGATIONS" shall mean "Obligations" as defined in the AXEL
Credit Agreement.
"COLLATERAL ACCOUNTS" shall mean "Collateral Accounts" as defined
in the Intercreditor Agreement.
"COMMITMENTS" means the Credit Agreement Commitments and the AXEL
Commitments.
"CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"CREDIT AGREEMENT COMMITMENTS" shall mean the "Commitments" as
defined in the Credit Agreement.
"CREDIT AGREEMENT OBLIGATIONS" shall mean the "Obligations" as
defined in the Credit Agreement.
"EVENT OF DEFAULT" means any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which the
Company is the Defaulting Party and which results in the designation of an Early
Termination Date (as such terms are defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate
Agreement.
"FINANCING AGREEMENT" means the Credit Agreement or the AXEL Credit
Agreement, and "Financing Agreements" means the Credit Agreement and the AXEL
Credit Agreement, collectively.
XVIII-3
<PAGE>
"FINANCING AGREEMENT OBLIGATIONS" means Credit Agreement Obligations
and AXEL Obligations.
"HOLDINGS" has the meaning assigned to that term in the recitals to
this Agreement.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated
as of December 18, 1997, by and among CA Administrative Agent, AXEL
Administrative Agent and Collateral Agent.
"INTEREST RATE EXCHANGERS" has the meaning assigned to that term in
the recitals to this Agreement.
"LENDER INTEREST RATE AGREEMENT" has the meaning assigned to that
term in the recitals to this Agreement.
"LOAN" means any "Loan" as defined in any Financing Agreement, and
"LOANS" means all such Loans collectively.
"LOAN DOCUMENT" means any "Loan Document" as defined in any
Financing Agreement, and "LOAN DOCUMENTS" means all such Loan Documents
collectively.
"NEW PLEDGED SHARES" has the meaning assigned to that term in
Section 2(e) of this Agreement.
"PLEDGE AMENDMENT" has the meaning assigned to that term in Section
7 of this Agreement.
"PLEDGED COLLATERAL" has the meaning assigned to that term in
Section 2 of this Agreement.
"PLEDGED DEBT" has the meaning assigned to that term in the recitals
to this Agreement.
"PLEDGED SHARES" has the meaning assigned to that term in the
recitals to this Agreement.
"PLEDGOR" has the meaning assigned to that term in the introduction
of this Agreement.
"POTENTIAL EVENT OF DEFAULT" means any "Potential Event of
Default" as defined in any Financing Agreement.
"REQUISITE AXEL LENDERS" means "Requisite Lenders" as defined in
the AXEL Credit Agreement.
XVIII-4
<PAGE>
"REQUISITE CREDIT AGREEMENT LENDERS" means "Requisite Lenders" as
defined in the Credit Agreement.
"REQUISITE LENDERS" means (A) unless an Acceleration shall have
occurred and be continuing, the Requisite Credit Agreement Lenders and the
Requisite AXEL Lenders, and (B) if an Acceleration has occurred and is
continuing, Secured Parties holding more than 50% of the Financing Agreement
Obligations.
"REQUISITE OBLIGEES" has the meaning assigned to that term in
Section 17(a) of this Agreement.
"SECURED OBLIGATIONS" has the meaning assigned to that term in
Section 3 of this Agreement.
"SECURED PARTIES" has the meaning assigned to that term in the
recitals to this Agreement.
SECTION 2. PLEDGE OF SECURITY.
------------------
Each Pledgor hereby pledges and assigns to Collateral Agent, and
hereby grants to Collateral Agent a security interest in, all of such Pledgor's
right, title and interest in and to the following (the "PLEDGED COLLATERAL"):
(a) the Pledged Shares and the certificates representing the
Pledged Shares and any interest of Pledgor in the entries on the books
of any financial intermediary pertaining to the Pledged Shares, and
all dividends, cash, warrants, rights, instruments and other property
or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares;
(b) the Pledged Debt and the instruments evidencing the Pledged
Debt, and all interest, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Debt;
(c) all additional shares of, and all securities convertible into
and warrants, options and other rights to purchase or otherwise
acquire, stock of any issuer of the Pledged Shares from time to time
acquired by such Pledgor in any manner (which shares shall be deemed
to be part of the Pledged Shares), the certificates or other
instruments representing such additional shares, securities, warrants,
options or other rights and any interest of such Pledgor in the
entries on the books of any financial intermediary pertaining to such
additional shares (all such shares, securities, warrants, options,
rights, certificates, instruments and interests collectively being
"ADDITIONAL PLEDGED SHARES"), and all dividends, cash, warrants,
rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or
XVIII-5
<PAGE>
in exchange for any or all of such Additional Pledged Shares;
provided, however, that to the extent that the issuer of any
------- -------
Additional Pledged Shares is a controlled foreign corporation, such
Pledgor shall only be required to pledge Additional Pledged Shares of
such issuer possessing up to but not exceeding 65% of the voting power
of all classes of capital stock entitled to vote of such issuer, and
all dividends, cash, warrants, rights, instruments and other property
or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
Additional Pledged Shares;
(d) all additional indebtedness from time to time owed to such
Pledgor by any obligor on the Pledged Debt and the instruments
evidencing such indebtedness, and all interest, cash, instruments and
other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
such indebtedness;
(e) all shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire,
stock of any Person that, after the date of this Agreement, becomes,
as a result of any occurrence, a direct Subsidiary of such Pledgor
(which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such shares (all such
shares, securities, warrants, options, rights, certificates,
instruments and interests collectively being "NEW PLEDGED SHARES"),
securities, warrants, options or other rights and any interest of such
Pledgor in the entries on the books of any financial intermediary
pertaining to such shares, and all dividends, cash, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such shares, securities, warrants, options or other
rights; provided, however, that in the event that any such direct
-------- -------
Subsidiary is a controlled foreign corporation, such Pledgor shall
only be required to pledge New Pledged Shares of such Subsidiary
possessing up to but not exceeding 65% of the voting power of all
classes of capital stock entitled to vote of such Subsidiary, and all
dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such New
Pledged Shares;
(f) all indebtedness from time to time owed to such Pledgor by any
Person that, after the date of this Agreement, becomes, as a result of
any occurrence, a Subsidiary of such Pledgor, and all interest, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such indebtedness; and
(g) to the extent not covered by clauses (a) through (f) above,
all proceeds of any or all of the foregoing Pledged Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received when Pledged Collateral or proceeds are sold,
exchanged, collected or otherwise
XVIII-6
<PAGE>
disposed of, whether such disposition is voluntary or involuntary, and
includes, without limitation, proceeds of any indemnity or guaranty
payable to such Pledgor or Collateral Agent from time to time with
respect to any of the Pledged Collateral.
SECTION 3. SECURITY FOR OBLIGATIONS.
------------------------
This Agreement secures, and the Pledged Collateral is collateral
security for, the prompt payment or performance in full when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. (S)362(a)), of all obligations and liabilities of every nature of
Pledgors now or hereafter existing under or arising out of or in connection with
the Guaranty and all extensions or renewals thereof, whether for principal,
interest (including without limitation interest that, but for the filing of a
petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Collateral Agent or any Secured Party or Interest Rate Exchanger
as a preference, fraudulent transfer or otherwise, and all obligations of every
nature of Pledgors now or hereafter existing under this Agreement (all such
obligations of Pledgors being the "SECURED OBLIGATIONS").
SECTION 4. DELIVERY OF PLEDGED COLLATERAL.
------------------------------
All certificates or instruments representing or evidencing the Pledged
Collateral shall be delivered to and held by or on behalf of Collateral Agent
pursuant hereto and shall be in suitable form for transfer by delivery or, as
applicable, shall be accompanied by the applicable Pledgor's endorsement, where
necessary, or duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to Collateral Agent. Upon the
occurrence and during the continuation of an Event of Default, Collateral Agent
shall have the right, without notice to any Pledgor, to transfer to or to
register in the name of Collateral Agent or any of its nominees any or all of
the Pledged Collateral, subject only to the revocable rights specified in
Section 8(a). In addition, upon the occurrence and during the continuance of an
Event of Default, Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
------------------------------
Each Pledgor represents and warrants as follows:
XVIII-7
<PAGE>
(a) Due Authorization, etc. of Pledged Collateral. All of the
---------------------------------------------
Pledged Shares have been duly authorized and validly issued and are
fully paid and non-assessable. All of the Pledged Debt has been duly
authorized, authenticated or issued, and delivered and is the legal,
valid and binding obligation of the issuers thereof and is not in
default.
(b) Description of Pledged Collateral. The Pledged Shares
---------------------------------
constitute the percentage of the issued and outstanding shares of
stock of each issuer thereof set forth on Schedule I annexed hereto,
----------
and there are no outstanding warrants, options or other rights to
purchase, or other agreements outstanding with respect to, or property
that is now or hereafter convertible into, or that requires the
issuance or sale of, any Pledged Shares. The Pledged Debt consti tutes
all of the issued and outstanding intercompany indebtedness evidenced
by a promissory note of the respective issuers thereof owing to
Pledgor.
(c) Ownership of Pledged Collateral. Pledgors are the legal,
-------------------------------
record and beneficial owners of the Pledged Collateral free and clear
of any Lien except for the security interest created by this
Agreement.
SECTION 6. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL; ETC.
--------------------------------------------------------------
Each Pledgor shall:
(a) not, except as expressly permitted by the Financing
Agreements, (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral, (ii) create or suffer to exist any Lien upon or
with respect to any of the Pledged Collateral, except for the security
interest under this Agreement, or (iii) permit any issuer of Pledged
Shares to merge or consolidate unless all the outstanding capital
stock of the surviving or resulting corporation is, upon such merger
or consolidation, pledged hereunder and no cash, securities or other
property is distributed in respect of the outstanding shares of any
other constituent corporation; provided that if the surviving or
--------
resulting corporation upon any such merger or consolidation involving
an issuer of Pledged Shares which is a controlled foreign corporation
is a controlled foreign corporation, then such Pledgor shall only be
required to pledge outstanding capital stock of such surviving or
resulting corporation possessing up to but not exceeding 65% of the
voting power of all classes of capital stock of such issuer entitled
to vote; provided that in the event a Pledgor makes an Asset Sale
--------
permitted by the Financing Agreements and the assets subject to such
Asset Sale are Pledged Shares, Collateral Agent shall release the
Pledged Shares that are the subject of such Asset Sale to Pledgor free
and clear of the lien and security interest under this Agreement
concurrently with the consummation of such Asset Sale; provided,
--------
further that, as a condition precedent to such release, Collateral
-------
Agent shall have received evidence reasonably satisfactory to it that
arrangements reasonably satisfactory to it have been made for delivery
to Collateral Agent of the Net Asset Sale Proceeds of
XVIII-8
<PAGE>
such Asset Sale in the event and to the extent that all or any portion of such
Net Asset Sale Proceeds are required to be applied to prepay the Loans under the
Financing Agreements;
(b) (i) cause each issuer of Pledged Shares not to issue any stock
or other securities in addition to or in substitution for the Pledged
Shares issued by such issuer, except to a Pledgor, (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of
each issuer of Pledged Shares, and (iii) pledge hereunder, immediately
upon its acquisition (directly or indirectly) thereof, any and all
shares of stock of any Person that, after the date of this Agreement,
becomes, as a result of any occurrence, a direct Subsidiary of such
Pledgor; provided, that notwithstanding anything contained in this
--------
clause (b) to the contrary, such Pledgor shall only be required to
pledge the outstanding capital stock of a foreign controlled
corporation possessing up to but not exceeding 65% of the voting power
of all classes of capital stock of such controlled foreign corporation
entitled to vote;
(c) (i) pledge hereunder, immediately upon their issuance, any and
all instruments or other evidences of additional indebtedness from
time to time owed to such Pledgor by any obligor on the Pledged Debt,
and (ii) pledge hereunder, immediately upon their issuance, any and
all instruments or other evidences of indebtedness from time to time
owed to such Pledgor by any Person that after the date of this
Agreement becomes, as a result of any occurrence, a Subsidiary of such
Pledgor; and
(d) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged
Collateral, except to the extent the validity thereof is being
contested in good faith.
SECTION 7. FURTHER ASSURANCES; PLEDGE AMENDMENTS; ADDITIONAL PLEDGORS.
----------------------------------------------------------
(a) Each Pledgor agrees that from time to time, at the expense of
Pledgors, such Pledgor will promptly execute and deliver all further instruments
and documents, and take all further action that Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral. Without limiting the generality of the foregoing, each Pledgor will:
(i) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices as Collateral Agent may
reasonably request, in order to perfect and preserve the security interests
granted or purported to be granted hereby and (ii) at Collateral Agent's
reasonable request, appear in and defend any action or proceeding that may
affect such Pledgor's title to or Collateral Agent's security interest in all or
any part of the Pledged Collateral.
(b) Each Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder
as provided in Section 6(b)
XVIII-9
<PAGE>
or (c), promptly (and in any event within five Business Days) deliver to
Collateral Agent a Pledge Amendment, duly executed by such Pledgor, in
substantially the form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"),
-----------
in respect of the additional Pledged Shares or Pledged Debt to be pledged
pursuant to this Agreement. Each Pledgor hereby authorizes Collateral Agent to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares or Pledged Debt listed on any Pledge Amendment delivered to Collateral
Agent shall for all purposes hereunder be considered Pledged Collateral;
provided that the failure of any Pledgor to execute a Pledge Amendment with
--------
respect to any additional Pledged Shares or Pledged Debt pledged pursuant to
this Agreement shall not impair the security interest of Collateral Agent
therein or otherwise adversely affect the rights and remedies of Collateral
Agent hereunder with respect thereto.
(c) The initial Pledgors hereunder shall be those Subsidiaries of
Company as are signatories hereto on the date hereof. From time to time
subsequent to the date hereof, additional Subsidiaries of Company may become
parties hereto, as additional Pledgors (each an "ADDITIONAL PLEDGOR"), by
executing a counterpart of this Agreement substantially in the form of Schedule
--------
III annexed hereto. Upon delivery of any such counterpart to the Collateral
---
Agent, notice of which is hereby waived by the Pledgors, each Additional Pledgor
shall be a Pledgor and shall be as fully a party hereto as if such Additional
Pledgor were an original signatory hereof. Each Pledgor expressly agrees that
its obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Pledgor hereunder, nor by any election of
Collateral Agent not to cause any Subsidiary to become an Additional Pledgor
hereunder. This Agreement shall be fully effective as to any Pledgor that is or
becomes a party hereto regardless of whether any other Person becomes or fails
to become or ceases to be a Pledgor hereunder. Each Additional Pledgor shall
execute and file such financing statements and such other instruments or notices
as may be necessary or desirable, or as Collateral Agent may reasonably request,
in order to perfect the security interests granted or purported to be granted
hereunder.
SECTION 8. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Each Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms of
this Agreement or the Financing Agreements;
(ii) Each Pledgor shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Agreement, any and all
dividends and interest paid in respect of the Pledged Collateral;
provided, however, that any and all dividends and interest paid
-------- -------
or payable other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Collateral, shall be, and shall
forthwith be delivered to Collateral Agent to hold as, Pledged
Collateral and shall, if received by such Pledgor, be received in
trust for the benefit of
XVIII-10
<PAGE>
Collateral Agent, be segregated from the other property or funds of
such Pledgor and be forthwith delivered to Collateral Agent as Pledged
Collateral in the same form as so received (with all necessary
endorsements); provided, that such Pledgor shall not be required
--------
to deliver the outstanding capital stock of a foreign controlled
corporation paid as a dividend or interest to such Pledgor, if
Collateral Agent would hold as Pledged Collateral outstanding capital
stock of such controlled foreign corporation possessing greater than
65% of the voting power of all classes of capital stock of such
controlled foreign corporation entitled to vote; and
(iii) Collateral Agent shall promptly execute and deliver (or
cause to be executed and delivered) to each Pledgor all such proxies,
dividend payment orders and other instruments as such Pledgor may from
time to time reasonably request for the purpose of enabling such
Pledgor to exercise the voting and other consensual rights which it is
entitled to exercise pursuant to paragraph (i) above and to receive
the dividends, principal or interest payments which it is authorized
to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Collateral Agent to a Pledgor, all
rights of such Pledgor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to
Section 8(a)(i) shall cease, and all such rights shall thereupon
become vested in Collateral Agent who shall thereupon have the sole
right to exercise such voting and other consensual rights;
(ii) all rights of such Pledgor to receive the dividends and
interest payments which it would otherwise be authorized to receive
and retain pursuant to Section 8(a)(ii) shall cease, and all such
rights shall thereupon become vested in Collateral Agent who shall
thereupon have the sole right to receive and hold as Pledged
Collateral such dividends and interest payments; and
(iii) all dividends, principal and interest payments which are
received by such Pledgor contrary to the provisions of paragraph (ii)
of this Section 8(b) shall be (A) forthwith (and in any event within
two Business Days) deposited by the Grantor in the exact form
received, duly indorsed by the Pledgor to the Collateral Agent if
required, in a Collateral Account maintained under the sole dominion
and control of the Collateral Agent, subject to withdrawal by the
Collateral Agent for the account of the Secured Parties only as
provided in Section 15, (B) until turned over in accordance with the
preceding subsection (A), all such amounts and proceeds received by
Pledgor shall be received in trust for the benefit of Collateral Agent
hereunder and shall be segregated from other funds of Pledgor.
(c) In order to permit Collateral Agent to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
8(b)(i) and to receive
XVIII-11
<PAGE>
all dividends and other distributions which it may be entitled to receive under
Section 8(a)(ii) or Section 8(b)(ii), (i) each Pledgor shall promptly execute
and deliver (or cause to be executed and delivered) to Collateral Agent all such
proxies, dividend payment orders and other instruments as Collateral Agent may
from time to time reasonably request and (ii) without limiting the effect of the
immediately preceding clause (i), each Pledgor hereby grants to Collateral Agent
an irrevocable proxy to vote the Pledged Shares and to exercise all other
rights, powers, privileges and remedies to which a holder of the Pledged Shares
would be entitled (including, without limitation, giving or withholding written
consents of shareholders, calling special meetings of shareholders and voting at
such meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Shares on the
record books of the issuer thereof) by any other Person (including the issuer of
the Pledged Shares or any officer or agent thereof), upon the occurrence and
during the continuance of an Event of Default and which proxy shall only
terminate upon the payment in full of the Secured Obligations.
SECTION 9. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
-------------------------------------------
Each Pledgor hereby irrevocably appoints Collateral Agent as such
Pledgor's attorney-in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor, Collateral Agent or otherwise, from
time to time, upon the occurrence and during the continuance of an Event of
Default, in Collateral Agent's reasonable discretion to take any action and to
execute any instrument that Collateral Agent may reasonably deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of such Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
such Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any proceedings
that Collateral Agent may reasonably deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the rights
of Collateral Agent with respect to any of the Pledged Collateral.
SECTION 10. COLLATERAL AGENT MAY PERFORM.
----------------------------
If any Pledgor fails to perform any agreement contained herein,
Collateral Agent may itself perform, or cause performance of, such agreement,
and the reasonable expenses of
XVIII-12
<PAGE>
Collateral Agent incurred in connection therewith shall be payable by Pledgors
under Section 16(b).
SECTION 11. STANDARD OF CARE.
----------------
The powers conferred on Collateral Agent hereunder are solely to
protect its interest in the Pledged Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the exercise of reasonable care
in the custody of any Pledged Collateral in its possession and the accounting
for moneys actually received by it hereunder, Collateral Agent shall have no
duty as to any Pledged Collateral, it being understood that Collateral Agent
shall have no responsibility for (a) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relating
to any Pledged Collateral, whether or not Collateral Agent has or is deemed to
have knowledge of such matters, (b) taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above to maintain
possession of the Pledged Collateral) to preserve rights against any parties
with respect to any Pledged Collateral, (c) taking any necessary steps to
collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Collateral Agent shall be deemed to have exercised reasonable care in
the custody and preservation of Pledged Collateral in its possession if such
Pledged Collateral is accorded treatment substantially equal to that which
Collateral Agent accords its own property consisting of negotiable securities.
XVIII-13
<PAGE>
SECTION 12. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Collateral Agent may exercise in respect of the Pledged Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE")
(whether or not the Code applies to the affected Pledged Collateral), and
Collateral Agent may also in its sole discretion, without notice except as
specified below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange or broker's board or at any
of Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Collateral Agent may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Pledged Collateral.
Collateral Agent or any Secured Party or Interest Rate Exchanger may be the
purchaser of any or all of the Pledged Collateral at any such sale and
Collateral Agent, as administrative agent for and representative of Secured
Parties and Interest Rate Exchangers (but not any Secured Party or Secured
Parties or Interest Rate Exchanger or Interest Rate Exchangers in its or their
respective individual capacities unless Requisite Obligees shall otherwise agree
in writing), shall be entitled, for the purpose of bidding and making settlement
or payment of the purchase price for all or any portion of the Pledged
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Collateral Agent at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of any Pledgor, and each Pledgor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to such Pledgor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Collateral Agent shall
not be obligated to make any sale of Pledged Collateral regardless of notice of
sale having been given. Collateral Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned. Each Pledgor hereby waives any claims against Collateral Agent
arising by reason of the fact that the price at which any Pledged Collateral may
have been sold at such a private sale was less than the price which might have
been obtained at a public sale, even if Collateral Agent accepts the first offer
received and does not offer such Pledged Collateral to more than one offeree.
If the proceeds of any sale or other disposition of the Pledged Collateral are
insufficient to pay all the Secured Obligations, Pledgors shall be jointly and
severally liable for the deficiency and the reasonable fees of any attorneys
employed by Collateral Agent to collect such deficiency.
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Collateral
Agent may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire
XVIII-14
<PAGE>
the Pledged Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Each Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable than those obtainable
through a public sale without such restrictions (including, without limitation,
a public offering made pursuant to a registration statement under the Securities
Act) and, notwithstanding such circumstances, Pledgor agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that Collateral Agent shall have no obligation to engage in public
sales and no obligation to delay the sale of any Pledged Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to
so register it.
(c) If Collateral Agent determines to exercise its right to sell any
or all of the Pledged Collateral, upon written request, such Pledgor shall and
shall cause each issuer of any Pledged Shares to be sold hereunder from time to
time to furnish to Collateral Agent all such information as Collateral Agent may
reasonably request in order to determine the number of shares and other
instruments included in the Pledged Collateral which may be sold by Collateral
Agent in exempt transactions under the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder, as the same
are from time to time in effect.
SECTION 13. PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT.
----------------------------------------------
In addition to the rights of the Collateral Agent and the Secured
Parties specified in Section 8, if an Event of Default shall occur and be
continuing, upon request of the Collateral Agent, all proceeds received by the
Grantor consisting of cash, checks and other near-cash items shall be held by
the Grantor in trust for the Collateral Agent and the Secured Parties,
segregated from other funds of the Grantor, and shall, forthwith upon receipt by
the Grantor, be turned over to the Collateral Agent in the exact form received
by the Grantor (duly indorsed by the Grantor to the Collateral Agent, if
required) and held by the Collateral Agent in a Collateral Account maintained
under the Intercreditor Agreement. All proceeds while held by the Collateral
Agent in a Collateral Account (or by the Grantor in trust for the Collateral
Agent and the Secured Parties) shall continue to be held as collateral security
for all the Secured Obligations and shall not constitute payment thereof until
applied as provided in Section 15.
SECTION 14. APPLICATION OF PROCEEDS.
-----------------------
All proceeds held in any Collateral Account and all other proceeds
received by Collateral Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Pledged Collateral shall be
applied as provided in subsection 3 of the Intercreditor Agreement.
SECTION 15. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgors jointly and severally agree to indemnify Collateral
Agent, each Lender and each Interest Rate Exchanger from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the
XVIII-15
<PAGE>
transactions contemplated hereby (including, without limitation, enforcement of
this Agreement), except to the extent such claims, losses or liabilities result
solely from Collateral Agent's or such Secured Party's or Interest Rate
Exchanger's gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
(b) Pledgors jointly and severally agree to pay to Collateral Agent
promptly following written demand the amount of any and all reasonable costs and
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, that Collateral Agent may incur in connection
with (i) the administration of this Agreement, (ii) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of
Collateral Agent hereunder, or (iv) the failure by any Pledgor to perform or
observe any of the provisions hereof.
SECTION 16. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.
-----------------------------------------------
This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (a) remain in full force and effect until the
payment in full of all Secured Obligations (other than inchoate indemnification
obligations with respect to claims, losses or liabilities which have not yet
arisen and are not yet due and payable), the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon each Pledgor, its successors and assigns, and (c)
inure, together with the rights and remedies of Collateral Agent hereunder, to
the benefit of Collateral Agent and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), but subject to the
provisions of subsection 10.1 of the Credit Agreement and subsection 10.1 of the
AXEL Credit Agreement, any Secured Party may assign or otherwise transfer any
Loans held by it to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to Lenders herein
or otherwise. Upon the payment in full of all Secured Obligations (other than
inchoate indemnification obligations with respect to claims, losses or
liabilities which have not yet arisen and are not yet due and payable), the
cancellation or termination of the Commitments and the cancellation or
expiration of all outstanding Letters of Credit, the security interest granted
hereby shall terminate and all rights to the Pledged Collateral shall revert to
the applicable Pledgors. Upon any such termination Collateral Agent will, at
the joint and several expense of Pledgors, execute and deliver to Pledgors such
documents as Pledgors shall reasonably request to evidence such termination in
accordance with the terms of the Intercreditor Agreement and Pledgors shall be
entitled to the return, upon its request and at its expense, against receipt and
without recourse to Collateral Agent, of such of the Pledged Collateral as shall
not have been sold or otherwise applied pursuant to the terms hereof.
SECTION 17. COLLATERAL AGENT AS ADMINISTRATIVE AGENT.
----------------------------------------
(a) Collateral Agent has been appointed to act as Collateral Agent
hereunder by CA Administrative Agent on behalf of the Credit Agreement Lenders
and AXEL Administrative Agent on behalf of the AXEL Lenders pursuant to the
Intercreditor Agreement and, by their acceptance of the benefits hereof,
Interest Rate Exchangers and shall be entitled to
XVIII-16
<PAGE>
the benefits of the Intercreditor Agreement. Collateral Agent shall be
obligated, and shall have the right hereunder, to make demands, to give notices,
to exercise or refrain from exercising any rights, and to take or refrain from
taking any action (including, without limitation, the release or substitution of
Pledged Collateral), solely in accordance with this Agreement and the
Intercreditor Agreement; provided that Collateral Agent shall exercise, or
--------
refrain from exercising, any remedies provided for in Section 12 in accordance
with the instructions of (i) Requisite Lenders or (ii) after payment in full of
all Financing Agreement Obligations under the Financing Agreements and any other
Loan Documents, the holders of a majority of the aggregate notional amount (or,
with respect to any Lender Interest Rate Agreement that has been terminated in
accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "REQUISITE OBLIGEES"). In furtherance of the foregoing provisions of
this Section 18(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Pledged Collateral hereunder, it being understood and agreed by such
Interest Rate Exchanger that all rights and remedies hereunder may be exercised
solely by Collateral Agent for the benefit of Lenders and Interest Rate
Exchangers in accordance with the terms of this Section 18(a).
(b) Collateral Agent shall at all times be the same Person that is
appointed Collateral Agent under the Intercreditor Agreement. The Collateral
Agent may resign and a successor Collateral Agent may be appointed in the manner
provided in the Intercreditor Agreement. Upon the acceptance of any appointment
as Collateral Agent by a successor Collateral Agent, that successor Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Collateral Agent under this
Agreement, and the retiring or removed Collateral Agent under this Agreement
shall promptly (i) transfer to such successor Collateral Agent all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Collateral Agent under this
Agreement, and (ii) execute and deliver to such successor Collateral Agent such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Collateral Agent of the security interests created hereunder, whereupon such
retiring or removed Collateral Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Collateral
Agent's resignation or removal hereunder as Collateral Agent, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Collateral Agent hereunder.
SECTION 18. AMENDMENTS; ETC.
---------------
No amendment, modification, termination or waiver of any provision of
this Agreement, and no consent to any departure by any Pledgor therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Collateral Agent and, in the case of any such amendment or modification, by
Pledgors; provided that any Pledge Amendment in the form of Schedule II annexed
-------- -----------
hereto or any amendment hereto pursuant to Section 6(c) shall be
XVIII-17
<PAGE>
effective upon execution by any Pledgor and Pledgors hereby waive any
requirement of notice or of consent to any such Pledge Amendment or amendment.
Any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which it was given.
SECTION 19. NOTICES.
-------
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Collateral Agent and Pledgors shall not be
--------
effective until received. For the purposes hereof, the address of each party
hereto shall be as provided in subsection 10.8 of the Credit Agreement and
subsection 10.8 AXEL Credit Agreement, as applicable, or as set forth under
such party's name on the signature pages hereof or such other address as shall
be designated by such party in a written notice delivered to the other parties
hereto.
SECTION 20. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Collateral Agent in the exercise of
any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 21. SEVERABILITY.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 22. HEADINGS.
--------
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 23. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT
XVIII-18
<PAGE>
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT
THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED
BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein or in the Financing Agreements, terms used in Articles 8 and 9 of
the Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 24. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PLEDGOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH PLEDGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION
20;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH PLEDGOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT;
(V) AGREES THAT COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH
PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 25 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT
PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
XVIII-19
<PAGE>
SECTION 25. WAIVER OF JURY TRIAL.
--------------------
EACH PLEDGOR AND COLLATERAL AGENT HEREBY AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-
encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including without limitation
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Pledgors and Collateral Agent each acknowledge that this
waiver is a material induce ment for Pledgors and Collateral Agent to enter
into a business relationship, that each Pledgor and Collateral Agent have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Each Pledgor
and Collateral Agent further warrant and represent that each has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 26
AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
SECTION 26. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
XVIII-20
<PAGE>
IN WITNESS WHEREOF, Pledgors and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
SEALY, INC.
THE STEARNS & FOSTER
BEDDING COMPANY
THE STEARNS & FOSTER
UPHOLSTERY FURNITURE
COMPANY
ADVANCED SLEEP
PRODUCTS
SEALY MATTRESS
COMPANY OF SAN DIEGO
SEALY MATTRESS
COMPANY OF PUERTO RICO
OHIO-SEALY MATTRESS
MANUFACTURING CO. INC.
OHIO-SEALY MATTRESS
MANUFACTURING CO. --
FORT WORTH
OHIO-SEALY MATTRESS
MANUFACTURING CO.
OHIO-SEALY MATTRESS
MANUFACTURING CO. --
HOUSTON
[OTHER PLEDGORS]
By: _________________________
Name:
Title:
Notice Address:
_____________________
_____________________
_____________________
XVIII-21
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: _________________________
Name:
Title:
Notice Address:
_____________________
_____________________
_____________________
XVIII-22
<PAGE>
SCHEDULE I
Attached to and forming a part of the Subsidiary Pledge Agreement
dated as of December 18, 1997 between the subsidiaries of Sealy Mattress Company
party thereto from time to time, as Pledgors, and Morgan Guaranty Trust Company
of New York, as Collateral Agent.
PART A
=================================================================================
PERCENTAGE
STOCK NUMBER OF OF
CLASS OF CERTIFI- PAR SHARES OUTSTANDING
PLEDGOR STOCK ISSUER STOCK CATE VALUE SHARES
NOS. PLEDGED
=================================================================================
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
=================================================================================
Part B
=========================================================
AMOUNT OF
PLEDGOR DEBT ISSUER INDEBTEDNESS
=========================================================
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
=========================================================
XVIII-23
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, [199_][200_], is delivered
pursuant to Section 6(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Subsidiary Pledge Agreement dated as of December 18, 1997, between the
undersigned, the other Pledgors party thereto from time to time, and Morgan
Guaranty Trust Company of New York, as Collateral Agent (the "PLEDGE
AGREEMENT," capitalized terms defined therein being used herein as therein
defined), and that the [Pledged Shares] [Pledged Debt] listed on this Pledge
Amendment shall be deemed to be part of the [Pledged Shares] [Pledged Debt] and
shall become part of the Pledged Collateral and shall secure all Secured
Obligations.
[NAME OF PLEDGOR]
By: ____________________
Name:
Title:
===========================================================================
PERCENTAGE OF
STOCK NUM- OUTSTANDING
CLASS OF CERTIFICATE PAR BER OF SHARES PLEDGED
STOCK ISSUER STOCK NOS. VALUE SHARES
===========================================================================
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
===========================================================================
====================================
AMOUNT OF
DEBT ISSUER INDEBTEDNESS
====================================
------------------------------------
------------------------------------
------------------------------------
====================================
XVIII-24
<PAGE>
SCHEDULE III
[FORM OF COUNTERPART TO SUBSIDIARY PLEDGE AGREEMENT]
This counterpart, dated ___________, [199_][200_] is delivered
pursuant to Section 6(c) of that certain Subsidiary Pledge Agreement dated as of
December 18, 1997, among the Pledgors party thereto from time to time, and
Morgan Guaranty Trust Company of New York, as Collateral Agent (the "PLEDGE
AGREEMENT," capitalized terms defined therein being used herein as therein
defined). The undersigned hereby agrees (i) that this counterpart may be
attached to the Pledge Agreement, (ii) that the undersigned will comply with all
the terms and conditions of the Pledge Agreement as if it were an original
signatory thereto, and (iii) that the [Pledged Shares] [Pledged Debt] listed
below shall be deemed to be part of the [Pledged Shares] [Pledged Debt] and
shall become part of the Pledged Collateral and shall secure all Secured
Obligations.
[NAME OF ADDITIONAL PLEDGOR]
By: ________________________
Name:
Title:
==========================================================================
PERCENTAGE OF
STOCK NUM- OUTSTANDING
CLASS OF CERTIFICATE PAR BER OF SHARES
STOCK ISSUER STOCK NOS. VALUE SHARES PLEDGED
==========================================================================
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
==========================================================================
========================================
AMOUNT OF
DEBT ISSUER INDEBTEDNESS
========================================
----------------------------------------
----------------------------------------
----------------------------------------
========================================
XVIII-25
<PAGE>
EXHIBIT XIX
[FORM OF SUBSIDIARY SECURITY AGREEMENT]
SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (this "AGREEMENT") is dated as of
December 18, 1997 and entered into by and among THE UNDERSIGNED DIRECT AND
INDIRECT SUBSIDIARIES (each of such undersigned Subsidiaries being a "GRANTOR"
and collectively "GRANTORS"; provided that after the Closing Date,
--------
"Grantors" shall be deemed to include any Additional Grantors (as hereinafter
defined)) of Sealy Mattress Company, an Ohio corporation ("COMPANY"), and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN GUARANTY"), as Collateral
Agent for and representative of (in such capacity herein called "COLLATERAL
AGENT") the Secured Parties (as hereinafter defined) and any Interest Rate
Exchangers (as hereinafter defined).
RECITALS
A. Company, Sealy Corporation, a Delaware Corporation
("HOLDINGS"), the financial institutions from time to time parties thereto
(the "CREDIT AGREEMENT LENDERS"), Goldman Sachs Credit Partners L.P.
("GSCP"), as arranger and syndication agent (in such capacity, "CA
SYNDICATION AGENT"), Morgan Guaranty, as administrative agent (in such
capacity, "CA ADMINISTRATIVE AGENT"), and Bankers Trust Company ("BTCO."),
as documentation agent (in such capacity, "CA DOCUMENTATION AGENT") have
entered into a Credit Agreement dated as of December 18, 1997 (said Credit
Agreement, as it may hereafter be amended, restated, supplemented or otherwise
modified from time to time, being the ("CREDIT AGREEMENT") pursuant to which
Credit Agreement Lenders have made certain commitments, subject to the terms and
conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company.
B. Company, Holdings, the financial institutions from time to time
parties thereto (the "AXEL LENDERS"), GSCP, as arranger and syndication agent
(in such capacity, "AXEL SYNDICATION AGENT"), Morgan Guaranty, as
administrative agent (in such capacity, "AXEL ADMINISTRATIVE AGENT"), and
BTCo., as documentation agent (in such capacity, "AXEL DOCUMENTATION AGENT")
have entered into an AXEL Credit Agreement dated as of December 18, 1997 (said
AXEL Credit Agreement, as it may hereafter be amended, restated, supplemented or
otherwise modified from time to time, being the "AXEL CREDIT AGREEMENT"; the
Credit Agreement Lenders, the CA Syndication Agent, the CA Administrative Agent,
the CA Documentation Agent, the AXEL Lenders, the AXEL Syndication Agent, the
AXEL Administrative Agent, and the AXEL Documentation Agent each being a
"SECURED PARTY" and collectively the "SECURED PARTIES") pursuant to which
AXEL Lenders have made certain commitments, subject to the terms and conditions
set forth in the AXEL Credit Agreement, to extend certain credit facilities to
Company.
XIX-1
<PAGE>
C. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"LENDER INTEREST RATE AGREEMENTS") with one or more CA Lenders or their
Affiliates or AXEL Lenders or their Affiliates (in such capacity, collectively,
"INTEREST RATE EXCHANGERS").
D. Grantors have executed and delivered that certain Subsidiary
Guaranty dated as of December 18, 1997 (said Subsidiary Guaranty, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "GUARANTY") in favor of Collateral Agent for the benefit of Secured
Parties and any Interest Rate Exchangers, pursuant to which Grantors have
guarantied the prompt payment and performance when due of all obligations of
Company under the Financing Agreements and any other Loan Documents and all
obligations of Company under the Lender Interest Rate Agreements, including
without limitation the obligation of Company to make payments, if any,
thereunder in the event of early termination thereof.
E. It is a condition precedent to the initial extensions of credit
by Secured Parties under the Financing Agreements that each Grantor shall have
granted the security interests and undertaken the obligations contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce (i) the
CA Administrative Agent, the CA Syndication Agent and the Credit Agreement
Lenders to enter into the Credit Agreement, (ii) the Credit Agreement Lenders to
make their respective loans to, and issue Letters of Credit for the account of,
Company, (iii) the AXEL Administrative Agent, the AXEL Syndication Agent and the
AXEL Lenders to enter into the AXEL Loan Agreement, (iv) the AXEL Lenders to
make their respective loans to Company and (v) to induce Interest Rate
Exchangers to enter into the Lender Interest Rate Agreements and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Grantor hereby agrees with the Collateral Agent as follows:
1. DEFINED TERMS.
-------------
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to such terms in the
Credit Agreement;
(b) The following terms shall have the following meanings:
"ACCELERATION" shall mean any of the Credit Agreement Obligations or
the AXEL Credit Agreement Obligations have been declared, or have become,
immediately due and payable, or the commitments to extend credit of the Credit
Agreement Lenders or the AXEL Lenders shall have been terminated under Section 8
of the Credit Agreement or Section 7 of the AXEL Credit Agreement, respectively.
"ACCOUNTS" has the meaning assigned to that term in Section 2 of
this Agreement.
XIX-2
<PAGE>
"AGREEMENT" means this Company Security Agreement dated as of
December 18, 1997, as it may be amended, supplemented or otherwise modified from
time to time.
"ASSIGNED AGREEMENT" has the meaning assigned to that term in
Section 2 of this Agreement.
"AXEL COMMITMENTS" shall mean the "Commitments" as defined in the
AXEL Credit Agreement.
"AXEL CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"AXEL OBLIGATIONS" shall mean the "Obligations" as defined in the
AXEL Credit Agreement.
"COLLATERAL" has the meaning assigned to that term in Section 2 of
this Agreement.
"COLLATERAL ACCOUNTS" shall mean "Collateral Accounts" as defined
in the Intercreditor Agreement.
"COMMITMENTS" means the Credit Agreement Commitments and the AXEL
Commitments.
"CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"CREDIT AGREEMENT COMMITMENTS" shall mean the "Commitments" as
defined in the Credit Agreement.
"CREDIT AGREEMENT OBLIGATIONS" shall mean the "Obligations" as
defined in the Credit Agreement.
"EQUIPMENT" has the meaning assigned to that term in Section 2 of
this Agreement.
"EVENT OF DEFAULT" means any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which Company is
the Defaulting Party and which results in the designation of an Early
Termination Date (as such terms are defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate
Agreement.
XIX-3
<PAGE>
"FINANCING AGREEMENT" means either the Credit Agreement or the AXEL
Credit Agreement, and "Financing Agreements" means the Credit Agreement and
the AXEL Credit Agreement, collectively.
"FINANCING AGREEMENT OBLIGATIONS" means Credit Agreement Obligations
and AXEL Obligations.
"GRANTOR" has the meaning assigned to that term in the introduction
of this Agreement.
"HOLDINGS" has the meaning assigned to that term in the recitals to
this Agreement.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated
as of December 18, 1997, by and among CA Administrative Agent, AXEL
Administrative Agent and Collateral Agent.
"INTEREST RATE EXCHANGERS" has the meaning assigned to that term in
the recitals to this Agreement.
"INVENTORY" has the meaning assigned to that term in Section 2 of
this Agreement.
"LENDER INTEREST RATE AGREEMENT" has the meaning assigned to that
term in the recitals to this Agreement.
"LOAN" means any "Loan" as defined in any Financing Agreement, and
"LOANS" means all such Loans collectively.
"LOAN DOCUMENT" means any "Loan Document" as defined in any
Financing Agreement, and "LOAN DOCUMENTS" means all such Loan Documents
collectively.
"NEGOTIABLE DOCUMENT OF TITLE" has the meaning assigned to that term
in Section 2 of this Agreement.
"POTENTIAL EVENT OF DEFAULT" means any "Potential Event of
Default" as defined in any Financing Agreement.
"RELATED CONTRACTS" has the meaning assigned to that term in Section
2 of this Agreement.
"REQUISITE AXEL LENDERS" means "Requisite Lenders" as defined in
the AXEL Credit Agreement.
"REQUISITE CREDIT AGREEMENT LENDERS" means "Requisite Lenders" as
defined in the Credit Agreement.
XIX-4
<PAGE>
"REQUISITE LENDERS" means (A) unless an Acceleration shall have
occurred and be continuing, the Requisite Credit Agreement Lenders and the
Requisite AXEL Lenders, and (B) if an Acceleration has occurred and is
continuing, Secured Parties holding more than 50% of the Financing Agreement
Obligations.
"REQUISITE OBLIGEES" has the meaning assigned to that term in
Section 23 of this Agreement.
"SECURED OBLIGATIONS" has the meaning assigned to that term in
Section 2 of this Agreement.
"SECURED PARTIES" has the meaning assigned to that term in the
recitals to this Agreement.
SECTION 2. GRANT OF SECURITY.
-----------------
Each Grantor hereby assigns to Collateral Agent, and hereby grants to
Collateral Agent a security interest in, all of such Grantor's right, title and
interest in and to the following, in each case whether now or hereafter existing
or in which such Grantor now has or hereafter acquires an interest and wherever
the same may be located (the "COLLATERAL"):
(a) all equipment in all of its forms, all parts thereof and all
accessions thereto (any and all such equipment, parts and accessions being the
"EQUIPMENT");
(b) all inventory in all of its forms (including, but not limited to,
(i) all goods held by such Grantor for sale or lease or to be furnished under
contracts of service or so leased or furnished, (ii) all raw materials, work in
process, finished goods, and materials used or consumed in the manufacture,
packing, shipping, advertising, selling, leasing, furnishing or production of
such inventory or otherwise used or consumed in such Grantor's business, (iii)
all goods in which such Grantor has an interest in mass or a joint or other
interest or right of any kind, and (iv) all goods which are returned to or
repossessed by such Grantor) and all accessions thereto and products thereof
(all such inventory, accessions and products being the "INVENTORY") and all
negotiable and non-negotiable documents of title (including without limitation
warehouse receipts, dock receipts and bills of lading) issued by any Person
covering any Inventory (any such negotiable document of title being a
"NEGOTIABLE DOCUMENT OF TITLE");
(c) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any kind
and all rights in, to and under all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper,
XIX-5
<PAGE>
documents, instruments, general intangibles or other obligations (any and all
such accounts, contract rights, chattel paper, documents, instruments, general
intangibles and other obligations being the "ACCOUNTS", and any and all such
security agreements, leases and other contracts being the "RELATED
CONTRACTS");
(d) all agreements and contracts to which such Grantor is a party as
of the date hereof or becomes a party after the date hereof, as each such
agreement may be amended, supplemented or otherwise modified from time to time
(said agreements, as so amended, supplemented or otherwise modified, being
referred to herein individually as an "ASSIGNED AGREEMENT" and collectively as
the "ASSIGNED AGREEMENTS"), including (i) all rights of such Grantor to receive
moneys due or to become due under or pursuant to the Assigned Agreements, (ii)
all rights of such Grantor to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the Assigned Agreements, (iii) all claims
of such Grantor for damages arising out of any breach of or default under the
Assigned Agreements, and (iv) all rights of such Grantor to terminate, amend,
supplement, modify or exercise rights or options under the Assigned Agreements,
to perform thereunder and to compel performance and otherwise exercise all
remedies thereunder;
(e) all deposit accounts, including without limitation all deposit
accounts maintained with Collateral Agent;
(f) all tradesecrets, licenses, copyrights, registrations and
franchise rights, and all goodwill associated with any of the foregoing;
(g) to the extent not included in any other paragraph of this Section
2, all other general intangibles (including without limitation tax refunds,
rights to payment or performance, choses in action and judgments taken on any
rights or claims included in the Collateral);
(h) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products thereof;
(i) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(j) all proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Collateral Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received
XIX-6
<PAGE>
when Collateral or proceeds are sold, exchanged, collected or otherwise disposed
of, whether such disposition is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and each Grantor shall not be deemed to have granted a
security interest in, any of such Grantor's rights or interests in any license,
contract or agreement to which such Grantor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such license, contract or agreement or otherwise,
result in a breach of the terms of, or constitute a default under any license,
contract or agreement to which such Grantor is a party (other than to the extent
that any such term would be rendered ineffective pursuant to Section 9-318(4) of
the Uniform Commercial Code of any relevant jurisdiction or any other applicable
law (including the Bankruptcy Code) or principles of equity); provided, that
--------
immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and each Grantor shall be deemed to
have granted a security interest in, all such rights and interests as if such
provision had never been in effect.
SECTION 3. SECURITY FOR OBLIGATIONS.
------------------------
This Agreement secures, and the Collateral is collateral security for,
the prompt payment or performance in full when due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or otherwise
(including the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
(S)362(a)), of all obligations and liabilities of every nature of Grantors now
or hereafter existing under or arising out of or in connection with the Guaranty
and all extensions or renewals thereof, whether for principal, interest
(including without limitation interest that, but for the filing of a petition in
bankruptcy with respect to Company, would accrue on such obligations, whether or
not a claim is allowed against Company for such interest in the related
bankruptcy proceeding), reimbursement of amounts drawn under Letters of Credit,
payments for early termination of Lender Interest Rate Agreements, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Collateral
Agent or any Lender or Interest Rate Exchanger as a preference, fraudulent
transfer or otherwise and all obligations of every nature of Grantors now or
hereafter existing under this Agreement (all such obligations of Grantors being
the "SECURED OBLIGATIONS").
SECTION 4. GRANTORS REMAIN LIABLE.
----------------------
Anything contained herein to the contrary notwithstanding, (a) each
Grantor shall remain liable under any contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Collateral Agent of any of its rights hereunder
shall not release Grantor from any of its duties or obligations under the
contracts and
XIX-7
<PAGE>
agreements included in the Collateral, and (c) Collateral Agent shall not have
any obligation or liability under any contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Collateral Agent be obligated
to perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
------------------------------
Each Grantor represents and warrants as follows:
(a) Ownership of Collateral. Except for the security interest created
-----------------------
by this Agreement, Grantors own the Collateral free and clear of any Lien
subject to liens permitted by the Financing Agreements.
(b) Location of Equipment and Inventory. All of the Equipment and
-----------------------------------
Inventory is, as of the date hereof, located at the places specified in Schedule
--------
5(b) annexed hereto.
----
(c) Negotiable Documents of Title. No Negotiable Documents of Title
-----------------------------
are outstanding with respect to any of the Inventory (other than in respect of
(i) Inventory with an aggregate value not in excess of $1,000,000 or (ii)
Inventory which, in the ordinary course of business, is in transit either (A)
from a supplier to Grantor, (B) between the locations specified in Schedule 5(b)
-------------
hereto, or (C) to customers of Grantor).
(d) Office Locations; Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where such Grantor keeps its records
regarding the Accounts and all originals of all chattel paper that evidence
Accounts is, and has been for the four month period preceding the date hereof,
located at the offices set forth on Schedule 5(d) annexed hereto. Grantors have
-------------
not in the past done, and do not now do, business under any other name
(including any trade-name or fictitious business name) except as set forth on
Schedule 5(d) annexed hereto.
-------------
XIX-8
<PAGE>
SECTION 6. FURTHER ASSURANCES; ADDITIONAL GRANTORS.
---------------------------------------
(a) Each Grantor agrees that from time to time, at the expense of
Grantors, such Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, each Grantor will: (i) mark
conspicuously each item of chattel paper included in the Accounts, each Related
Contract and, at the reasonable request of Collateral Agent, each of its records
pertaining to the Collateral, with a legend, in form and substance reasonable
satisfactory to Collateral Agent, indicating that such Collateral is subject to
the security interest granted hereby, (ii) at the reasonable request of
Collateral Agent, deliver and pledge to Collateral Agent hereunder all
promissory notes and other instruments (excluding checks) and all original
counterparts of chattel paper constituting Collateral, duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Collateral Agent, (iii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, or as Collateral Agent may reasonably request, in order
to perfect and preserve the security interests granted or purported to be
granted hereby, (iv) after the acquisition by such Grantor of any item of
Equipment which is covered by a certificate of title under a statute of any
jurisdiction under the law of which indication of a security interest on such
certificate is required as a condition of perfection thereof, upon the
reasonable request of Collateral Agent, execute and file with the registrar of
motor vehicles or other appropriate authority in such jurisdiction an
application or other document requesting the notation or other indication of the
security interest created hereunder on such certificate of title, (v) upon the
reasonable request of Collateral Agent, deliver to Collateral Agent copies of
all such applications or other documents filed during such calendar quarter and
copies of all such certificates of title issued during such calendar quarter
indicating the security interest created hereunder in the items of Equipment
covered thereby, and (vi) at Collateral Agent's reasonable request, appear in
and defend any action or proceeding that may affect such Grantor's title to or
Collateral Agent's security interest in all or any part of the Collateral.
(b) Each Grantor hereby authorizes Collateral Agent to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of such Grantor to the
extent permitted by applicable law. Each Grantor agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
signed by such Grantor shall be sufficient as a financing statement and may be
filed as a financing statement in any and all jurisdictions.
XIX-9
<PAGE>
(c) The initial Grantors hereunder shall be those Subsidiaries of
Company as are signatories hereto on the date hereof. From time to time
subsequent to the date hereof, additional Subsidiaries of Company may become
parties hereto, as additional Grantors (each an "ADDITIONAL GRANTOR"), by
executing a counterpart of this Agreement substantially in the form of Schedule
--------
6(d) annexed hereto. Upon delivery of any such counterpart to the Collateral
----
Agent, notice of which is hereby waived by the Grantors, each Additional Grantor
shall be a Grantor and shall be as fully a party hereto as if such Additional
Grantor were an original signatory hereof. Each Grantor expressly agrees that
its obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Grantor hereunder, nor by any election of
Collateral Agent not to cause any Subsidiary to become an Additional Grantor
hereunder. This Agreement shall be fully effective as to any Grantor that is or
becomes a party hereto regardless of whether any other Person becomes or fails
to become or ceases to be a Grantor hereunder. Each Additional Grantor shall
execute and file such financing statements and such other instruments or notices
or as Collateral Agent may reasonably request, in order to perfect the security
interests granted or purported to be granted hereunder.
SECTION 7. CERTAIN COVENANTS OF GRANTORS.
-----------------------------
Each Grantor shall:
(a) notify Collateral Agent of any change in such Grantor's name,
identity or corporate structure within 30 days of such change;
(b) give Collateral Agent 30 days' written notice following any change
in such Grantor's chief place of business, chief executive office or residence
or the office where such Grantor keeps its records regarding the Accounts and
all originals of all chattel paper that evidence Accounts;
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to the
extent the validity thereof is being contested in good faith.
SECTION 8. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
---------------------------------------------------------
Each Grantor shall:
(a) keep the Equipment and Inventory at the places therefor specified
on Schedule 5(b) annexed hereto or, upon 30 days' written notice to Collateral
-------------
Agent following any change in location, at such other places in jurisdictions
where all action, or that Collateral Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby, or to enable Collateral Agent to exercise and enforce its rights and
remedies hereunder, with respect to such Equipment and Inventory shall have been
taken;
XIX-10
<PAGE>
(b) cause the Equipment to be maintained and preserved working order
as when new, ordinary wear and tear and damage by casualty excepted, and in
accordance with such Grantor's past practices, and shall forthwith make or cause
to be made all repairs, replacements and other improvements in connection
therewith that are necessary in the Grantor's reasonable business judgment to
such end;
(c) keep correct and accurate records of the Inventory, itemizing and
describing the kind, type and quantity of Inventory, such Grantor's cost
therefor and (where applicable) the current list prices for the Inventory;
(d) if any Inventory is in possession or control of any of such
Grantor's agents or processors, upon the occurrence of an Event of Default,
instruct such agent or processor to hold all such Inventory for the account of
Collateral Agent and subject to the instructions of Collateral Agent; and
(e) promptly upon the issuance and delivery to such Grantor of any
Negotiable Document of Title (other than any one or more Negotiable Documents of
Title covering (i) Inventory with an aggregate value not in excess of $1,000,000
or (ii) Inventory which, in the ordinary course of business, is in transit
either (A) from a supplier to such Grantor, (B) between the locations specified
in Schedule 5(b) hereto, or (C) to customers of such Grantor), deliver such
-------------
Negotiable Document of Title to Collateral Agent.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED CONTRACTS.
----------------------------------------------------------------
(a) Each Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts, and all originals of all chattel paper that
evidence Accounts, at the location therefor specified in Section 5 or, upon 30
days' written notice to Collateral Agent following any change in location, at
such other location in a jurisdiction where all action that Collateral Agent may
request, in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder, with respect to such Accounts and
Related Contracts shall have been taken. Promptly upon the reasonable request
of Collateral Agent, Grantors shall deliver to Collateral Agent complete and
correct copies of each Related Contract.
(b) Grantors shall, maintain (i) complete records of each Account,
including records of all payments received, credits granted and merchandise
returned, and (ii) all documentation relating thereto in accordance with prudent
business practices.
(c) Except as otherwise provided in this subsection (c), each Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to each Grantor under the Accounts and Related Contracts. In connection with
such collections, each Grantor shall
XIX-11
<PAGE>
take such action as such Grantor or Collateral Agent may deem necessary or
advisable to enforce collection of amounts due or to become due under the
Accounts; provided, however, that Collateral Agent shall have the right at any
-------- -------
time, upon the occurrence and during the continuation of an Event of Default and
upon written notice to such Grantor of its intention to do so, to notify the
account debtors or obligors under any Accounts of the assignment of such
Accounts to Collateral Agent and to direct such account debtors or obligors to
make payment of all amounts due or to become due to such Grantor thereunder
directly to Collateral Agent, to notify each Person maintaining a lockbox or
similar arrangement to which account debtors or obligors under any Accounts have
been directed to make payment to remit all amounts representing collections on
checks and other payment items from time to time sent to or deposited in such
lockbox or other arrangement directly to Collateral Agent and, upon such
notification and at the expense of Grantors, to enforce collection of any such
Accounts and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as such Grantors might have done. After
receipt by a Grantor of the notice from Collateral Agent referred to in the
proviso to the preceding sentence, (i) any payments of Accounts, received by the
-------
Grantor shall be forthwith (and in any event within two Business Days) deposited
by the Grantor in the exact form received, duly indorsed by the Grantor to the
Collateral Agent if required, in a Collateral Account maintained under the sole
dominion and control of the Collateral Agent, subject to withdrawal by the
Collateral Agent for the account of the Secured Parties only as provided in
subsection 19, (ii) until so turned over in accordance with the proceeding
subsection (i), all amounts and proceeds (including checks and other
instruments) received by Grantor in respect of the Accounts and the Related
Contracts shall be received in trust for the benefit of Collateral Agent
hereunder and shall be segregated from other funds of Grantor and (iii) Grantor
shall not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
SECTION 10. DEPOSIT ACCOUNTS.
----------------
Upon the occurrence and during the continuation of an Event of
Default, Collateral Agent may exercise dominion and control over, and refuse to
permit further withdrawals (whether of money, securities, instruments or other
property) from any deposit accounts maintained with Collateral Agent
constituting part of the Collateral.
SECTION 11. LICENSE OF COPYRIGHTS, ETC.
--------------------------
Each Grantor hereby assigns, transfers and conveys to Collateral
Agent, effective upon the occurrence of any Event of Default, the nonexclusive
right and license to use all copyrights or technical processes owned or used by
such Grantor that relate to the Collateral and any other collateral granted by
such Grantor as security for the Secured Obligations, together with any goodwill
associated therewith, all to the extent necessary to enable Collateral Agent to
use, possess and realize on the Collateral and to enable any successor or assign
to enjoy the benefits of the Collateral. This right and license shall inure to
the benefit of all successors, assigns and transferees of Collateral Agent and
its successors, assigns and transferees, whether by voluntary conveyance,
operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure
or otherwise. Such right and license is granted free of charge, without
requirement that any monetary payment whatsoever be made to any Grantor.
XIX-12
<PAGE>
SECTION 12. TRANSFERS AND OTHER LIENS.
-------------------------
Each Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Financing
Agreements; or
(b) except for the security interest created by this Agreement and
Liens permitted by the Financing Agreements, create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure the indebtedness or
other obligations of any Person.
SECTION 13. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
-------------------------------------------
Each Grantor hereby irrevocably appoints Collateral Agent as such
Grantor's attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor, Collateral Agent or otherwise, from
time to time upon the occurrence and during the continuance of an Event of
Default in Collateral Agent's reasonable discretion to take any action and to
execute any instrument that Collateral Agent may reasonably deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) to obtain and adjust insurance required to be maintained on the
Collateral or paid to Collateral Agent under the Financing Agreements;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any proceedings
that Collateral Agent may reasonably deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Collateral Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Collateral Agent in
its reasonable discretion, any such payments made by Collateral Agent to become
obligations of such Grantor to Collateral Agent, due and payable immediately
without demand;
XIX-13
<PAGE>
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as though
Collateral Agent were the absolute owner thereof for all purposes, and to do, at
Collateral Agent's option and Grantors' expense, at any time or from time to
time, all acts and things that Collateral Agent reasonably deems necessary to
protect, preserve or realize upon the Collateral and Collateral Agent's security
interest therein in order to effect the intent of this Agreement, all as fully
and effectively as any Grantor might do.
SECTION 14. COLLATERAL AGENT MAY PERFORM.
----------------------------
If any Grantor fails to perform any agreement contained herein,
Collateral Agent may itself perform, or cause performance of, such agreement,
and the reasonable expenses of Collateral Agent incurred in connection therewith
shall be payable by Grantors under Section 20.
SECTION 15. STANDARD OF CARE.
----------------
The powers conferred on Collateral Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Collateral Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. Collateral
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Collateral Agent accords its own
property.
SECTION 16. REMEDIES.
--------
If any Event of Default shall have occurred and be continuing,
Collateral Agent may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE")
(whether or not the Code applies to the affected Collateral), and also may (a)
require Grantors to, and each Grantor hereby agrees that it will at its expense
and upon request of Collateral Agent forthwith, assemble all or part of the
Collateral as directed by Collateral Agent and make it available to Collateral
Agent at a place to be designated by Collateral Agent that is reasonably
convenient to both parties, (b) enter onto the property where any Collateral is
located and take possession thereof with or without judicial process, (c) prior
to the disposition of the Collateral,
XIX-14
<PAGE>
store, process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Collateral Agent deems
appropriate, (d) take possession of any or each Grantor's premises or place
custodians in exclusive control thereof, remain on such premises and use the
same and any of such Grantor's equipment for the purpose of completing any work
in process, taking any actions described in the preceding clause (c) and
collecting any Secured Obligation, and (e) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or prices
and upon such other terms as Collateral Agent may deem commercially reasonable.
Collateral Agent or any Secured Party or Interest Rate Exchanger may be the
purchaser of any or all of the Collateral at any such sale and Collateral Agent,
as agent for and representative of Secured Parties and Interest Rate Exchangers
(but not any Secured Party or Secured Parties or Interest Rate Exchanger or
Interest Rate Exchangers in its or their respective individual capacities unless
Requisite Obligees shall otherwise agree in writing), shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Secured Obligations as a credit on account of the purchase
price for any Collateral payable by Collateral Agent at such sale. Each
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of any Grantor, and each Grantor hereby waives (to
the extent permitted by applicable law) all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. Each Grantor agrees that,
to the extent notice of sale shall be required by law, at least ten days' notice
to such Grantor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification.
Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Collateral Agent may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. Each Grantor hereby waives any claims
against Collateral Agent arising by reason of the fact that the price at which
any Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if Collateral Agent
accepts the first offer received and does not offer such Collateral to more than
one offeree. If the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantors shall be jointly
and severally liable for the deficiency and the reasonable fees of any attorneys
employed by Collateral Agent to collect such deficiency.
SECTION 17. PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT.
----------------------------------------------
In addition to the rights of the Collateral Agent and the Secured
Parties specified in Section 9 with respect to payments of Accounts, if an Event
of Default shall occur and be continuing, upon request of the Collateral Agent,
all proceeds received by the Grantor consisting of cash, checks and other near-
cash items shall be held by the Grantor in trust for the Collateral Agent and
the Secured Parties, segregated from other funds of the Grantor, and shall,
forthwith upon receipt by the Grantor, be turned over to the Collateral Agent in
the exact form received by the Grantor (duly indorsed by the Grantor to the
Collateral Agent, if required) and held by the Collateral Agent in a Collateral
Account maintained under the Intercreditor
XIX-15
<PAGE>
Agreement. All proceeds while held by the Collateral Agent in a Collateral
Account (or by the Borrower in trust for the Collateral Agent and the Secured
Parties) shall continue to be held as collateral security for all the Secured
Obligations and shall not constitute payment thereof until applied as provided
in Section 19.
SECTION 18. APPLICATION OF PROCEEDS.
-----------------------
Except as expressly provided elsewhere in this Agreement, all proceeds
held in any Collateral Account and all other proceeds received by Collateral
Agent in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied as provided in subsection 3 of
the Intercreditor Agreement.
SECTION 19. INDEMNITY AND EXPENSES.
----------------------
(a) Grantors jointly and severally agree to indemnify Collateral
Agent, each Lender and each Interest Rate Exchanger from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result from Collateral Agent's or such
Lender's or Interest Rate Exchanger's gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
(b) Grantors jointly and severally agree to pay to Collateral Agent,
promptly following written upon demand the amount of any and all reasonable
costs and reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Collateral Agent hereunder, or (iv) the failure by Grantor
to perform or observe any of the provisions hereof.
SECTION 20. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.
-----------------------------------------------
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations (other than inchoate indemnification obligations
with respect to claims, losses or liabilities which have not yet arisen and are
not yet due and payable), the cancellation or termination of the Commitments and
the cancellation or expiration of all outstanding Letters of Credit, (b) be
binding upon each Grantor, its successors and assigns, and (c) inure, together
with the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement and subsection 10.1 of the AXEL Credit
Agreement, any Secured Party may assign or otherwise transfer any Loans held by
it to any other Person, and such other Person shall thereupon become vested with
all the benefits in respect thereof granted to Secured Parties herein or
otherwise. Upon the payment in full of all Secured Obligations (other than
inchoate indemnification obligations with
XIX-16
<PAGE>
respect to claims, losses or liabilities which have not yet arisen and are not
yet due and payable), the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the applicable Grantors. Upon any such termination Collateral Agent
will, at the joint and several expense of Grantors, expense, execute and deliver
to Grantors such documents as Grantors shall reasonably request to evidence such
termination in accordance with the terms of the Intercreditor Agreement.
SECTION 21. COLLATERAL AGENT AS ADMINISTRATIVE AGENT.
----------------------------------------
(a) Collateral Agent has been appointed to act as Collateral Agent
hereunder by CA Administrative Agent on behalf of the Credit Agreement Lenders
and AXEL administrative agent on behalf of the AXEL Lenders pursuant to the
Intercreditor Agreement and, by their acceptance of the benefits hereof,
Interest Rate Exchangers, and shall be entitled to the benefits of the
Intercreditor Agreement. Collateral Agent shall be obligated, and shall have
the right hereunder, to make demands, to give notices, to exercise or refrain
from exercising any rights, and to take or refrain from taking any action
(including, without limitation, the release or substitution of Collateral),
solely in accordance with this Agreement and the Credit Agreement; provided that
--------
Collateral Agent shall exercise, or refrain from exercising, any remedies
provided for in Section 17 in accordance with the instructions of (i) Requisite
Lenders or (ii) after payment in full of all Financing Agreement Obligations
under the Financing Agreements and any other Loan Documents, the holders of a
majority of the aggregate notional amount (or, with respect to any Lender
Interest Rate Agreement that has been terminated in accordance with its terms,
the amount then due and payable (exclusive of expenses and similar payments but
including any early termination payments then due) under such Lender Interest
Rate Agreement) under all Lender Interest Rate Agreements (Requisite Lenders or,
if applicable, such holders being referred to herein as "REQUISITE OBLIGEES").
In furtherance of the foregoing provisions of this Section 22(a), each Interest
Rate Exchanger, by its acceptance of the benefits hereof, agrees that it shall
have no right individually to realize upon any of the Collateral hereunder, it
being understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Collateral Agent for the benefit
of Lenders and Interest Rate Exchangers in accordance with the terms of this
Section 22(a).
(b) Collateral Agent shall at all times be the same Person that is
appointed Collateral Agent under the Intercreditor Agreement. The Collateral
Agent may resign and a successor Collateral Agent may be appointed in the manner
provided in the Intercreditor Agreement. Upon the acceptance of any
appointment as Collateral Agent by a successor Collateral Agent, that successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Collateral
Agent under this Agreement, and the retiring or removed Collateral Agent under
this Agreement shall promptly (i) transfer to such successor Collateral Agent
all sums, securities and other items of Collateral held hereunder, together with
all records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Collateral Agent under this
Agreement, and (ii) execute and deliver to such successor Collateral Agent such
amendments to financing statements, and take such other actions, as may be
necessary or
XIX-17
<PAGE>
appropriate in connection with the assignment to such successor Collateral Agent
of the security interests created hereunder, whereupon such retiring or removed
Collateral Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Collateral Agent's resignation or
removal hereunder as Collateral Agent, the provisions of this Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it under
this Agreement while it was Collateral Agent hereunder.
SECTION 23. AMENDMENTS; ETC.
---------------
No amendment, modification, termination or waiver of any provision of
this Agreement, and no consent to any departure by any Grantor therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Collateral Agent and, in the case of any such amendment or modification, by
Grantors; provided that any amendment hereto pursuant to Section 5(d) shall be
--------
effective upon execution by any Grantor and Grantors hereby waive any
requirement of notice or of consent to any such amendment.
SECTION 23. NOTICES.
-------
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Collateral Agent and Grantor shall not be
--------
effective until received. For the purposes hereof, the address of each party
hereto shall be as provided in subsection 10.8 of the Credit Agreement or
subsection 10.8 of the AXEL Credit Agreement, as applicable, or as set forth
under such party's name on the signature pages hereof or such other address as
shall be designated by such party in a written notice delivered to the other
parties hereto.
SECTION 24. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Collateral Agent in the exercise of
any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 25. SEVERABILITY.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
XIX-18
<PAGE>
SECTION 26. HEADINGS.
--------
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 27. GOVERNING LAW; TERMS.
--------------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined.
SECTION 28. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION
24;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GRANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH
XIX-19
<PAGE>
COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH GRANTOR
IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 29 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT
PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
SECTION 29. WAIVER OF JURY TRIAL.
--------------------
EACH GRANTOR AND COLLATERAL AGENT HEREBY AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-
encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including without limitation
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Grantors and Collateral Agent each acknowledge that this
waiver is a material inducement for Grantors and Collateral Agent to enter into
a business relationship, that each Grantor and Collateral Agent have already
relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Each Grantor
and Collateral Agent further warrant and represent that each has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 28
AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
SECTION 30. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
XIX-20
<PAGE>
IN WITNESS WHEREOF, Grantors and Collateral Agent have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
SEALY, INC.
THE STEARNS & FOSTER
BEDDING COMPANY
THE STEARNS & FOSTER
UPHOLSTERY FURNITURE
COMPANY
ADVANCED SLEEP
PRODUCTS
SEALY MATTRESS
COMPANY OF SAN DIEGO
SEALY MATTRESS
COMPANY OF PUERTO
RICO
OHIO-SEALY MATTRESS
MANUFACTURING CO.
INC.
OHIO-SEALY MATTRESS
MANUFACTURING CO. --
FORT WORTH
OHIO-SEALY MATTRESS
MANUFACTURING CO.
OHIO-SEALY MATTRESS
MANUFACTURING CO. --
HOUSTON
[OTHER GRANTORS]
By:
-------------------
Name:
Title:
Notice Address:
--------------------------
--------------------------
--------------------------
XIX-21
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, AS COLLATERAL AGENT
By:
---------------------------------
Name:
Title:
Notice Address:
--------------------------
--------------------------
--------------------------
XIX-22
<PAGE>
SCHEDULE 5(b)
TO SUBSIDIARY SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
XIX-23
<PAGE>
SCHEDULE 5(d)
TO SUBSIDIARY SECURITY AGREEMENT
Office Locations; Other Names
XIX-24
<PAGE>
SCHEDULE 6(d)
TO SUBSIDIARY SECURITY AGREEMENT
[FORM OF COUNTERPART TO SUBSIDIARY SECURITY AGREEMENT]
This counterpart, dated ___________, [199__][200__] is delivered
pursuant to Section 5(d) of that certain Subsidiary Security Agreement dated as
of December 18, 1997, among the Grantors party thereto from time to time, and
Morgan Guaranty Trust Company of New York, as Collateral Agent (the "SECURITY
AGREEMENT," capitalized terms defined therein being used herein as therein
defined). The undersigned hereby agrees (i) that this counterpart may be
attached to the Security Agreement, and (ii) that the undersigned will comply
with all the terms and conditions of the Pledge Agreement as if it were an
original signatory thereto.
[NAME OF ADDITIONAL GRANTOR]
By:
---------------------------------
Name:
Title:
XIX-25
<PAGE>
EXHIBIT XX
[FORM OF SUBSIDIARY PATENT AND TRADEMARK SECURITY AGREEMENT]
SUBSIDIARY PATENT AND TRADEMARK SECURITY AGREEMENT
This SUBSIDIARY PATENT AND TRADEMARK SECURITY AGREEMENT (this
"AGREEMENT") is dated as of December 18, 1997 and entered into by and among THE
UNDERSIGNED DIRECT AND INDIRECT SUBSIDIARIES (each of such undersigned
Subsidiaries being a "GRANTOR" and collectively "GRANTORS"; provided that after
--------
the Closing Date, "Grantors" shall be deemed to include any Additional Grantors
(as hereinafter defined)) of Sealy Mattress Company, an Ohio corporation
("COMPANY"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN GUARANTY"),
as Collateral Agent for and representative of (in such capacity herein called
"COLLATERAL AGENT") the Secured Parties (as hereinafter defined) and any
Interest Rate Exchangers (as hereinafter defined).
RECITALS
A. Sealy Corporation, a Delaware Corporation ("HOLDINGS"), the
financial institutions from time to time parties thereto (the "CREDIT AGREEMENT
LENDERS"), Goldman Sachs Credit Partners L.P. ("GSCP"), as arranger and
syndication agent (in such capacity, "CA SYNDICATION AGENT"), Morgan Guaranty,
as administrative agent (in such capacity, "CA ADMINISTRATIVE AGENT"), and
Bankers Trust Company ("BTCO."), as documentation agent (in such capacity, "CA
DOCUMENTATION AGENT") have entered into a Credit Agreement dated as of December
18, 1997 (said Credit Agreement, as it may hereafter be amended, restated,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT"), with Company pursuant to which Credit Agreement Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Company.
B. Company, Holdings, the financial institutions from time to time
parties thereto (the "AXEL LENDERS"), GSCP, as arranger and syndication agent
(in such capacity, "AXEL SYNDICATION AGENT"), Morgan Guaranty, as administrative
agent (in such capacity, "AXEL ADMINISTRATIVE AGENT"), and BTCo., as
documentation agent (in such capacity, "AXEL DOCUMENTATION AGENT") have entered
into an AXEL Credit Agreement dated as of December 18, 1997 (said AXEL Credit
Agreement, as it may hereafter be amended, restated, supplemented or otherwise
modified from time to time, being the "AXEL CREDIT AGREEMENT"; the Credit
Agreement Lenders, the CA Syndication Agent, the CA Administrative Agent, the CA
Documentation Agent, the AXEL Lenders, the AXEL Syndication Agent, the AXEL
Administrative Agent, and the AXEL Documentation Agent each being a "SECURED
PARTY" and collectively the "SECURED PARTIES") pursuant to which AXEL Lenders
have made certain commitments, subject to the terms and conditions set forth in
the AXEL Credit Agreement, to extend certain credit facilities to Company.
XX-1
<PAGE>
C. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"LENDER INTEREST RATE AGREEMENTS") with one or more CA Lenders or their
Affiliates or AXEL Lenders or their Affiliates (in such capacity, collectively,
"INTEREST RATE EXCHANGERS") in accordance with the terms of the Financing
Agreements (as hereinafter defined), and it is desired that the obligations of
Company under the Lender Interest Rate Agreements, including without limitation
the obligation of Company to make payments thereunder in the event of early
termination thereof (all such obligations being the "INTEREST RATE
OBLIGATIONS"), together with all obligations of Company under the Financing
Agreements and the any other Loan Documents, be secured hereunder.
D. Grantors have executed and delivered that certain Subsidiary
Guaranty dated as of December 18, 1997 (said Subsidiary Guaranty, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "SUBSIDIARY GUARANTY") in favor of Collateral Agent for the benefit
of Secured Parties and any Interest Rate Exchangers, pursuant to which Grantors
have guarantied the prompt payment and performance when due of all obligations
of Company under the Financing Agreements and any other Loan Documents and all
obligations of Company under the Lender Interest Rate Agreements, including
without limitation the obligation of Company to make payments thereunder in the
event of early termination thereof.
E. Additional Grantors shall execute and deliver counterparts to the
Subsidiary Guaranty in favor of Collateral Agent for the benefit of Secured
Parties and any Interest Rate Exchangers, pursuant to which each Additional
Grantor shall guaranty the prompt payment and performance when due of all
obligations of Company under the Financing Agreements and any other Loan
Documents and all obligations of Company under the Lender Interest Rate
Agreements, including without limitation the obligation of Company to make
payments thereunder in the event of early termination thereof.
F. Grantors have and may in the future have rights, title and
interests in and to various Patents and other related Collateral (as such terms
are hereinafter defined).
G. Grantors own and use in their business, and will in the future
adopt and so use, various intangible assets, including trademarks, service
marks, designs, logos, indicia, tradenames, corporate names, company names,
business names, fictitious business names, trade styles and/or other source
and/or business identifiers and applications pertaining thereto (collectively,
the "TRADEMARKS").
G. Collateral Agent desires Grantors to grant to it a lien on and
security interest in all of Grantors' existing and future Patents, existing and
future Trademarks, all registrations that have been or may hereafter be issued
or applied for thereon in the United States and any state thereof (the
"REGISTRATIONS"), all common law and other rights in and to the Trademarks in
the United States and any state thereof (the "TRADEMARK RIGHTS"), all goodwill
of Grantors' business symbolized by the Trademarks and associated therewith,
including without limitation the documents and things described in Section 2(b)
(the "ASSO-
XX-2
<PAGE>
CIATED GOODWILL") and any other Collateral, and all proceeds of the Patents,
Trademarks, the Registrations, the Trademark Rights, the Associated Goodwill and
any other Collateral, and Grantors agree to grant to Collateral Agent a secured
and protected interest in the Trademarks, the Registrations, the Trademark
Rights, the Associated Goodwill and all the proceeds thereof as provided herein.
I. Pursuant to the Subsidiary Security Agreement, each Grantor has
granted to Collateral Agent a lien on and security interest in, among other
assets, all Grantors' equipment, inventory, accounts and general intangibles
relating to the products and services sold or delivered under or in connection
with the Trademarks such that, upon the occurrence and during the continuation
of an Event of Default (as hereinafter defined) Collateral Agent would be able
to exercise its remedies consistent with the Security Agreement, this Agreement
and applicable law to foreclose upon Grantors' business and use the Trademarks,
the Registrations and the Trademark Rights in conjunction with the continued
operation of such business, maintaining substantially the same product and
service specifications and quality as maintained by Grantors, and benefit from
the Associated Goodwill.
J. It is a condition precedent to the initial extensions of credit
by Lenders under the Financing Agreements that Grantors shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and to induce (i) the
CA Administrative Agent, the CA Syndication Agent and the Credit Agreement
Lenders to enter into the Credit Agreement, (ii) the Credit Agreement Lenders to
make their respective loans to, and issue Letters of Credit for the account of,
Company, (iii) the AXEL Administrative Agent, the AXEL Syndication Agent and the
AXEL Lenders to enter into the AXEL Loan Agreement, (iv) the AXEL Lenders to
make their respective loans to Company, and (v) to induce Interest Rate
Exchangers to enter into the Lender Interest Rate Agreements and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Grantor hereby agrees with the Collateral Agent as follows:
1. DEFINED TERMS.
-------------
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to such terms in the
Credit Agreement;
(b) The following terms shall have the following meanings:
"ACCELERATION" shall mean any of the Credit Agreement Obligations or
the AXEL Credit Agreement Obligations have been declared, or have become,
immediately due and payable, or the commitments to extend credit of the Credit
Agreement Lenders or the AXEL Lenders shall have been terminated under Section 8
of the Credit Agreement or Section 7 of the AXEL Credit Agreement, respectively.
"AGREEMENT" means this Company Security Agreement dated as of
December 18, 1997, as it may be amended, supplemented or otherwise modified from
time to time.
XX-3
<PAGE>
"ASSOCIATED GOODWILL" has the meaning assigned to that term in the
recitals to this Agreement.
"AXEL COMMITMENTS" shall mean the "Commitments" as defined in the
AXEL Credit Agreement.
"AXEL CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"AXEL LENDERS" has the meaning assigned to that term in the recitals
to this Agreement.
"AXEL OBLIGATIONS" shall mean "Obligations" as defined in the AXEL
Credit Agreement.
"AXEL SYNDICATION AGENT" has the meaning assigned to that term in
the recitals to this Agreement.
"COLLATERAL" has the meaning assigned to that term in Section 5 of
this Agreement.
"COLLATERAL ACCOUNTS" shall mean "Collateral Accounts" as defined
in the Intercreditor Agreement.
"COLLATERAL AGENT" has the meaning assigned to that term in the
introduction.
"COMMITMENTS" means the Credit Agreement Commitments and the AXEL
Commitments.
"CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"CREDIT AGREEMENT COMMITMENTS" shall mean the "Commitments" as
defined in the Credit Agreement.
"CREDIT AGREEMENT OBLIGATIONS" shall mean the "Obligations" as
defined in the Credit Agreement.
"EVENT OF DEFAULT" means any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which Company in
the Defaulting Party and which results in the designation of an Early
Termination Date (as defined in a Master Agreement or an Interest Rate Swap
Agreement or Interest Rate and Currency Exchange Agreement in the form prepared
by the International Swap and Derivatives Association Inc. or a similar event
under any similar swap agreement) under any Lender Interest Rate Agreement.
XX-4
<PAGE>
"HOLDINGS" has the meaning assigned to that term in the recitals to
this Agreement.
"FINANCING AGREEMENT" means the Credit Agreement or the AXEL Credit
Agreement, and "Financing Agreements" means the Credit Agreement and the AXEL
Credit Agreement, collectively.
"FINANCING AGREEMENT OBLIGATIONS" means "Credit Agreement
Obligations and AXEL Obligations.
"GRANTOR" has the meaning assigned to that term in the introduction
of this Agreement.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated
as of December 18, 1997, by and among CA Administrative Agent, AXEL
Administrative Agent and Collateral Agent.
"INTEREST RATE EXCHANGERS" has the meaning assigned to that term in
the recitals to this Agreement.
"INTEREST RATE OBLIGATIONS" has the meaning assigned to that term in
the recitals to this Agreement.
"LENDER INTEREST RATE AGREEMENT" has the meaning assigned to that
term in the recitals to this Agreement.
"LOAN" means any "Loan" as defined in any Financing Agreement, and
"LOANS" means all such Loans collectively.
"LOAN DOCUMENT" means any "Loan Document" as defined in any
Financing Agreement, and "LOAN DOCUMENTS" means all such Loan Documents
collectively.
"MATERIAL PATENT" has the meaning assigned to that term in Section 5
of this Agreement.
"MATERIAL TRADEMARK PROPERTY" has the meaning assigned to that term
in Section 5 of this Agreement.
"PATENTS" has the meaning assigned to that term in Section 2 of this
Agreement.
"PERMITTED PATENT LIENS" has the meaning assigned to that term in
Section 5 of this Agreement.
XX-5
<PAGE>
"PERMITTED TRADEMARK LIENS" has the meaning assigned to that term in
Section 5 of this Agreement.
"POTENTIAL EVENT OF DEFAULT" means any "Potential Event of
Default" as defined in any Financing Agreement.
"REGISTRATIONS" has the meaning assigned to that term in the
recitals to this Agreement.
"REQUISITE AXEL LENDERS" means "Requisite Lenders" as defined in
the AXEL Credit Agreement.
"REQUISITE CREDIT AGREEMENT LENDERS" means "Requisite Lenders" as
defined in the Credit Agreement.
"REQUISITE LENDERS" means (A) unless an Acceleration shall have
occurred and be continuing, the Requisite Credit Agreement Lenders and the
Requisite AXEL Lenders, and (B) if an Acceleration has occurred and is
continuing, Secured Parties holding more than 50% of the Financing Agreement
Obligations.
"REQUISITE OBLIGEES" has the meaning assigned to that term in
Section 19 of this Agreement.
"SECURED OBLIGATIONS" has the meaning assigned to that term in
Section 3 of this Agreement.
"SECURED PARTIES" has the meaning assigned to that term in the
recitals to this Agreement.
"TRADEMARKS" has the meaning assigned to that term in the recitals
to this Agreement.
"TRADEMARK RIGHTS" has the meaning assigned to that term in the
recitals to this Agreement.
2. GRANT OF SECURITY.
-----------------
Each Grantor hereby grants to Collateral Agent a security interest in
all of such Grantor's right, title and interest in and to the following, in each
case whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):
A. each of the U.S. Trademarks and rights and interests in
Trademarks which are presently, or in the future may be, owned, held
(whether pursuant to a license or otherwise) or used by such Grantor,
in whole or in part (including without limitation the U.S. Trademarks
specifically identified in Schedule I
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XX-6
<PAGE>
annexed hereto) and including all Trademark Rights with respect
thereto and all federal and state Registrations heretofore or
hereafter granted or applied for, the right (but not the obligation)
to file for registration claims under any state or federal trademark
law or regulation and to apply for, renew and extend the Trademarks,
Registrations and Trademark Rights, the right (but not the obligation)
to sue or bring opposition or cancellation proceedings in the name of
such Grantor or in the name of Collateral Agent or otherwise for past,
present and future infringements of the Trademarks, Registrations or
Trademark Rights and all rights (but not obligations) corresponding
thereto in the United States, and the Associated Goodwill; it being
understood that the rights and interests included herein shall
include, without limitation, all rights and interests pursuant to
licensing or other contracts in favor of such Grantor pertaining to
any Trademarks, Registrations or Trademark Rights presently or in the
future owned, held or used by third parties but, in the case of third
parties which are not Affiliates of such Grantor, only to the extent
permitted by such licensing or other contracts or otherwise permitted
by applicable law and, if not so permitted under any such contracts
and applicable law, only with the consent of such third parties;
B. the following documents and things in such Grantor's
possession, or subject to such Grantor's right to possession, related
to (Y) the production, sale and delivery by such Grantor, or by any
Affiliate, licensee or subcontractor of such Grantor, of products or
services sold or delivered by or under the authority of such Grantor
in connection with the Trademarks, Registrations or Trademark Rights
(which products and services shall, for purposes of this Agreement, be
deemed to include, without limitation, products and services sold or
delivered pursuant to merchandising operations utilizing any
Trademarks, Registrations or Trademark Rights); or (Z) any retail or
other merchandising operations conducted under the name of or in
connection with the Trademarks, Registrations or Trademark Rights by
such Grantor or any Affiliate, licensee or subcontractor of such
Grantor:
1. all lists and ancillary documents that identify and
describe any of such Grantor's customers, or those of their
Affiliates, licensees or subcontractors, for products sold and
services delivered under or in connection with the Trademarks or
Trademark Rights, including without limitation any lists and
ancillary documents that contain a customer's name and address,
the name and address of any of its warehouses, branches or other
places of business, the identity of the Person or Persons having
the principal responsibility on a customer's behalf for ordering
products or services of the kind supplied by such Grantor, or the
credit, payment, discount, delivery or other sale terms applicable
to such customer, together with information setting forth the
total purchases, by brand, product, service, style, size or other
criteria, and the patterns of such purchases;
XX-7
<PAGE>
2. all product and service specification documents and
production and quality control manuals used in the manufacture or
delivery of products and services sold or delivered under or in
connection with the Trademarks or Trademark Rights;
3. all documents which reveal the name and address of
any source of supply, and any terms of purchase and delivery, for
any and all materials, components and services used in the
production of products and services sold or delivered under or in
connection with the Trademarks or Trademark Rights; and
4. all documents constituting or concerning the then
current or proposed advertising and promotion by such Grantor or
its Affiliates, licensees or subcontractors of products and
services sold or delivered under or in connection with the
Trademarks or Trademark Rights including, without limitation, all
documents which reveal the media used or to be used and the cost
for all such advertising conducted within the described period or
planned for such products and services; and
C. all patents and patent applications and rights and interests
in U.S. patents and patent applications that are presently, or in the
future may be, owned, held (whether pursuant to a license or otherwise)
or used by such Grantor in whole or in part (including, without
limitation, the U.S. patents and patent applications listed in Schedule
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II annexed hereto, all rights (but not obligations) corresponding thereto
--
(including without limitation the right (but not the obligation) to sue
for past, present and future infringements in the name of such Grantor or
in the name of Secured Party), and all re-issues, divisions,
continuations, renewals, extensions and continuations-in-part thereof
(all of the foregoing being collectively referred to as the "PATENTS");
it being understood that the rights and interests granted hereby shall
include, without limitation, all rights and interests pursuant to
licensing or other contracts in favor of such Grantor pertaining to any
Patent presently or in the future owned, held or used by third parties
but, in the case of third parties which are not Affiliates of such
Grantor, only to the extent permitted by such licensing or other
contracts or otherwise permitted by applicable law and, if not so
permitted under any such contracts and applicable law, only with the
consent of such third parties;
D. all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software that
at any time evidence or contain information relating to any of the
Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereupon;
E. to the extent not included in the foregoing clauses (a) -(d),
all general intangibles relating to the Collateral; and
XX-8
<PAGE>
F. all proceeds, products, and profits (including without
limitation license royalties and proceeds of infringement suits) of or
from any and all of the foregoing Collateral and, to the extent not
otherwise included, all payments under insurance (whether or not
Collateral Agent is the loss payee thereof), or any indemnity, warranty
or guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral. For purposes of this
Agreement, the term "PROCEEDS" includes whatever is receivable or
received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or
involuntary.
3. SECURITY FOR OBLIGATIONS.
------------------------
This Agreement secures, and the Collateral is collateral security for,
the prompt payment or performance in full when due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or otherwise
(including without limitation the payment of amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. (S)362(a)), of all Secured Obligations with respect to such
Grantor. "SECURED OBLIGATIONS" means all obligations and liabilities of every
nature of Grantors now or hereafter existing under or arising out of or in
connection with the Subsidiary Guaranty, in each case together with all
extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in bankruptcy
with respect to Grantor, would accrue on such obligations), reimbursement of
amounts drawn under Letters of Credit, payments for early termination of Lender
Interest Rate Agreements, fees, expenses, indemnities or otherwise, whether
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later increased, created or
incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from Collateral Agent or any Secured Party or Interest
Rate Exchanger as a preference, fraudulent transfer or otherwise, and all
obligations of every nature of Grantors now or hereafter existing under this
Agreement.
4. GRANTORS REMAINS LIABLE.
-----------------------
Anything contained herein to the contrary notwithstanding, (a) each
Grantor shall remain liable under any contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Collateral Agent of any of its rights hereunder
shall not release any Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral, and (c) Collateral Agent
shall not have any obligation or liability under any contracts and agreements
included in the Collateral by reason of this Agreement, nor shall Collateral
Agent be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
XX-9
<PAGE>
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
Each Grantor represents and warrants as follows:
(a) OWNERSHIP OF COLLATERAL. Except as expressly permitted by
the Financing Agreements and for the security interest and conditional
assignment created by this Agreement (and other than ownership and
other rights reserved by third party owners with respect to each
Material Trademark Property and each Material Patent that Grantor is
licensed to use), such Grantor is the legal and beneficial owner of
the entire right, title and interest in and to (i) each Material
Trademark Property, free and clear of any Lien other than Liens of
mechanics, materialmen, attorneys and other similar liens imposed by
laws in the ordinary course of business in connection with the
establishment, creation or application for registration of any
Trademarks, Registrations or Trademark Rights for sums not yet
delinquent or being contested in good faith (such Liens being referred
to herein as "PERMITTED TRADEMARK LIENS"), and (ii) each Material
Patent, free and clear of any Lien other than Liens of mechanics,
materialmen, attorneys and other similar liens imposed by law in the
ordinary course of business in connection with the establishment,
creation or application for any Patent for sums not yet delinquent or
being contested in good faith (such Liens being referred to herein as
"PERMITTED PATENT LIENS"). Except such as may have been filed in favor
of Collateral Agent relating to this Agreement except as permitted by
the Financing Agreements, no effective financing statement or other
instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office, including the
United States Patent and Trademark Office.
(b) DESCRIPTION OF COLLATERAL. A true and complete list of all
Registrations, trade names, corporate names, fictitious business names
and Trademark license agreements owned, held (whether pursuant to a
license or otherwise) or used by such Grantor, in whole or in part, as
of the date such Grantor has entered into this Agreement is set forth
in Schedule I annexed hereto. Each Registration, trade name, corporate
----------
name, fictitious business name and Trademark license designated on
Schedule I annexed hereto as a Material Trademark Property, and each
other Trademark, Registration or Trademark Right hereafter arising or
otherwise owned, held or used by any Grantor that is material to any
of such Grantor's business or operations is referred to herein as a
"MATERIAL TRADEMARK PROPERTY". A true and complete list of all Patents
owned or held (whether pursuant to a license or otherwise) by such
Grantor, in whole or in part, as of the date such Grantor has entered
into this Agreement is set forth in Schedule II annexed hereto. Each
-----------
Patent designated on Schedule II annexed hereto as a Material Patent
-----------
and each other Patent hereafter arising or otherwise owned or held by
such Grantor that is material to any of such Grantor's business or
operations is referred to herein as a "MATERIAL PATENT".
XX-10
<PAGE>
(c) VALIDITY AND ENFORCEABILITY OF COLLATERAL. Each Material
Trademark Property and each Material Patent is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part, and
Grantor has entered into this Agreement, such Grantor is not aware of
any pending or threatened claim by any third party that any Material
Trademark Property or any Material Patent is invalid or unenforceable
or that the use of any Material Trademark Property or any Material
Patent violates the rights of any third person.
(d) PERFECTION. This Agreement together with the filing of UCC
financing statements naming each Grantor as "debtor", naming
Collateral Agent as "secured party" and describing the U.S. Collateral
in the filing offices set forth on Schedule III annexed hereto and the
------------
recording of this Agreement with the United States Patent and
Trademark Office, creates a valid, perfected and First Priority
security interest in the Collateral (subject only to Permitted Patent
Liens and Permitted Trademark Liens) securing the payment of the
Secured Obligations, and all filings and other actions necessary to
perfect and protect such security interests under the laws of the
United States or any State thereunder have been or will promptly be
following execution hereof duly made or taken.
(e) OTHER INFORMATION. All information hereto, herein or
hereafter supplied to Collateral Agent by or on behalf of each Grantor
with respect to the Collateral is accurate and complete in all
material respects.
6. FURTHER ASSURANCES; NEW TRADEMARKS, REGISTRATIONS AND
-----------------------------------------------------
TRADEMARK RIGHTS; NEW PATENTS AND PATENT APPLICATIONS; CERTAIN INSPECTION
-------------------------------------------------------------------------
RIGHTS.
------
(a) Each Grantor agrees that from time to time, at the expense of
Grantors, such Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, or that Collateral Agent may
reasonably request, in order to perfect and protect any security interest or
conditional assignment granted or purported to be granted hereby or to enable
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
each Grantor will: (i) at the reasonable request of Collateral Agent, mark
conspicuously each of its records pertaining to the Collateral with a legend, in
form and substance reasonably satisfactory to Collateral Agent indicating that
such Collateral is subject to the security interest granted hereby, (ii) execute
and file such financing or continuation statements, or amendments thereto, and
such other instruments or notices, or as Collateral Agent may reasonably
request, in order to perfect and preserve the security interests granted or
purported to be granted hereby, (iii) use its best efforts to obtain any
necessary consents of third parties to the grant and perfection of a security
interest to Collateral Agent with respect to any Collateral, and (iv) at
Collateral Agent's request, appear in and defend any action or proceeding that
would reasonably be expected to affect such Grantor's title to or Collateral
Agent's security interest in all or any part of the Collateral.
XX-11
<PAGE>
(b) Each Grantor hereby authorizes Collateral Agent to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of any Grantor to the
extent permitted by applicable law. Each Grantor agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
signed by such Grantor shall be sufficient as a financing statement and may be
filed as a financing statement in any and all jurisdictions.
(c) Each Grantor will furnish to Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Collateral Agent may
reasonably request, all in reasonable detail.
(d) If any Grantor shall obtain rights to any new Trademarks,
Registrations or Trademark Rights, or to any patentable inventions, or become
entitled to the benefit of any U.S. patent application or patent or any reissue,
division, continuation, renewal, extension, or continuation-in-part of any
Patent or any improvement in any Patent, the provisions of this Agreement shall
automatically apply thereto. Once per calendar year, each Grantor shall notify
Collateral Agent in writing of any Registrations or Patents acquired by such
Grantor during such calendar year and of any Registrations issued or
applications for Registration made during such calendar year, which notice shall
state whether such Registration constitutes a Material Trademark Property or
whether such Patent constitutes a Material Patent. Concurrently with the filing
of an application for Registration for any Trademark, or an application for any
Patent the applicable Grantor shall execute, deliver and record in all places
where this Agreement is recorded an appropriate Patent and Trademark Security
Agreement, substantially in the form hereof, with appropriate insertions, or an
amendment to this Agreement, in form and substance reasonably satisfactory to
Collateral Agent, pursuant to which such Grantor shall grant a security interest
to the extent of its interest in such Registration or Patent as provided herein
to Collateral Agent unless so doing would, in the reasonable judgment of such
Grantor, after due inquiry, result in the grant of a Patent or Registration in
the name of Collateral Agent, in which event such Grantor shall give written
notice to Collateral Agent as soon as reasonably practicable and the filing
shall instead be undertaken as soon as practicable but in no case later than
immediately following the grant of such Patent or Registration.
7. CERTAIN COVENANTS OF GRANTORS.
-----------------------------
Each Grantor shall:
(a) notify Collateral Agent of any change in such Grantor's
name, identity or corporate structure within 30 days of such change;
(b) give Collateral Agent 30 days' written notice following any
change in such Grantor's chief place of business or chief executive
office or the office where such Grantor keeps its records regarding
the Collateral;
(c) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including
XX-12
<PAGE>
claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good
faith;
(d) not sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except as permitted by the
Financing Agreements;
(e) except for Permitted Patent Liens and Permitted Trademark
Liens and the security interest and conditional assignment created by
this Agreement, not create or suffer to exist any Lien upon or with
respect to any of the Collateral to secure the indebtedness or other
obligations of any Person other than Lien permitted by the Financing
Agreements;
(f) diligently keep reasonable records respecting the Collateral
and at all times keep at least one complete set of its records
concerning substantially all of the Patents and Registrations at its
chief executive office or principal place of business;
(g) take all steps reasonably necessary in such Grantor's
business judgment to protect the secrecy of all trade secrets relating
to the products and services sold or delivered under or in connection
with the Patents, Trademarks and Trademark Rights;
(h) use proper statutory notice in connection with its use of
each Material Patent and Material Trademark Property to the extent
reasonably necessary for the protection of such Material Patent or
Material Trademark Property; and
(i) use consistent standards of high quality (which may be
consis tent with such Grantor's past practices or with such Grantor's
business judgment) in the manufacture, sale and delivery of products
and services sold or delivered under or in connection with the
Trademarks, Registrations and Trademark Rights, including, to the
extent applicable, in the operation and maintenance of its
merchandising operations.
8. AMOUNTS PAYABLE IN RESPECT OF THE COLLATERAL.
--------------------------------------------
Except as otherwise provided in this Section 8, each Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
Grantors in respect of the Collateral or any portion thereof. In connection
with such collections, each Grantor may take (and, at Collateral Agent's
direction, shall take) such action as such Grantor may deem necessary or
advisable to enforce collection of such amounts; provided, however, that
-------- -------
Collateral Agent shall have the right at any time, upon the occurrence and
during the continuation of an Event of Default and upon written notice to such
Grantor of its intention to do so, to notify the obligors with respect to any
such amounts of the existence of the security interest and the conditional
assignment created hereby, and to direct such obligors to make
XX-13
<PAGE>
payment of all such amounts directly to Collateral Agent, and, upon such
notification and at the expense of Grantors, to enforce collection of any such
amounts and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as such Grantor might have done. After
receipt by such Grantor of the notice from Collateral Agent referred to in the
proviso to the preceding sentence, (i) all amounts and proceeds (including
checks and other instruments) received by such Grantor in respect of amounts due
to such Grantor in respect of the Collateral or any portion thereof shall be
forthwith (and in any event within two Business Days) deposited by the Grantor
in the exact form received, duly indorsed by the Grantor to the Collateral Agent
if required, in a Collateral Account maintained under the sole dominion and
control of the Collateral Agent, subject to withdrawal by the Collateral Agent
for the account of Secured Parties only as provided in Section 16, (ii) until so
turned over in accordance with the preceding subsection (i), all such amounts
and proceeds received by such Grantor shall be received in trust for the benefit
of Collateral Agent hereunder- and shall be segregated from other funds of
Grantor and (iii)such Grantor shall not adjust, settle or compromise the amount
or payment of any such amount or release wholly or partly any obligor with
respect thereto or allow any credit or discount thereon.
9. PATENT OR TRADEMARK APPLICATIONS AND LITIGATION.
-----------------------------------------------
(a) Each Grantor shall have the duty diligently, to prosecute any
trademark application relating to any Material Trademark Property that is
pending as of the date of this Agreement, to make federal application on any
existing or future registerable but unregistered Material Trademark Property
(whenever it is commercially reasonable in the reasonable judgement of such
Grantor to do so), and to file and prosecute opposition and cancellation
proceedings, renew Registrations and do any and all reasonable acts which are
necessary or desirable to preserve and maintain all rights in all Material
Trademark Properties; provided, however, that Grantor shall not be obligated to
-------- -------
prosecute or apply for registration of any Trademark or Registration that Grant
determines in its reasonable business judgment is no longer necessary or
desirable in the conduct of its business. Any expenses incurred in connection
therewith shall be borne solely by Grantors. No Grantor shall abandon any
Material Trademark Property; provided, however, that Grantor shall not be
-------- -------
obligated to maintain any Trademark or Registration that Grantor determines in
its reasonable business judgment is no longer necessary or desirable in the
conduct of its business.
(b) Each Grantor shall have the duty diligently, through counsel
reasonably acceptable to Collateral Agent, to prosecute any patent application
relating to any Material Patent that is pending as of the date of this Agreement
and to do any and all acts which are necessary or desirable to preserve and
maintain all rights in all Material Patents; provided, however, that Grantor
-------- -------
shall not be obligated to prosecute or maintain any Patent that Grantor
determines in its reasonable business judgment is no longer necessary or
desirable in the conduct of its business. Any expenses incurred in connection
therewith shall be borne solely by Grantors. Each Grantor shall not, as to any
patentable invention or Patent that constitutes or could constitute a Material
Patent, abandon any pending patent application or any Patent without the prior
written consent of Collateral Agent; provided, however, that Grantor shall not
-------- -------
be obligated to prosecute or maintain any Patent that Grantor determines in its
reasonable business judgment is no longer necessary or desirable in the conduct
of its business.
XX-14
<PAGE>
(c) Except as provided in Section 9(e), each Grantor shall have the
right to commence and prosecute in its own name, as real party in interest, for
its own benefit and at its own expense, such suits, proceedings or other actions
for infringement, unfair competition, dilution or other damage as are in its
reasonable business judgment necessary to protect the Collateral. Collateral
Agent shall provide, at Grantor's expense, all reasonable and necessary
cooperation in connection with any such suit, proceeding or action including,
without limitation, joining as a necessary party.
(d) Each Grantor shall promptly, following its becoming aware thereof,
notify Collateral Agent of the institution of, or of any adverse determination
in, any proceeding (whether in the United States Patent and Trademark Office or
any federal, state, local or foreign court) described in subsection 9(a), 9(b)
or 9(c) or regarding such Grantor's claim of ownership in or right to use any of
the Trademarks, Registrations or Trademark Rights, its right to register the
same, or its right to keep and maintain such Registration. Such Grantor shall
provide to Collateral Agent any information with respect thereto requested by
Collateral Agent.
(e) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default, Collateral
Agent shall have the right (but not the obligation) to bring suit, in the name
of any Grantor, Collateral Agent or otherwise, to enforce any Patent, Trademark,
Registration, Trademark Right, Associated Goodwill and any license thereunder,
in which event each Grantor shall, at the request of Collateral Agent, do any
and all lawful acts and execute any and all documents required by Collateral
Agent in aid of such enforcement and each Grantor shall promptly, upon demand,
reimburse and indemnify Collateral Agent as provided in Section 17 in connection
with the exercise of its rights under this Section 9. To the extent that
Collateral Agent shall elect not to bring suit to enforce any Patent, Trademark,
Registration, Trademark Right, Associated Goodwill or any license thereunder as
provided in this Section 9(e), each Grantor agrees to use all reasonable
measures, whether by action, suit, proceeding or otherwise, to prevent the
infringement of any of the Patents, Trademarks, Registrations, Trademark Rights
or Associated Goodwill by others and for that purpose agrees to diligently
maintain in accordance with reasonable business practice any action, suit or
proceeding against any Person so infringing necessary to prevent such
infringement.
10. NON-DISTURBANCE AGREEMENTS, ETC.
--------------------------------
If and to the extent that any Grantor is permitted to license the
Collateral, Collateral Agent shall enter into a non-disturbance agreement or
other similar arrangement, at Grantors' request and expense, with such Grantor
and any licensee of any Collateral permitted hereunder in form and substance
reasonably satisfactory to Collateral Agent pursuant to which (a) Collateral
Agent shall agree not to disturb or interfere with such licensee's rights under
its license agreement with such Grantor so long as such licensee is not in
default thereunder and (b) such licensee shall acknowledge and agree that the
Collateral licensed to it is subject to the security interest and conditional
assignment created in favor of Collateral Agent and the other terms of this
Agreement.
XX-15
<PAGE>
11. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
-------------------------------------------
Each Grantor hereby irrevocably appoints Collateral Agent as such
Grantor's attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor, Collateral Agent or otherwise, from
time to time, upon the occurrence during the continuance of an Event of Default,
in Collateral Agent's reasonable discretion to take any action and to execute
any instrument that Collateral Agent may reasonably deem necessary or advisable
to accomplish the purposes of this Agreement, including without limitation:
A. to endorse such Grantor's name on all applications,
documents, papers and instruments necessary for Collateral Agent in the
use or maintenance of the Collateral;
B. to ask for, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
C. to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with clause (b)
above;
D. upon the occurrence and during the continuance of an Event of
Default, to file any claims or take any action or institute any
proceedings that Collateral Agent may reasonably deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of Collateral Agent with respect to any of the
Collateral;
E. to pay or discharge taxes or Liens (other than Liens
permitted under this Agreement or the Financing Agreements) levied or
placed upon or threatened against the Collateral, the legality or
validity thereof and the amounts necessary to discharge the same to be
determined by Collateral Agent in its sole discretion, any such
payments made by Collateral Agent to become obligations of such Grantor
to Collateral Agent, due and payable immediately without demand; and
F. upon the occurrence and during the continuance of an Event of
Default, (i) to execute and deliver any of the assignments or documents
requested by Collateral Agent pursuant to Section 14(b), (ii) to grant
or issue an exclusive or non-exclusive license to the Collateral or any
portion thereof to any Person, and (iii) otherwise generally to sell,
transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though Collateral
Agent were the absolute owner thereof for all purposes, and to do, at
Collateral Agent's option and Grantors' expense, at any time or from
time to time, all acts and things that Collateral Agent deems necessary
to protect, preserve or realize upon the Collateral and Collateral
Agent's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
XX-16
<PAGE>
12. COLLATERAL AGENT MAY PERFORM.
----------------------------
If any Grantor fails to perform any agreement contained herein,
Collateral Agent may itself perform, or cause performance of, such agreement,
and the reasonable expenses of Collateral Agent incurred in connection therewith
shall be payable by such Grantor under Section 17.
13. STANDARD OF CARE.
----------------
The powers conferred on Collateral Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for monies
actually received by it hereunder, Collateral Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. Collateral
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Collateral Agent accords its own
property.
XX-17
<PAGE>
14. REMEDIES.
--------
If any Event of Default shall have occurred and be continuing:
XX-18
<PAGE>
A. Collateral Agent may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a collateral agent on default
under the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"CODE") (whether or not the Code applies to the affected Collateral), and also
may (i) require each Grantor to, and each Grantor hereby agrees that it will at
its expense and upon request of Collateral Agent forthwith, assemble all or part
of the Collateral as directed by Collateral Agent and make it available to
Collateral Agent at a place to be designated by Collateral Agent that is
reasonably convenient to both parties, (ii) enter onto the property where any
Collateral is located and take possession thereof with or without judicial
process, (iii) prior to the disposition of the Collateral, store the Collateral
or otherwise prepare the Collateral for disposition in any manner to the extent
Collateral Agent deems appropriate, (iv) take possession of any Grantor's
premises or place custodians in exclusive control thereof, remain on such
premises and use the same for the purpose of taking any actions described in the
preceding clause (iii) and collecting any Secured Obligation, (v) exercise any
and all rights and remedies of Grantors under or in connection with the
contracts related to the Collateral or otherwise in respect of the Collateral,
including without limitation any and all rights of Grantors to demand or
otherwise require payment of any amount under, or performance of any provision
of, such contracts, and (vi) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Collateral Agent may deem commercially reasonable. Collateral
Agent or any Secured Party or Interest Rate Exchanger may be the purchaser of
any or all of the Collateral at any such sale and Collateral Agent, as agent for
and representative of Secured Parties and Interest Rate Exchangers (but not any
Secured Party or Secured Parties or Interest Rate Exchanger or Interest Rate
Exchangers in its or their respective individual capacities unless Requisite
Obligees shall otherwise agree in writing), shall be entitled, for the purpose
of bidding and making settlement or payment of the purchase price for all or any
portion of the Collateral sold at any such public sale, to use and apply any of
the Secured Obligations as a credit on account of the purchase price for any
Collateral payable by Collateral Agent at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of any Grantor, and each Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Grantor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to such Grantor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice of sale
having been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the
XX-19
<PAGE>
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Each Grantor hereby
waives any claims against Collateral Agent arising by reason of the fact that
the price at which any Collateral may have been sold at such a private sale was
less than the price which might have been obtained at a public sale, even if
Collateral Agent accepts the first offer received and does not offer such
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantors shall be jointly and severally liable for the deficiency
and the reasonable fees of any attorneys employed by Collateral Agent to collect
such deficiency.
B. Upon written demand from Secured Party, each Grantor shall execute and
deliver to Collateral Agent an assignment or assignments of the Patents,
Trademarks, Registrations, Trademark Rights and the Associated Goodwill and such
other documents as are requested by Collateral Agent. Each Grantor agrees that
such an assignment and/or recording shall be applied to reduce the Secured
Obligations outstanding only to the extent that Collateral Agent (or any
Secured) receives cash proceeds in respect of the sale of, or other realization
upon, the Collateral.
C. Within five Business Days after written notice from Collateral Agent,
each Grantor shall make available to Collateral Agent, to the extent within each
applicable Grantor's power and authority, such personnel in such Grantor's
employ on the date of such Event of Default as Collateral Agent may reasonably
designate, by name, title or job responsibility, to permit such Grantor to
continue, directly or indirectly, to produce, advertise and sell the products
and services sold or delivered by such Grantor under or in connection with the
Patents, Trademarks, Registrations and Trademark Rights, such persons to be
available to perform their prior functions on Collateral Agent's behalf and to
be compensated by Collateral Agent at Grantors' expense on a per diem, pro-rata
basis consistent with the salary and benefit structure applicable to each as of
the date of such Event of Default.
XX-20
<PAGE>
15. PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT.
----------------------------------------------
In addition to the rights of the Collateral Agent and the Secured
Parties specified in Section 8 with respect to payments of Accounts, if an Event
of Default shall occur and be continuing, upon request of the Collateral Agent,
all proceeds received by the Grantor consisting of cash, checks and other near-
cash items shall be held by the Grantor in trust for the Collateral Agent and
the Secured Parties, segregated from other funds of the Grantor, and shall,
forthwith upon receipt by the Grantor, be turned over to the Collateral Agent in
the exact form received by the Grantor (duly indorsed by the Grantor to the
Collateral Agent, if required) and held by the Collateral Agent in a Collateral
Account maintained under the Intercreditor Agreement. All proceeds while held
by the Collateral Agent in a Collateral Account (or by the Grantor in trust for
the Collateral Agent and the Secured Parties) shall continue to be held as
collateral security for all the Secured Obligations and shall not constitute
payment thereof until applied as provided in Section 16.
16. APPLICATION OF PROCEEDS.
-----------------------
Except as expressly provided elsewhere in this Agreement, all proceeds
held in any Collateral Account and all other proceeds received by Collateral
Agent in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied as provided in subsection 3 of
the Intercreditor Agreement.
17. INDEMNITY AND EXPENSES.
----------------------
(a) Grantors jointly and severally agree to indemnify Collateral
Agent, each Secured Party and each Interest Rate Exchanger from and against any
and all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including without limitation enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Collateral Agent's
or such Secured Party's or Interest Rate Exchanger's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Grantors jointly and severally agree to pay to Collateral Agent
promptly following written demand the amount of any and all costs and expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, that Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights of
Collateral Agent hereunder, or (iv) the failure by any Grantor to perform or
observe any of the provisions hereof.
(c) The obligations of Grantors in this Section 17 shall survive the
termination of this Agreement and the discharge of Grantors' other obligations
under this Agreement, the Interest Rate Agreements, the Credit Agreement and the
other Loan Documents.
XX-21
<PAGE>
18. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.
-----------------------------------------------
This Agreement shall create a continuing security interest in and
conditional assignment of the Collateral effective only upon the occurrence and
during the continuance of an Event of Default and shall (a) remain in full force
and effect until the payment in full of the Secured Obligations (other than
inchoate indemnification obligations with respect to claims, losses or
liabilities which have not yet arisen and are not yet due and payable), the
cancellation or termination of the Commitments and the cancellation or
expiration of all outstanding Letters of Credit, (b) be binding upon Grantors
and their respective successors and assigns, and (c) inure, together with the
rights and remedies of Collateral Agent hereunder, to the benefit of Collateral
Agent and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement and subsection 10.1 of the AXEL Credit
Agreement, any Secured Party may assign or otherwise transfer any Loans held by
it to any other Person, and such other Person shall thereupon become vested with
all the benefits in respect thereof granted to Secured Parties herein or
otherwise. Upon the payment in full of all Secured Obligations (other than
inchoate indemnification obligations with respect to claims, losses or
liabilities which have not yet arisen and are not yet due and payable), the
cancellation or termination of the Commitments and the cancellation or
expiration of all outstanding Letters of Credit, the security interest and
conditional assignment granted hereby shall terminate and all rights to the
Collateral shall revert to the applicable Grantors. Upon any such termination
Collateral Agent will, at Grantors' expense, execute and deliver to Grantors
such documents as Grantors shall reasonably request to evidence such termination
in accordance with the terms of the Intercreditor Agreement.
XX-22
<PAGE>
19. COLLATERAL AGENT AS ADMINISTRATIVE AGENT.
----------------------------------------
(a) Collateral Agent has been appointed to act as Collateral Agent
hereunder by CA Administrative Agent on behalf of the Credit Agreement Lenders
and AXEL Administrative Agent on behalf of the AXEL Lenders pursuant to the
Intercreditor Agreement and, by their acceptance of the benefits hereof,
Interest Rate Exchangers, and shall be entitled to the benefits of the
Intercreditor Agreement. Collateral Agent shall be obligated, and shall have
the right hereunder, to make demands, to give notices, to exercise or refrain
from exercising any rights, and to take or refrain from taking any action
(including without limitation the release or substitution of Collateral), solely
in accordance with this Agreement and the Intercreditor Agreement; provided that
--------
Collateral Agent shall exercise, or refrain from exercising, any remedies
provided for in Section 14 in accordance with the instructions of (i) Requisite
Lenders or (ii) after payment in full of all Financing Agreement Obligations
under the Financing Agreements and any other Loan Documents, the holders of a
majority of the aggregate notional amount (or, with respect to any Lender
Interest Rate Agreement that has been terminated in accordance with its terms,
the amount then due and payable (exclusive of expenses and similar payments but
including any early termination payments then due) under such Lender Interest
Rate Agreement) under all Lender Interest Rate Agreements (Requisite Lenders or,
if applicable, such holders being referred to herein as "REQUISITE OBLIGEES").
In furtherance of the foregoing provisions of this Section 19(a), each Interest
Rate Exchanger, by its acceptance of the benefits hereof, agrees that it shall
have no right individually to realize upon any of the Collateral hereunder, it
being understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Collateral Agent for the benefit
of Secured Parties and Interest Rate Exchangers in accordance with the terms of
this Section 19(a).
(b) Collateral Agent shall at all times be the same Person that is
appointed Collateral Agent under the Intercreditor Agreement. The Collateral
Agent may resign and a successor Collateral Agent may be appointed in the manner
provided in the Intercreditor Agreement. Upon the acceptance of any appointment
as Collateral Agent by a successor Collateral Agent, that successor Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Collateral Agent under this
Agreement, and the retiring or removed Collateral Agent under this Agreement
shall promptly (i) transfer to such successor Collateral Agent all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Collateral Agent under this
Agreement, and (ii) execute and deliver to such successor Collateral Agent such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Collateral Agent of the security interests created hereunder, whereupon such
retiring or removed Collateral Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Collateral
Agent's resignation or removal hereunder as Collateral Agent, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Collateral Agent hereunder.
XX-23
<PAGE>
20. AMENDMENTS; ETC.
---------------
No amendment, modification, termination or waiver of any provision of
this Agreement, and no consent to any departure by any Grantor therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Collateral Agent and, in the case of any such amendment or modification, by
Grantors; provided that any amendment hereto pursuant to Section 22 or Section
--------
6(c) shall be effective upon execution by any Additional Grantor and Grantors
hereby waive any requirement of notice of or consent to any such amendment. Any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
21. NOTICES.
-------
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Collateral Agent or Grantor shall not be
--------
effective until received. For the purposes hereof, the address of each party
hereto shall be provided in subsection 10.8 of the Credit Agreement or
subsection 10.8 of the AXEL Credit Agreement, or as set forth under such party's
name on the signature pages hereof or such other address as shall be designated
by such party in a written notice delivered to the other parties hereto.
22. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Collateral Agent in the exercise of
any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
XX-24
<PAGE>
23. ADDITIONAL GRANTORS.
-------------------
From time to time subsequent to the date hereof, Subsidiaries of
Company may become parties hereto as additional Grantors (each an "ADDITIONAL
GRANTOR") by executing an acknowledgement to this Agreement substantially in
the form of Schedule IV annexed hereto. Upon delivery of any such
-----------
acknowledgment to Collateral Agent and Secured Party, notice of which is hereby
waived by Grantors, each such Additional Grantor shall be a Grantor and shall be
as fully a party hereto as if such Additional Grantor were an original signatory
hereto. Each Grantor expressly agrees that its obligations arising hereunder
shall not be affected or diminished by the addition or release of any other
Grantor hereunder, nor by any election of Collateral Agent not to cause any
Subsidiary of Company to become an Additional Grantor hereunder. This Agreement
shall be fully effective as to any Grantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Grantor hereunder.
24. SEVERABILITY.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
25. HEADINGS.
--------
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
26. GOVERNING LAW; TERMS.
--------------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined.
XX-25
<PAGE>
27. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
b) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
c) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SECTION 21;
d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GRANTOR IN ANY
SUCH PROCEED ING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
e) AGREES THAT COLLATERAL AGENT RETAINS THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
f) AGREES THAT THE PROVISIONS OF THIS SECTION 25 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-
1402 OR OTHERWISE.
XX-26
<PAGE>
28. WAIVER OF JURY TRIAL.
--------------------
GRANTORS AND COLLATERAL AGENT HEREBY AGREE TO WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Each Grantor and Collateral Agent acknowledge that this
waiver is a material inducement for Grantors and Collateral Agent to enter into
a business relationship, that Grantors and Collateral Agent have already relied
on this waiver in entering into this Agreement and that each will continue to
rely on this waiver in their related future dealings. Each Grantor and
Collateral Agent further warrant and represent that each has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 28
AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
29. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
XX-27
<PAGE>
IN WITNESS WHEREOF, Grantors and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
SEALY, INC.
THE STEARNS & FOSTER BEDDING COMPANY
THE STEARNS & FOSTER UPHOLSTERY
FURNITURE COMPANY
ADVANCED SLEEP PRODUCTS
SEALY MATTRESS COMPANY OF SAN DIEGO
SEALY MATTRESS COMPANY OF PUERTO
RICO
OHIO-SEALY MATTRESS MANUFACTURING
CO. INC.
OHIO-SEALY MATTRESS MANUFACTURING
CO. -- FORT WORTH
OHIO-SEALY MATTRESS MANUFACTURING
CO.
OHIO-SEALY MATTRESS MANUFACTURING
CO. -- HOUSTON
[OTHER GRANTORS]
By: __________________
Name:
Title:
Notice Address:
_____________________
_____________________
_____________________
XX-28
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK,
as Secured Party
By: -----------------
Name:
Title:
XX-29
<PAGE>
SCHEDULE I
TO
SUBSIDIARY PATENT AND TRADEMARK SECURITY AGREEMENT
REGISTERED UNITED STATES TRADEMARK REGISTRATION REGISTRATION
OWNER DESCRIPTION NUMBER DATE
------------- ----------------------- ------------ ------------
XX-30
<PAGE>
SCHEDULE II
TO
SUBSIDIARY PATENT AND SECURITY AGREEMENT
PATENTS ISSUED
--------------
Patent No. Issue Date Invention
---------- ---------- ---------
PATENTS PENDING
---------------
Applicant's Date Application
Name Filed No. Invention Inventor
----------- ----- ----------- --------- --------
XX-31
<PAGE>
SCHEDULE III
TO
SUBSIDIARY PATENT AND TRADEMARK SECURITY AGREEMENT
FILING OFFICES
--------------
XX-32
<PAGE>
SCHEDULE IV
TO
SUBSIDIARY PATENT AND TRADEMARK SECURITY AGREEMENT
[FORM OF ACKNOWLEDGEMENT]
This Acknowledgement, dated _______________, [199_] [200_], is delivered
pursuant to Section 23 of the Patent and Trademark Security Agreement referred
to below. The undersigned hereby agrees that this Acknowledgement may be
attached to the Patent and Trademark Security Agreement dated December 18, 1996,
by and among the Grantors referred to therein and Morgan Guaranty Trust Company
of New York, as Collateral Agent (the "PATENT AND TRADEMARK SECURITY
AGREEMENT", capitalized terms defined therein being used herein as therein
defined), that the undersigned by executing and delivering this Acknowledgement
hereby becomes a Grantor under the Patent and Trademark Security Agreement in
accordance with Section 20 thereof and agrees to be bound by all of the terms
thereof, and that the Patents, Registrations and Trademark Rights described on
this Acknowledgement shall be deemed to be part of the and shall become part of
the Collateral and shall secure all Secured Obligations.
[NAME OF ADDITIONAL GRANTOR]
By: ___________________________________
Name:
Title:
Notice Address:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
TRADEMARK REGISTRATIONS
-----------------------
REGISTERED TRADEMARK REGISTRATION REGISTRATION
OWNER DESCRIPTION NUMBER DATE JURISDICTION
------------- ----------- ------------ ------------ ------------
PATENTS ISSUED
--------------
XX-33
<PAGE>
PATENT NO. ISSUE DATE INVENTION INVENTOR
---------- ---------- --------- --------
PATENTS PENDING
---------------
APPLICANT'S NAME DATE FILED APPLICATION NO. INVENTION INVENTOR
---------------- ---------- --------------- --------- --------
XX-34
<PAGE>
EXHIBIT XXI
[FORM OF HOLDINGS GUARANTY]
HOLDINGS GUARANTY
This HOLDINGS GUARANTY is entered into as of December 18, 1997 and
entered into by and between SEALY CORPORATION, a Delaware corporation
("GUARANTOR"), in favor and for the benefit of MORGAN GUARANTY TRUST COMPANY
OF NEW YORK ("MORGAN GUARANTY"), as collateral for and representative of (in
such capacity herein called "GUARANTIED PARTY") the Secured Parties (as
hereinafter defined) and any Interest Rate Exchangers (as hereinafter defined),
and, subject to subsection 3.12, for the benefit of the other Beneficiaries (as
hereinafter defined).
RECITALS
A. Sealy Mattress Company, an Ohio corporation and a wholly-owned
subsidiary of Guarantor ("COMPANY"), Guarantor, the financial institutions
from time to time parties thereto (the "CREDIT AGREEMENT LENDERS"), Goldman
Sachs Credit Partners L.P. ("GSCP"), as arranger and syndication agent (in
such capacity, "CA SYNDICATION AGENT"), Morgan Guaranty, as administrative
agent (in such capacity, "CA ADMINISTRATIVE AGENT"), and Bankers Trust Company
("BTCO."), as documentation agent (in such capacity, "CA DOCUMENTATION
AGENT") have entered into a Credit Agreement dated as of December 18, 1997
(said Credit Agreement, as it may hereafter be amended, restated, supplemented
or otherwise modified from time to time, being the ("CREDIT AGREEMENT")
pursuant to which Credit Agreement Lenders have made certain commitments,
subject to the terms and conditions set forth in the Credit Agreement, to extend
certain credit facilities to Company.
B. Company, Guarantor, the financial institutions from time to time
parties thereto (the "AXEL LENDERS"), GSCP, as arranger and syndication agent
(in such capacity, "AXEL SYNDICATION AGENT"), Morgan Guaranty, as
administrative agent (in such capacity, "AXEL ADMINISTRATIVE AGENT"), and
BTCo., as documentation agent (in such capacity, "AXEL DOCUMENTATION AGENT")
have entered into an AXEL Credit Agreement dated as of December 18, 1997 (said
AXEL Credit Agreement, as it may hereafter be amended, restated, supplemented or
otherwise modified from time to time, being the "AXEL CREDIT AGREEMENT"; the
Credit Agreement Lenders, the CA Syndication Agent, the CA Administrative Agent,
the CA Documentation Agent, the AXEL Lenders, the AXEL Syndication Agent, the
AXEL Administrative Agent, and the AXEL Documentation Agent each being a
"SECURED PARTY" and collectively the "SECURED PARTIES") pursuant to which
AXEL Lenders have made certain commitments, subject to the terms and conditions
set forth in the AXEL Credit Agreement, to extend certain credit facilities to
Company.
C. Company may from time to time enter into one or more Interest Rate
Agreements (collectively, the "LENDER INTEREST RATE AGREEMENTS") with or one
or more Credit Agreement Lenders or their Affiliates or AXEL Lenders or their
Affiliates (in such
XXI-1
<PAGE>
capacity, collectively, "INTEREST RATE EXCHANGERS") in accordance with the terms
of the Financing Agreements (as hereinafter defined), and it is desired that the
obligations of Company under the Lender Interest Rate Agreements, including
without limitation the obligation of Company to make payments thereunder in the
event of early termination thereof (all such obligations being the "INTEREST
RATE OBLIGATIONS"), together with all obligations of Company under the Financing
Agreements and any other Loan Documents, be guarantied hereunder.
D. It is a condition precedent to the making of the initial Loans under
the Financing Agreements that Company's obligations thereunder be guarantied by
Guarantor.
E. Guarantor is willing irrevocably and unconditionally to guaranty
such obligations of Company.
NOW, THEREFORE, in consideration of the premises and to induce (i) the CA
Administrative Agent, the CA Syndication Agent and the Credit Agreement Lenders
to enter into the Credit Agreement, (ii) the Credit Agreement Lenders to make
their respective loans to, and issue Letters of Credit for the account of, the
Company, (iii) the AXEL Administrative Agent, the AXEL Syndication Agent and the
AXEL Lenders to enter into the AXEL Loan Agreement and (iv) the AXEL Lenders to
make their respective loans to the Company, and (v) to induce Interest Rate
Exchangers to enter into the Lender Interest Rate Agreements and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Guarantor hereby agrees as follows:
SECTION 1. DEFINITIONS
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to such terms in the
Credit Agreement;
(b) The following terms shall have the following meanings:
"ACCELERATION" shall mean any of the Credit Agreement Obligations or
the AXEL Credit Agreement Obligations have been declared, or have become,
immediately due and payable, or the commitments to extend credit of the
Credit Agreement Lenders or the AXEL Lenders shall have been terminated
under Section 8 of the Credit Agreement or Section 7 of the AXEL Credit
Agreement, respectively.
"AGGREGATE PAYMENTS" has the meaning assigned to that term ins
subsection 2.2.
"AXEL COMMITMENTS" shall mean the "Commitments" as defined in the
AXEL Credit Agreement.
"AXEL CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
XXI-2
<PAGE>
"AXEL OBLIGATIONS" shall mean the "Obligations" as defined in the
AXEL Credit Agreement.
"BENEFICIARIES" means Guarantied Party, Secured Parties and any
Interest Rate Exchangers.
"COLLATERAL ACCOUNTS" shall mean "Collateral Accounts" as defined in
the Intercreditor Agreement.
"COMMITMENTS" means the Credit Agreement Commitments and the AXEL
Commitments.
"CONTRIBUTING GUARANTORS" has the meaning assigned to that term ins
subsection 2.2.
"CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"CREDIT AGREEMENT COMMITMENTS" shall mean the "Commitments" as
defined in the Credit Agreement.
"CREDIT AGREEMENT OBLIGATIONS" shall mean the "Obligations" as
defined in the Credit Agreement.
"EVENT OF DEFAULT" means any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which
Company is the Defaulting Party and which results in the designation of an
Early Termination Date (as such terms are defined in a Master Agreement or
an Interest Rate Swap Agreement or Interest Rate and Currency Exchange
Agreement in the form prepared by the International Swap and Derivatives
Association Inc. or a similar event under any similar swap agreement) under
any Lender Interest Rate Agreement.
"FAIR SHARE" has the meaning assigned to that term ins subsection 2.2.
"FAIR SHARE CONTRIBUTION AMOUNT" has the meaning assigned to that term
ins subsection 2.2.
"FINANCING AGREEMENT" means either the Credit Agreement or the AXEL
Credit Agreement, and "Financing Agreements" means the Credit Agreement
and the AXEL Credit Agreement, collectively.
"FINANCING AGREEMENT OBLIGATIONS" means Credit Agreement Obligations
and AXEL Obligations.
XXI-3
<PAGE>
"FRAUDULENT TRANSFER LAWS" has the meaning assigned to that term ins
subsection 2.2.
"FAIR SHARE SHORTFALL" has the meaning assigned to that term ins
subsection 2.2.
"FUNDING GUARANTOR" has the meaning assigned to that term ins
subsection 2.2.
"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Holdings Guaranty dated as of December 18, 1997,
as it may be amended, supplemented or otherwise modified from time to time.
"GRANTOR" has the meaning assigned to that term in the introduction of
this Agreement.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated as
of December 18, 1997, by and among CA Administrative Agent, AXEL
Administrative Agent and Collateral Agent.
"INTEREST RATE EXCHANGERS" has the meaning assigned to that term in the
recitals to this Agreement.
"LENDER INTEREST RATE AGREEMENT" has the meaning assigned to that term
in the recitals to this Agreement.
"LOAN" means any "Loan" as defined in any Financing Agreement, and
"LOANS" means all such Loans collectively.
"LOAN DOCUMENT" means any "Loan Document" as defined in any Financing
Agreement, and "LOAN DOCUMENTS" means all such Loan Documents
collectively.
"POTENTIAL EVENT OF DEFAULT" means any "Potential Event of Default"
as defined in any Financing Agreement.
"REQUISITE AXEL LENDERS" means "Requisite Lenders" as defined in the
AXEL Credit Agreement.
"REQUISITE CREDIT AGREEMENT LENDERS" means "Requisite Lenders" as
defined in the Credit Agreement.
"REQUISITE LENDERS" means (A) unless an Acceleration shall have
occurred and be continuing, the Requisite Credit Agreement Lenders and the
Requisite AXEL
XXI-4
<PAGE>
Lenders, and (B) if an Acceleration has occurred and is continuing, Secured
Parties holding more than 50% of the Financing Agreement Obligations.
"REQUISITE OBLIGEES" has the meaning assigned to that term in
subsection 3.14 of this Agreement.
"SECURED PARTIES" has the meaning assigned to that term in the recitals
to this Agreement.
"PAYMENT IN FULL", "PAID IN FULL" or any similar term means payment
in full of the Guarantied Obligations (other than inchoate indemnification
obligations with respect to claims, losses or liabilities which have not yet
arisen and are not yet due and payable), including without limitation all
principal, interest, costs, fees and expenses (including, without
limitation, reasonable legal fees and expenses) of Beneficiaries as required
under the Loan Documents and the Lender Interest Rate Agreements.
1.2 INTERPRETATION. References to "Sections" and "subsections"
--------------
shall be to Sections and subsections, respectively, of this Guaranty unless
otherwise specifically provided.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Guarantor hereby
--------------------------------------
irrevocably and unconditionally guaranties, as primary obligor and not merely as
surety, the due and punctual payment in full of all Guarantied Obligations when
the same shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S) 362(a)). The term "GUARANTIED OBLIGATIONS"
is used herein in its most comprehensive sense and includes:
(a) any and all Financing Agreement Obligations of Company and any and
all Interest Rate Obligations, in each case now or hereafter made, incurred
or created, whether absolute or contingent, liquidated or unliquidated,
whether due or not due, and however arising under or in connection with any
Financing Agreement and any other Loan Documents and the Lender Interest
Rate Agreements, including those arising under successive borrowing
transactions under any Financing Agreement which shall either continue the
Financing Agreement Obligations of Company or from time to time renew them
after they have been satisfied and including interest which, but for the
filing of a petition in bankruptcy with respect to Company, would have
accrued on any Guarantied Obligations, whether or not a claim is allowed
against Company for such interest in the related bankruptcy proceeding; and
(b) those expenses set forth in subsection 2.9 hereof.
2.2 CONTRIBUTION BY GUARANTOR. Guarantor under this Guaranty, and each
-------------------------
Subsidiary Guarantor under the Subsidiary Guaranty, together desire to allocate
among
XXI-5
<PAGE>
themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and
equitable manner, their obligations arising under this Guaranty and the
Subsidiary Guaranty. Accordingly, in the event any payment or distribution is
made on any date by Guarantor under this Guaranty or a Subsidiary Guarantor
under the Subsidiary Guaranty (a "FUNDING GUARANTOR") that exceeds its Fair
Share (as defined below) as of such date, that Funding Guarantor shall be
entitled to a contribution from each of the other Contributing Guarantors in the
amount of such other Contributing Guarantor's Fair Share Shortfall (as defined
below) as of such date, with the result that all such contributions will cause
each Contributing Guarantor's Aggregate Payments (as defined below) to equal its
Fair Share as of such date. "FAIR SHARE" means, with respect to a Contributing
Guarantor as of any date of determination, an amount equal to (i) the ratio of
(x) the Fair Share Contribution Amount (as defined below) with respect to such
Contributing Guarantor to (y) the aggregate of the Fair Share Contribution
Amounts with respect to all Contributing Guarantors multiplied by (ii) the
---------- --
aggregate amount paid or distributed on or before such date by all Funding
Guarantors under this Guaranty and the Subsidiary Guaranty in respect of the
obligations guarantied. "FAIR SHARE SHORTFALL" means, with respect to a
Contributing Guarantor as of any date of determination, the excess, if any, of
the Fair Share of such Contributing Guarantor over the Aggregate Payments of
such Contributing Guarantor. "FAIR SHARE CONTRIBUTION AMOUNT" means, with
respect to a Contributing Guarantor as of any date of determination, the maximum
aggregate amount of the obligations of such Contributing Guarantor under this
Guaranty or the Subsidiary Guaranty, as applicable, that would not render its
obligations hereunder or thereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any applicable provisions of comparable state law; provided that, solely for
--------
purposes of calculating the "Fair Share Contribution Amount" with respect to
any Contributing Guarantor for purposes of this subsection 2.2, any assets or
liabilities of such Contributing Guarantor arising by virtue of any rights to
subrogation, reimbursement or indemnification or any rights to or obligations of
contribution hereunder or under subsection 2.2(b) of the Subsidiary Guaranty
shall not be considered as assets or liabilities of such Contributing Guarantor.
"AGGREGATE PAYMENTS" means, with respect to a Contributing Guarantor as of any
date of determination, an amount equal to (i) the aggregate amount of all
payments and distributions made on or before such date by such Contributing
Guarantor in respect of this Guaranty or the Subsidiary Guaranty, as applicable
(including, without limitation, in respect of this subsection 2.2 or subsection
2.2(b) of the Subsidiary Guaranty), minus (ii) the aggregate amount of all
-----
payments received on or before such date by such Contributing Guarantor from the
other Contributing Guarantors as contributions under this subsection 2.2 or
subsection 2.2(b) of the Subsidiary Guaranty. The amounts payable as
contributions hereunder and under subsection 2.2(b) of the Subsidiary Guaranty
shall be determined as of the date on which the related payment or distribution
is made by the applicable Funding Guarantor. The allocation among Contributing
Guarantors of their obligations as set forth in this subsection 2.2 and
subsection 2.2(b) of the Subsidiary Guaranty shall not be construed in any way
to limit the liability of any Contributing Guarantor hereunder or under the
Subsidiary Guaranty. Each Subsidiary Guarantor is a third party beneficiary to
the contribution agreement set forth in this subsection 2.2.
2.3 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Guarantor hereby
---------------------------------------------
agrees, in furtherance of the foregoing and not in limitation of any other right
which any Beneficiary may have at law or in equity against Guarantor by virtue
hereof, that upon the
XXI-6
<PAGE>
failure of Company to pay any of the Guarantied Obligations when and as the same
shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S) 362(a)), Guarantor will promptly following
written demand pay, or cause to be paid, in cash, to Guarantied Party for the
ratable benefit of Beneficiaries, an amount equal to the sum of the unpaid
principal amount of all Guarantied Obligations then due as aforesaid, accrued
and unpaid interest on such Guarantied Obligations (including, without
limitation, interest which, but for the filing of a petition in bankruptcy with
respect to Company, would have accrued on such Guarantied Obligations, whether
or not a claim is allowed against Company for such interest in the related
bankruptcy proceeding) and all other Guarantied Obligations then owed to
Beneficiaries as aforesaid. All such payments shall be applied promptly from
time to time by Guarantied Party as provided in subsection 3 of the
Intercreditor Agreement.
2.4 LIABILITY OF GUARANTOR ABSOLUTE. Guarantor agrees that its
-------------------------------
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guarantied Obligations. In furtherance of the foregoing and without limiting
the generality thereof, Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) The obligations of Guarantor hereunder are independent of the
obligations of Company under the Loan Documents or the Lender Interest Rate
Agreements and the obligations of any other guarantor (including any
Subsidiary Guarantor) of the obligations of Company under the Loan Documents
or the Lender Interest Rate Agreements, and a separate action or actions may
be brought and prosecuted against Guarantor whether or not any action is
brought against Company or any of such other guarantors and whether or not
Company is joined in any such action or actions.
(c) Guarantor's payment of a portion, but not all, of the Guarantied
Obligations shall in no way limit, affect, modify or abridge Guarantor's
liability for any portion of the Guarantied Obligations which has not been
paid. Without limiting the generality of the foregoing, if Guarantied Party
is awarded a judgment in any suit brought to enforce Guarantor's covenant to
pay a portion of the Guarantied Obligations, such judgment shall not be
deemed to release Guarantor from its covenant to pay the portion of the
Guarantied Obligations that is not the subject of such suit.
(d) Any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability of
this Guaranty or giving rise to any reduction, limitation, impairment,
discharge or termination of Guarantor's liability hereunder, from time to
time may (i) renew, extend, accelerate, increase the rate of interest on, or
otherwise change the time, place, manner or terms of payment of the
Guarantied Obligations, (ii) settle, compromise, release or discharge, or
XXI-7
<PAGE>
accept or refuse any offer of performance with respect to, or substitutions
for, the Guarantied Obligations or any agreement relating thereto and/or
subordinate the payment of the same to the payment of any other obligations;
(iii) request and accept other guaranties of the Guarantied Obligations and
take and hold security for the payment of this Guaranty or the Guarantied
Obligations; (iv) release, surrender, exchange, substitute, compromise,
settle, rescind, waive, alter, subordinate or modify, with or without
consideration, any security for payment of the Guarantied Obligations, any
other guaranties (including the Subsidiary Guaranty) of the Guarantied
Obligations, or any other obligation of any Person with respect to the
Guarantied Obligations; (v) enforce and apply any security now or hereafter
held by or for the benefit of such Beneficiary in respect of this Guaranty
or the Guarantied Obligations and direct the order or manner of sale
thereof, or exercise any other right or remedy that such Beneficiary may
have against any such security, in each case as such Beneficiary in its
discretion may determine consistent with the applicable Financing Agreement
or the applicable Lender Interest Rate Agreement and any applicable security
agreement, including foreclosure on any such security pursuant to one or
more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable, and even though such action operates to
impair or extinguish any right of reimbursement or subrogation or other
right or remedy of Guarantor against Company or any security for the
Guarantied Obligations; and (vi) exercise any other rights available to it
under the Loan Documents or the Lender Interest Rate Agreements.
(e) This Guaranty and the obligations of Guarantor hereunder shall be
valid and enforceable and shall not be subject to any reduction, limitation,
impairment, discharge or termination for any reason (other than payment in
full of the Guarantied Obligations), including without limitation the
occurrence of any of the following, whether or not Guarantor shall have had
notice or knowledge of any of them: (i) any failure or omission to assert
or enforce or agreement or election not to assert or enforce, or the stay or
enjoining, by order of court, by operation of law or otherwise, of the
exercise or enforcement of, any claim or demand or any right, power or
remedy (whether arising under the Loan Documents or the Lender Interest Rate
Agreements, at law, in equity or otherwise) with respect to the Guarantied
Obligations or any agreement relating thereto, or with respect to the
Subsidiary Guaranty or any other guaranty of or security for the payment of
the Guarantied Obligations; (ii) any rescission , waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including without limitation provisions relating to events of
default) of any Financing Agreement, any of the other Loan Documents, any of
the Lender Interest Rate Agreements or any agreement or instrument executed
pursuant thereto, or of the Subsidiary Guaranty or any other guaranty or
security for the Guarantied Obligations, in each case whether or not in
accordance with the terms of such Financing Agreement or such Loan Document,
such Lender Interest Rate Agreement or any agreement relating to the
Subsidiary Guaranty or such other guaranty or security; (iii) the
application of payments received from any source (other than payments
received pursuant to the other Loan Documents or any of the Lender Interest
Rate Agreements or from the proceeds of any security for the Guarantied
Obligations, except to the extent such security also serves as collateral
for indebtedness other than the Guarantied Obligations) to the
XXI-8
<PAGE>
payment of indebtedness other than the Guarantied Obligations, even though
any Beneficiary might have elected to apply such payment to any part or all
of the Guarantied Obligations; (iv) any Beneficiary's consent to the change,
reorganization or termination of the corporate structure or existence of
Company or any of its Subsidiaries and to any corresponding restructuring of
the Guarantied Obligations; (v) any failure to perfect or continue
perfection of a security interest in any collateral which secures any of the
Guarantied Obligations; (vi) any defenses, set-offs or counterclaims which
Company may allege or assert against any Beneficiary in respect of the
Guarantied Obligations, including but not limited to failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury; and (vii) any other act or
thing or omission, or delay to do any other act or thing, which may or might
in any manner or to any extent vary the risk of Guarantor as an obligor in
respect of the Guarantied Obligations.
2.5 WAIVERS BY GUARANTOR. Guarantor hereby waives, for the benefit of
--------------------
Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment or
performance by Guarantor, to (i) proceed against Company, any other
guarantor (including any Subsidiary Guarantor) of the Guarantied Obligations
or any other Person, (ii) proceed against or exhaust any security held from
Company, any such other guarantor or any other Person, (iii) proceed against
or have resort to any balance of any deposit account or credit on the books
of any Beneficiary in favor of Company or any other Person, or (iv) pursue
any other remedy in the power of any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of authority or
any disability or other defense of Company including, without limitation,
any defense based on or arising out of the lack of validity or the
unenforceability of the Guarantied Obligations or any agreement or
instrument relating thereto or by reason of the cessation of the liability
of Company from any cause other than payment in full of the Guarantied
Obligations;
(c) any defense based upon any statute or rule of law which provides that
the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions in the
administration of the Guarantied Obligations, except behavior which amounts
to bad faith, gross negligence or willful misconduct;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty, (ii) the
benefit of any statute of limitations affecting Guarantor's liability
hereunder or the enforcement hereof, (iii) any rights to set-offs,
recoupments and counterclaims, and (iv) promptness,
XXI-9
<PAGE>
diligence and any requirement that any Beneficiary protect, secure, perfect
or insure any security interest or lien or any property subject thereto; and
(f) notices, demands, presentments, protests, notices of protest, notices
of dishonor and notices of any action or inaction, including acceptance of
this Guaranty, notices of default under the Financing Agreements, the Lender
Interest Rate Agreements or any agreement or instrument related thereto,
notices of any renewal, extension or modification of the Guarantied
Obligations or any agreement related thereto, notices of any extension of
credit to Company and notices of any of the matters referred to in
subsection 2.4 and any right to consent to any thereof.
2.6 CERTAIN CALIFORNIA LAW WAIVERS. As used in this subsection 2.6, any
------------------------------
reference to "the principal" includes Company, and any reference to "the
creditor" includes each Beneficiary. In accordance with Section 2856 of the
California Civil Code:
(a) Guarantor agrees (i) to waive any and all rights of subrogation and
reimbursement against Company or against any collateral or security granted
by Company for any of the Guarantied Obligations and (ii) to withhold the
exercise of any and all rights of contribution against any other guarantor
(including any Subsidiary Guarantor) of any of the Guarantied Obligations
and against any collateral or security granted by any such other guarantor
for any of the Guarantied Obligations until the Guarantied Obligations shall
have been paid in full and the Commitments shall have terminated and all
Letters of Credit shall have expired or been cancelled, all as more fully
set forth in subsection 2.7;
(b) Guarantor waives any and all other rights and defenses available to
Guarantor by reason of Sections 2787 to 2855, inclusive, 2899 and 3433 of
the California Civil Code, including without limitation any and all rights
or defenses Guarantor may have by reason of protection afforded to the
principal with respect to any of the Guarantied Obligations, or to any other
guarantor (including any Subsidiary Guarantor) of any of the Guarantied
Obligations with respect to any of such guarantor's obligations under its
guaranty, in either case pursuant to the antideficiency or other laws of the
State of California limiting or discharging the principal's indebtedness or
such guarantor's obligations, including without limitation Section 580a,
580b, 580d, or 726 of the California Code of Civil Procedure; and
(c) Guarantor waives all rights and defenses arising out of an election
of remedies by the creditor, even though that election of remedies, such as
a nonjudicial foreclosure with respect to security for any Guarantied
Obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the
Code of Civil Procedure or otherwise; and even though that election of
remedies by the creditor, such as nonjudicial foreclosure with respect to
security for an obligation of any other guarantor (including any Subsidiary
Guarantor) of any of the Guarantied Obligations, has destroyed Guarantor's
rights of contribution against such other guarantor.
XXI-10
<PAGE>
No other provision of this Guaranty shall be construed as limiting the
generality of any of the covenants and waivers set forth in this subsection 2.6.
In accordance with subsection 3.6 below, this Guaranty shall be governed by, and
shall be construed and enforced in accordance with, the internal laws of the
State of New York, without regard to conflicts of laws principles. This
subsection 2.6 is included solely out of an abundance of caution, and shall not
be construed to mean that any of the above-referenced provisions of California
law are in any way applicable to this Guaranty or to any of the Guarantied
Obligations.
2.7 GUARANTOR'S RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Guarantor
----------------------------------------------------
hereby waives any claim, right or remedy, direct or indirect, that Guarantor now
has or may hereafter have against Company or any of its assets in connection
with this Guaranty or the performance by Guarantor of its obligations hereunder,
in each case whether such claim, right or remedy arises in equity, under
contract, by statute (including without limitation under California Civil Code
Section 2847, 2848 or 2849), under common law or otherwise and including without
limitation (a) any right of subrogation, reimbursement or indemnification that
Guarantor now has or may hereafter have against Company with respect to the
Guarantied Obligations, (b) any right to enforce, or to participate in, any
claim, right or remedy that any Beneficiary now has or may hereafter have
against Company, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Beneficiary. In addition,
until the Guarantied Obligations shall have been indefeasibly paid in full and
the Commitments shall have terminated and all Letters of Credit shall have
expired or been cancelled, Guarantor shall withhold exercise of any right of
contribution Guarantor may have against any other guarantor of the Guarantied
Obligations (including without limitation any such right of contribution under
California Civil Code Section 2848 or under the Subsidiary Guaranty as
contemplated by subsection 2.2). Guarantor further agrees that, to the extent
the waiver or agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification Guarantor may have
against Company or against any collateral or security, and any rights of
contribution Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights any Beneficiary may have against Company,
to all right, title and interest any Beneficiary may have in any such collateral
or security, and to any right any Beneficiary may have against such other
guarantor. If any amount shall be paid to Guarantor on account of any such
subrogation, reimbursement, indemnification or contribution rights at any time
when all Guarantied Obligations shall not have been paid in full, such amount
shall be held in trust for Guarantied Party on behalf of Beneficiaries and shall
forthwith be paid over to Guarantied Party for the benefit of Beneficiaries to
be credited and applied against the Guarantied Obligations, whether matured or
unmatured, in accordance with the terms hereof.
XXI-11
<PAGE>
2.8 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of Company now
----------------------------------
or hereafter held by Guarantor is hereby subordinated in right of payment to the
Guarantied Obligations (except for indebtedness of Company arising from tax
payments made by Guarantor on behalf of Company), and any such indebtedness of
Company to Guarantor collected or received by Guarantor after an Event of
Default has occurred and is continuing shall be held in trust for Guarantied
Party on behalf of Beneficiaries and shall forthwith be paid over to Guarantied
Party for the benefit of Beneficiaries to be credited and applied against the
Guarantied Obligations but without affecting, impairing or limiting in any
manner the liability of Guarantor under any other provision of this Guaranty.
2.9 EXPENSES. Guarantor agrees to pay, or cause to be paid, promptly
--------
upon written demand, and to save Beneficiaries harmless against liability for,
any and all reasonable costs and reasonable expenses (including reasonable fees
and reasonable disbursements of counsel and allocated costs of internal counsel)
incurred or expended by any Beneficiary in connection with the enforcement of or
preservation of any rights under this Guaranty.
2.10 CONTINUING GUARANTY; TERMINATION OF GUARANTY. This Guaranty is a
--------------------------------------------
continuing guaranty and shall remain in effect until all of the Guarantied
Obligations shall have been paid in full and the Commitments shall have
terminated and all Letters of Credit shall have expired or been cancelled.
Guarantor hereby irrevocably waives any right (including without limitation any
such right arising under California Civil Code Section 2815) to revoke this
Guaranty as to future transactions giving rise to any Guarantied Obligations.
2.11 AUTHORITY OF GUARANTOR OR COMPANY. It is not necessary for any
---------------------------------
Beneficiary to inquire into the capacity or powers of Guarantor or Company or
the officers, directors or any agents acting or purporting to act on behalf of
any of them.
2.12 FINANCIAL CONDITION OF COMPANY. Any Loans may be granted to Company
------------------------------
or continued from time to time, and any Lender Interest Rate Agreements may be
entered into from time to time, in each case without notice to or authorization
from Guarantor regardless of the financial or other condition of Company at the
time of any such grant or continuation or at the time such Lender Interest Rate
Agreement is entered into, as the case may be. No Beneficiary shall have any
obligation to disclose or discuss with Guarantor its assessment, or Guarantor's
assessment, of the financial condition of Company. Guarantor has adequate means
to obtain information from Company on a continuing basis concerning the
financial condition of Company and its ability to perform its obligations under
the Loan Documents and the Lender Interest Rate Agreements, and Guarantor
assumes the responsibility for being and keeping informed of the financial
condition of Company and of all circumstances bearing upon the risk of
nonpayment of the Guarantied Obligations. Guarantor hereby waives and
relinquishes any duty on the part of any Beneficiary to disclose any matter,
fact or thing relating to the business, operations or conditions of Company now
known or hereafter known by any Beneficiary .
2.13 RIGHTS CUMULATIVE. The rights, powers and remedies given to
-----------------
Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by virtue
of any statute or rule of law or in any of the other Loan Documents, any of the
Lender Interest Rate Agreements or any agreement
XXI-12
<PAGE>
between Guarantor and any Beneficiary or Beneficiaries or between Company and
any Beneficiary or Beneficiaries. Any forbearance or failure to exercise, and
any delay by any Beneficiary in exercising, any right, power or remedy hereunder
shall not impair any such right, power or remedy or be construed to be a waiver
thereof, nor shall it preclude the further exercise of any such right, power or
remedy.
2.14 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a)
-------------------------------------------------------------
So long as any Guarantied Obligations remain outstanding, Guarantor shall not,
without the prior written consent of Guarantied Party acting pursuant to the
instructions of Requisite Obligees (as defined in subsection 3.12), commence or
join with any other Person in commencing any bankruptcy, reorganization or
insolvency proceedings of or against Company. The obligations of Guarantor
under this Guaranty shall not be reduced, limited, impaired, discharged,
deferred, suspended or terminated by any proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization, liquidation
or arrangement of Company or by any defense which Company may have by reason of
the order, decree or decision of any court or administrative body resulting from
any such proceeding. The agreements of Guarantor in this subsection 2.14(a)
shall not alter or impair its rights as a shareholder of Borrower.
(b) Guarantor acknowledges and agrees that any interest on any portion
of the Guarantied Obligations which accrues after the commencement of any
proceeding referred to in clause (a) above (or, if interest on any portion of
the Guarantied Obligations ceases to accrue by operation of law by reason of the
commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantor and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantor pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Company of any
portion of such Guarantied Obligations. Guarantor will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Guarantied Party, or allow the claim of
Guarantied Party in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied Obligations
are paid by Company, the obligations of Guarantor hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from any Beneficiary as a preference, fraudulent transfer
or otherwise, and any such payments which are so rescinded or recovered shall
constitute Guarantied Obligations for all purposes under this Guaranty until
indefeasibly paid in full.
2.15 SET OFF. In addition to any other rights any Beneficiary may have
-------
under law or in equity, if any amount shall at any time be due and owing by
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time, without notice (any such notice being hereby
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including but not limited to indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness of such Beneficiary owing to Guarantor and any other property
of Guarantor held by any
XXI-13
<PAGE>
Beneficiary to or for the credit or the account of Guarantor against and on
account of the Guarantied Obligations and liabilities of Guarantor to any
Beneficiary under this Guaranty.
SECTION 3. MISCELLANEOUS
3.1 SURVIVAL OF WARRANTIES. All agreements, representations and
----------------------
warranties made herein shall survive the execution and delivery of this Guaranty
and the other Loan Documents and the Lender Interest Rate Agreements and any
increase in the Commitments under any Financing Agreement.
3.2 NOTICES. Any communications between Guarantied Party and Guarantor
-------
and any notices or requests provided herein to be given may be given by mailing
the same, postage prepaid, or by telex, facsimile transmission or cable to each
such party at its addresses set forth in the Financing Agreements, on the
signature pages hereof or to such other addresses as each such party may in
writing hereafter indicate. Any notice, request or demand to or upon Guarantied
Party or Guarantor shall not be effective until received.
3.3 SEVERABILITY. In case any provision in or obligation under this
------------
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
3.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
----------------------
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, Guarantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
3.5 HEADINGS. Section and subsection headings in this Guaranty are
--------
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
3.6 APPLICABLE LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
--------------
GUARANTOR AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
3.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and
----------------------
shall be binding upon Guarantor and its successors and assigns. This Guaranty
shall inure to the benefit of Beneficiaries and their respective successors and
assigns. Guarantor shall not assign this Guaranty or any of the rights or
obligations of Guarantor hereunder without the prior written consent of all
Lenders. Any Beneficiary may, without notice or consent, assign its
XXI-14
<PAGE>
interest in this Guaranty in whole or in part. The terms and provisions of this
Guaranty shall inure to the benefit of any transferee or assignee of any Loan,
and in the event of such transfer or assignment the rights and privileges herein
conferred upon such Beneficiary shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
3.8 NO OTHER WRITING. This writing is intended by Guarantor and
----------------
Beneficiaries as the final expression of this Guaranty and is also intended as a
complete and exclusive statement of the terms of their agreement with respect to
the matters covered hereby. No course of dealing, course of performance or
trade usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty.
3.9 FURTHER ASSURANCES. At any time or from time to time, upon the
------------------
request of Guarantied Party, Guarantor shall execute and deliver such further
documents and do such other acts and things as Guarantied Party may reasonably
request in order to effect fully the purposes of this Guaranty.
3.10 GUARANTIED PARTY AS COLLATERAL AGENT.
------------------------------------
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by CA Administrative Agent on behalf of the Credit Agreement Lenders
and by AXEL Administrative Agent on behalf of the AXEL Lenders pursuant to the
Intercreditor Agreement, and by their acceptance of the benefits hereof,
Interest Rate Exchangers and shall be entitled to the benefits of the
Intercreditor Agreement. Guarantied Party shall be obligated, and shall have
the right hereunder, to make demands, to give notices, to exercise or refrain
from exercising any rights, and to take or refrain from taking any action,
solely in accordance with this Guaranty and Intercreditor Agreement; provided
--------
that Guarantied Party shall exercise, or refrain from exercising, any remedies
hereunder in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Financing Agreement Obligations under the Financing
Agreements and any other Loan Documents, the holders of a majority of the
aggregate notional amount (or, with respect to any Lender Interest Rate
Agreement that has been terminated in accordance with its terms, the amount then
due and payable (exclusive of expenses and similar payments but including any
early termination payments then due) under such Lender Interest Rate Agreement)
under all Lender Interest Rate Agreements (Requisite Lenders or, if applicable,
such holders being referred to herein as "REQUISITE OBLIGEES"). In
furtherance of the foregoing provisions of this subsection 3.12, each Interest
Rate Exchanger, by its acceptance of the benefits hereof, agrees that it shall
have no right individually to enforce this Guaranty, it being understood and
agreed by such Interest Rate Exchanger that all rights and remedies hereunder
may be exercised solely by Guarantied Party for the benefit of Beneficiaries in
accordance with the terms of this subsection 3.12.
(b) Guarantied Party shall at all times be the same Person that is
Collateral Agent under the Intercreditor Agreement. The Collateral Agent may
resign and a successor Collateral Agent may be appointed in the manner provided
in the Intercreditor Agreement. Written notice of resignation by Collateral
Agent pursuant to the Intercreditor Agreement shall also constitute
XXI-15
<PAGE>
notice of resignation as Guarantied Party under this Guaranty; removal of
Collateral Agent pursuant to the Intercreditor Agreement shall also constitute
removal as Guarantied Party under this Guaranty; and appointment of a successor
Collateral Agent pursuant to the Intercreditor Agreement shall also constitute
appointment of a successor Guarantied Party under this Guaranty. Upon the
acceptance of any appointment as Collateral Agent by a successor Collateral
Agent, that successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Guarantied Party under this Guaranty, and the retiring or removed
Guarantied Party under this Guaranty shall promptly (i) transfer to such
successor Guarantied Party all sums held hereunder, together with all records
and other documents necessary or appropriate in connection with the performance
of the duties of the successor Guarantied Party under this Guaranty, and (ii)
take such other actions as may be necessary or appropriate in connection with
the assignment to such successor Guarantied Party of the rights created
hereunder, whereupon such retiring or removed Guarantied Party shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Guarantied Party's resignation or removal hereunder as
Guarantied Party, the provisions of this Guaranty shall inure to its benefit as
to any actions taken or omitted to be taken by it under this Guaranty while it
was Guarantied Party hereunder.
[Remainder of page intentionally left blank]
XXI-16
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and
delivered by its officer thereunto duly authorized as of the date first written
above.
SEALY CORPORATION
By: --------------------------------------
Name:
Title:
XXI-17
<PAGE>
EXHIBIT XXII
[FORM OF HOLDINGS PLEDGE AGREEMENT]
HOLDINGS PLEDGE AGREEMENT
This HOLDINGS PLEDGE AGREEMENT (this "AGREEMENT") is dated as of
December 18, 1997 and entered into by and between SEALY CORPORATION, a Delaware
corporation ("PLEDGOR"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("MORGAN GUARANTY"), as Collateral Agent for and representative of (in such
capacity herein called "COLLATERAL AGENT") the Secured Parties (as hereinafter
defined) and any Interest Rate Exchangers (as hereinafter defined).
RECITALS
A. Pledgor is the legal and beneficial owner of (i) the shares of stock
(the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto and
----------
issued by the corporations named therein and (ii) the indebtedness (the
"PLEDGED DEBT") described in Part B of said Schedule I and issued by the
----------
obligors named therein.
B. Sealy Mattress Company, an Ohio Corporation ("COMPANY"), Pledgor,
the financial institutions from time to time parties thereto (the "CREDIT
AGREEMENT LENDERS"), Goldman Sachs Credit Partners L.P. ("GSCP"), as arranger
and syndication agent (in such capacity, "CA SYNDICATION AGENT"), Morgan
Guaranty, as administrative agent (in such capacity, "CA ADMINISTRATIVE
AGENT"), and Bankers Trust Company ("BTCO."), as documentation agent (in such
capacity, "CA DOCUMENTATION AGENT") have entered into a Credit Agreement dated
as of December 18, 1997 (said Credit Agreement, as it may hereafter be amended,
restated, supplemented or otherwise modified from time to time, being the
("CREDIT AGREEMENT") pursuant to which Credit Agreement Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Company.
C. Company, Pledgor, the financial institutions from time to time
parties thereto (the "AXEL LENDERS"), GSCP, as arranger and syndication agent
(in such capacity, "AXEL SYNDICATION AGENT"), Morgan Guaranty, as
administrative agent (in such capacity, "AXEL ADMINISTRATIVE AGENT"), and
BTCo., as documentation agent (in such capacity, "AXEL DOCUMENTATION AGENT")
have entered into an AXEL Credit Agreement dated as of December 18, 1997 (said
AXEL Credit Agreement, as it may hereafter be amended, restated, supplemented or
otherwise modified from time to time, being the "AXEL CREDIT AGREEMENT"; the
Credit Agreement Lenders, the CA Syndication Agent, the CA Administrative Agent,
the CA Documentation Agent, the AXEL Lenders, the AXEL Syndication Agent, the
AXEL Administrative Agent, and the AXEL Documentation Agent each being a
"SECURED PARTY" and collectively the "SECURED PARTIES") pursuant to which
AXEL
XXII-1
<PAGE>
Lenders have made certain commitments, subject to the terms and conditions
set forth in the AXEL Credit Agreement, to extend certain credit facilities to
Company.
D. Company may from time to time enter into one or more Interest Rate
Agreements (collectively, the "LENDER INTEREST RATE AGREEMENTS") with one or
more CA Lenders or their Affiliates or AXEL Lenders or their Affiliates (in such
capacity, collectively, "INTEREST RATE EXCHANGERS").
E. Pledgor has executed and delivered that certain Holdings Guaranty
dated as of December 18, 1997 (said Holdings Guaranty, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the
"GUARANTY") in favor of Collateral Agent for the benefit of Secured Parties
and any Interest Rate Exchangers, pursuant to which Pledgor has guarantied the
prompt payment and performance when due of all obligations of Company under the
Financing Agreements and all obligations of Company under the Lender Interest
Rate Agreements, including without limitation the obligation of Company to make
payments, if any, thereunder in the event of early termination thereof.
F. It is a condition precedent to the initial extensions of credit by
Secured Parties under the Financing Agreements that Pledgor shall have granted
the security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and to induce (i) the CA
Administrative Agent, the CA Syndication Agent and the Credit Agreement Lenders
to enter into the Credit Agreement, (ii) the Credit Agreement Lenders to make
their respective loans to, and issue Letters of Credit for the account of, the
Company, (iii) the AXEL Administrative Agent, the AXEL Syndication Agent and the
AXEL Lenders to enter into the AXEL Loan Agreement, (iv) the AXEL Lenders to
make their respective loans to the Company and (v) to induce Interest Rate
Exchangers to enter into the Lender Interest Rate Agreements, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Pledgor hereby agrees with Collateral Agent as follows:
SECTION 1. DEFINED TERMS
-------------
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to such terms in the
Credit Agreement;
(b) The following terms shall have the following meanings:
"ACCELERATION" shall mean any of the Credit Agreement Obligations or
the AXEL Credit Agreement Obligations have been declared, or have become,
immediately due and payable, or the commitments to extend credit of the Credit
Agreement Lenders or the AXEL Lenders shall have been terminated under Section 8
of the Credit Agreement or Section 7 of the AXEL Credit Agreement, respectively.
XXII-2
<PAGE>
"ADDITIONAL PLEDGED SHARES" has the meaning assigned to that term in
Section 2(c) of this Agreement.
"AGREEMENT" means this Company Pledge Agreement dated as of December
18, 1997, as it may be amended, supplemented or otherwise modified from time to
time.
"AXEL CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"AXEL COMMITMENTS" shall mean "Commitments" as defined in the AXEL
Credit Agreement.
"AXEL OBLIGATIONS" shall mean "Obligations" as defined in the AXEL
Credit Agreement.
"COLLATERAL ACCOUNTS" shall mean "Collateral Accounts" as defined in
the Intercreditor Agreement.
"COMMITMENTS" means the Credit Agreement Commitments and the AXEL
Commitments.
"CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"CREDIT AGREEMENT COMMITMENTS" shall mean the "Commitments" as
defined in the Credit Agreement.
"CREDIT AGREEMENT OBLIGATIONS" shall mean the "Obligations" as
defined in the Credit Agreement.
"EVENT OF DEFAULT" means any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which Company is
the Defaulting Party and which results in the designation of an Early
Termination Date (as such terms are defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate
Agreement.
"FINANCING AGREEMENT" means the Credit Agreement or the AXEL Credit
Agreement, and "Financing Agreements" means the Credit Agreement and the AXEL
Credit Agreement, collectively.
"FINANCING AGREEMENT OBLIGATIONS" means Credit Agreement Obligations
and AXEL Obligations.
XXII-3
<PAGE>
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated as
of December 18, 1997, by and among CA Administrative Agent, AXEL Administrative
Agent and Collateral Agent.
"INTEREST RATE EXCHANGERS" has the meaning assigned to that term in the
recitals to this Agreement.
"LENDER INTEREST RATE AGREEMENT" has the meaning assigned to that term
in the recitals to this Agreement.
"LOAN" means any "Loan" as defined in any Financing Agreement, and
"LOANS" means all such Loans collectively.
"LOAN DOCUMENT" means any "Loan Document" as defined in any Financing
Agreement, and "LOAN DOCUMENTS" means all such Loan Documents collectively.
"NEW PLEDGED SHARES" has the meaning assigned to that term in Section
2(e) of this Agreement.
"PLEDGE AMENDMENT" has the meaning assigned to that term in Section 7
of this Agreement.
"PLEDGED COLLATERAL" has the meaning assigned to that term in Section 2
of this Agreement.
"PLEDGED DEBT" has the meaning assigned to that term in the recitals to
this Agreement.
"PLEDGED SHARES" has the meaning assigned to that term in the recitals
to this Agreement.
"PLEDGOR" has the meaning assigned to that term in the introduction of
this Agreement.
"POTENTIAL EVENT OF DEFAULT" means any "Potential Event of Default"
as defined in any Financing Agreement.
"REQUISITE AXEL LENDERS" means "Requisite Lenders" as defined in the
AXEL Credit Agreement.
"REQUISITE CREDIT AGREEMENT LENDERS" means "Requisite Lenders" as
defined in the Credit Agreement.
"REQUISITE LENDERS" means (A) unless an Acceleration shall have
occurred and be continuing, the Requisite Credit Agreement Lenders and the
Requisite AXEL Lenders, and (B)
XXII-4
<PAGE>
if an Acceleration has occurred and is continuing, Secured Parties holding more
than 50% of the Financing Agreement Obligations.
"REQUISITE OBLIGEES" has the meaning assigned to that term in Section
17(a) of this Agreement.
"SECURED OBLIGATIONS" has the meaning assigned to that term in Section
3 of this Agreement.
"SECURED PARTIES" has the meaning assigned to that term in the recitals
to this Agreement.
SECTION 2. PLEDGE OF SECURITY.
------------------
Pledgor hereby pledges and assigns to Secured Party, and hereby grants to
Collateral Agent a security interest in, all of Pledgor's right, title and
interest in and to the following (the "PLEDGED COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any
financial intermediary pertaining to the Pledged Shares, and all dividends,
cash, warrants, rights, instruments and other property or proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares;
(b) the Pledged Debt and the instruments evidencing the Pledged Debt, and
all interest, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock
of any issuer of the Pledged Shares from time to time acquired by Pledgor in
any manner (which shares shall be deemed to be part of the Pledged Shares),
the certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in
the entries on the books of any financial intermediary pertaining to such
additional shares (all such shares, securities, warrants, options, rights,
certificates, instruments and interests collectively being "ADDITIONAL
PLEDGED SHARES"), and all dividends, cash, warrants, rights, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Additional Pledged Shares;
(d) all additional indebtedness from time to time owed to Pledgor by any
obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness;
XXII-5
<PAGE>
(e) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any
Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a Subsidiary of Pledgor (which shares shall be deemed to be part
of the Pledged Shares), the certificates or other instruments representing
such shares, securities, warrants, options or other rights and any interest
of Pledgor in the entries on the books of any financial intermediary
pertaining to such shares (all such shares, securities, warrants, options,
rights, certificates, instruments and interests collectively being "NEW
PLEDGED SHARES"), and all dividends, cash, warrants, rights, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares, securities, warrants, options or other rights;
(f) all indebtedness from time to time owed to Pledgor by any Person
that, after the date of this Agreement, becomes, as a result of any
occurrence, a Subsidiary of Pledgor, and all interest, cash, instruments and
other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness; and
(g) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or
received when Pledged Collateral or proceeds are sold, exchanged, collected
or otherwise disposed of, whether such disposition is voluntary or
involuntary, and includes, without limitation, proceeds of any indemnity or
guaranty payable to Pledgor or Collateral Agent from time to time with
respect to any of the Pledged Collateral.
SECTION 3. SECURITY FOR OBLIGATIONS.
------------------------
This Agreement secures, and the Pledged Collateral is collateral security
for, the prompt payment or performance in full when due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
(S)362(a)), of all obligations and liabilities of every nature of Pledgor now or
hereafter existing under or arising out of or in connection with the Guaranty
and all extensions or renewals thereof, whether for principal, interest
(including without limitation interest that, but for the filing of a petition in
bankruptcy with respect to Company, would accrue on such obligations, whether or
not a claim is allowed against Company for such interest in the related
bankruptcy proceeding), reimbursement of amounts drawn under Letters of Credit,
payments for early termination of Lender Interest Rate Agreements, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Collateral
Agent or any Secured Party or Interest Rate Exchanger as a preference,
fraudulent transfer or otherwise, and all
XXII-6
<PAGE>
obligations of every nature of Pledgor now or hereafter existing under this
Agreement (all such obligations of Pledgor being the "SECURED OBLIGATIONS").
SECTION 4. DELIVERY OF PLEDGED COLLATERAL.
------------------------------
All certificates or instruments representing or evidencing the Pledged
Collateral shall be delivered to and held by or on behalf of Collateral Agent
pursuant hereto and shall be in suitable form for transfer by delivery or, as
applicable, shall be accompanied by Pledgor's endorsement, where necessary, or
duly executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to Collateral Agent. Upon the occurrence and
during the continuation of an Event of Default, Collateral Agent shall have the
right, without notice to Pledgor, to transfer to or to register in the name of
Collateral Agent or any of its nominees any or all of the Pledged Collateral,
subject only to the revocable rights specified in Section 8(a). In addition,
upon the occurrence and during the continuance of an Event of Default,
Collateral Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
------------------------------
Pledgor represents and warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
---------------------------------------------
Shares have been duly authorized and validly issued and are fully paid and
non-assessable. All of the Pledged Debt has been duly authorized,
authenticated or issued, and delivered and is the legal, valid and binding
obligation of the issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares constitute the
---------------------------------
percentage of the issued and outstanding shares of stock of each issuer
thereof set forth on Schedule I annexed hereto, and there are no outstanding
----------
warrants, options or other rights to purchase, or other agreements
outstanding with respect to, or property that is now or hereafter
convertible into, or that requires the issuance or sale of, any Pledged
Shares. The Pledged Debt constitutes all of the issued and outstanding
intercompany indebtedness evidenced by a promissory note of the respective
issuers thereof owing to Pledgor.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
-------------------------------
beneficial owner of the Pledged Collateral free and clear of any Lien except
for the security interest created by this Agreement.
XXII-7
<PAGE>
SECTION 6. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL; ETC.
--------------------------------------------------------------
Pledgor shall:
(a) not, except as expressly permitted by the Financing Agreements (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create
or suffer to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest under this Agreement, or (iii)
permit any issuer of Pledged Shares to merge or consolidate;
(b) (i) cause each issuer of Pledged Shares not to issue any stock or
other securities in addition to or in substitution for the Pledged Shares
issued by such issuer, except to Pledgor, (ii) pledge hereunder, immediately
upon its acquisition (directly or indirectly) thereof, any and all
additional shares of stock or other securities of each issuer of Pledged
Shares, and (iii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all shares of stock of any Person
that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of Pledgor;
(c) (i) pledge hereunder, immediately upon their issuance, any and all
instruments or other evidences of additional indebtedness from time to time
owed to Pledgor by any obligor on the Pledged Debt, and (ii) pledge
hereunder, immediately upon their issuance, any and all instruments or other
evidences of indebtedness from time to time owed to Pledgor by any Person
that after the date of this Agreement becomes, as a result of any
occurrence, a Subsidiary of Pledgor;
(d) pay promptly when due all taxes, assessments and governmental charges
or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith.
SECTION 7. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action that Collateral Agent may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable Collateral Agent to exercise and enforce its rights
and remedies hereunder with respect to any Pledged Collateral. Without limiting
the generality of the foregoing, Pledgor will: (i) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, or as Collateral Agent may reasonably request, in order
to perfect and preserve the security interests granted or purported to be
granted hereby and (ii) at Secured Party's reasonable request, appear in and
defend any action or proceeding that may affect Pledgor's title to or Secured
Party's security interest in all or any part of the Pledged Collateral.
XXII-8
<PAGE>
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of stock or other securities required to be pledged hereunder as provided
in Section 6(b) or (c), promptly (and in any event within five Business Days)
deliver to Collateral Agent a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"),
-----------
in respect of the additional Pledged Shares or Pledged Debt to be pledged
pursuant to this Agreement. Pledgor hereby authorizes Collateral Agent to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares or Pledged Debt listed on any Pledge Amendment delivered to Collateral
Agent shall for all purposes hereunder be considered Pledged Collateral;
provided that the failure of Pledgor to execute a Pledge Amendment with respect
--------
to any additional Pledged Shares or Pledged Debt pledged pursuant to this
Agreement shall not impair the security interest of Collateral Agent therein or
otherwise adversely affect the rights and remedies of Collateral Agent hereunder
with respect thereto.
SECTION 8. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof
for any purpose not inconsistent with the terms of this Agreement or the
Financing Agreements;
(ii) Pledgor shall be entitled to receive and retain, and to utilize free
and clear of the lien of this Agreement, any and all dividends and interest
paid in respect of the Pledged Collateral; provided, however, that any and
-------- -------
all dividends and interest paid or payable other than in cash in respect of,
and instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for, any Pledged Collateral, shall
be, and shall forthwith be delivered to Collateral Agent to hold as, Pledged
Collateral and shall, if received by Pledgor, be received in trust for the
benefit of Collateral Agent, be segregated from the other property or funds
of Pledgor and be forthwith delivered to Collateral Agent as Pledged
Collateral in the same form as so received (with all necessary
endorsements); and
(iii) Collateral Agent shall promptly execute and deliver (or cause to
be executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the voting and other
consensual rights which it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends, principal or interest payments which it
is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Collateral Agent to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 8(a)(i) shall cease,
and all such rights shall
XXII-9
<PAGE>
thereupon become vested in Collateral Agent who shall thereupon have the
sole right to exercise such voting and other consensual rights;
(ii) all rights of Pledgor to receive the dividends and interest payments
which it would otherwise be authorized to receive and retain pursuant to
Section 8(a)(ii) shall cease, and all such rights shall thereupon become
vested in Collateral Agent who shall thereupon have the sole right to
receive and hold as Pledged Collateral such dividends and interest payments;
and
(iii) all dividends, principal and interest payments which are received
by Pledgor contrary to the provisions of paragraph (ii) of this Section 8(b)
shall be (A) forthwith (and in any event within two Business Days) deposited
by the Pledgor to the exact form received, duly endorsed by the Pledgor to
the Collateral Agent if required, in a Collateral Account maintained under
the sole dominion and control of the Collateral Agent for the account of the
Secured Parties only as provided in Section 15, (B) until so turned over in
accordance with the preceding subsection (A), all such amounts and proceeds
received by Grantor shall be received in trust for the benefit of Collateral
Agent hereunder -- and shall be segregated from other funds of Pledgor.
(c) In order to permit Collateral Agent to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
8(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 8(a)(ii) or Section 8(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Collateral Agent all such proxies, dividend payment orders and other instruments
as Collateral Agent may from time to time reasonably request and (ii) without
limiting the effect of the immediately preceding clause (i), Pledgor hereby
grants to Collateral Agent an irrevocable proxy to vote the Pledged Shares and
to exercise all other rights, powers, privileges and remedies to which a holder
of the Pledged Shares would be entitled (including, without limitation, giving
or withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence and during the continuance of an Event of Default
and which proxy shall only terminate upon the payment in full of the Secured
Obligations.
SECTION 9. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
-------------------------------------------
Pledgor hereby irrevocably appoints Collateral Agent as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor, Collateral Agent or otherwise, from time to time, upon the
occurrence and during the continuance of an Event of Default, in Collateral
Agents's reasonable discretion to take any action and to execute any instrument
that Collateral Agent may reasonably deem necessary or advisable to accomplish
the purposes of this Agreement, including without limitation:
XXII-10
<PAGE>
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any proceedings
that Collateral Agent may reasonably deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the
rights of Collateral Agent with respect to any of the Pledged Collateral.
SECTION 10. COLLATERAL AGENT MAY PERFORM.
----------------------------
If Pledgor fails to perform any agreement contained herein, Collateral
Agent may itself perform, or cause performance of, such agreement, and the
reasonable expenses of Collateral Agent incurred in connection therewith shall
be payable by Pledgor under Section 16(b).
SECTION 11. STANDARD OF CARE.
----------------
The powers conferred on Collateral Agent hereunder are solely to protect
its interest in the Pledged Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, Collateral Agent shall have no duty as
to any Pledged Collateral, it being understood that Collateral Agent shall have
no responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not Collateral Agent has or is deemed to have
knowledge of such matters, (b) taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above to maintain
possession of the Pledged Collateral) to preserve rights against any parties
with respect to any Pledged Collateral, (c) taking any necessary steps to
collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Collateral Agent shall be deemed to have exercised reasonable care in
the custody and preservation of Pledged Collateral in its possession if such
Pledged Collateral is accorded treatment substantially equal to that which
Collateral Agent accords its own property consisting of negotiable securities.
XXII-11
<PAGE>
SECTION 12. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Collateral Agent may exercise in respect of the Pledged Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE")
(whether or not the Code applies to the affected Pledged Collateral), and
Collateral Agent may also in its sole discretion, without notice except as
specified below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange or broker's board or at any
of Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Collateral Agent may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Pledged Collateral.
Collateral Agent or any Secured Party or Interest Rate Exchanger may be the
purchaser of any or all of the Pledged Collateral at any such sale and Secured
Party, as agent for and representative of Secured Parties and Interest Rate
Exchangers (but not any Secured Party or Secured Parties or Interest Rate
Exchanger or Interest Rate Exchangers in its or their respective individual
capacities unless Requisite Obligees (shall otherwise agree in writing), shall
be entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Pledged Collateral sold at any such
public sale, to use and apply any of the Secured Obligations as a credit on
account of the purchase price for any Pledged Collateral payable by Collateral
Agent at such sale. Each purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of Pledgor, and Pledgor
hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Collateral Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. Collateral
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Pledgor hereby
waives any claims against Collateral Agent arising by reason of the fact that
the price at which any Pledged Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale,
even if Collateral Agent accepts the first offer received and does not offer
such Pledged Collateral to more than one offeree. If the proceeds of any sale
or other disposition of the Pledged Collateral are insufficient to pay all the
Secured Obligations, Pledgor shall be liable for the deficiency and the
reasonable fees of any attorneys employed by Collateral Agent to collect such
deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions contained
in the Securities Act and applicable state securities laws, Collateral Agent may
be compelled, with respect to any sale of all or any part of the Pledged
Collateral conducted without prior registration or qualification of such Pledged
Collateral under the Securities Act and/or such state securities laws, to limit
purchasers to those who will agree, among other things, to acquire the Pledged
Collateral for their own account, for investment and not with a view to the
XXII-12
<PAGE>
distribution or resale thereof. Pledgor acknowledges that any such private
sales may be at prices and on terms less favorable than those obtainable through
a public sale without such restrictions (including, without limitation, a public
offering made pursuant to a registration statement under the Securities Act)
and, notwithstanding such circumstances and the registration rights granted to
Collateral Agent by Pledgor pursuant to Section 13, Pledgor agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that Collateral Agent shall have no obligation to engage in public
sales and no obligation to delay the sale of any Pledged Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to
so register it.
(c) If Collateral Agent determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Collateral Agent all such information as Collateral Agent may
reasonably request in order to determine the number of shares and other
instruments included in the Pledged Collateral which may be sold by Collateral
Agent in exempt transactions under the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder, as the same
are from time to time in effect.
SECTION 13. REGISTRATION RIGHTS.
-------------------
If Collateral Agent shall determine to exercise its right to sell all or
any of the Pledged Collateral pursuant to Section 12, Pledgor agrees that, upon
request of Collateral Agent (which request may be made by Collateral Agent in
its sole discretion), Pledgor will, at its own expense:
(a) execute and deliver, and cause each issuer of the Pledged Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all such other acts and things, as may be necessary or, in the opinion of
Collateral Agent, advisable to register such Pledged Collateral under the
provisions of the Securities Act and to cause the registration statement
relating thereto to become effective and to remain effective for such period
as prospectuses are required by law to be furnished, and to make all
amendments and supplements thereto and to the related prospectus which, in
the opinion of Collateral Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Pledged Collateral under all
applicable state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Pledged Collateral, as requested
by Collateral Agent;
(c) cause each such issuer to make available to its security holders, as
soon as practicable, an earnings statement which will satisfy the provisions
of Section 11(a) of the Securities Act;
XXII-13
<PAGE>
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Pledged Collateral or any part thereof
valid and binding and in compliance with applicable law; and
(e) bear all costs and expenses, including reasonable attorneys' fees, of
carrying out its obligations under this Section 13.
Pledgor further agrees that a breach of any of the covenants contained in
this Section 13 will cause irreparable injury to Collateral Agent, that
Collateral Agent has no adequate remedy at law in respect of such breach and, as
a consequence, that each and every covenant contained in this Section 13 shall
be specifically enforceable against Pledgor, and Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no default has occurred giving rise to
the Secured Obligations becoming due and payable prior to their stated
maturities. Nothing in this Section 13 shall in any way alter the rights of
Collateral Agent under Section 13.
SECTION 14. PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT.
----------------------------------------------
In addition to the rights of the Collateral Agent and the Secured Parties
specified in Section 8(b), if an Event of Default shall occur and be continuing,
upon request of the Collateral Agent, all proceeds received by the Pledgor
consisting of cash, checks and other near-cash items shall be held by the
Pledgor in trust for the Collateral Agent and the Secured Parties, segregated
from other funds of the Pledgor and shall, forthwith upon receipt by the
Pledgor, be turned over to the Collateral Agent in the exact form received by
the Pledgor (duly indorsed by the Pledgor to the Collateral Agent, if required)
and held by the Collateral Agent in a Collateral Account maintained under the
Intercreditor Agreement. All proceeds while held by the Collateral Agent in a
Collateral Account (or by the Pledgor in trust for the Collateral Agent and the
Secured Parties) shall continue to be held as collateral security for all the
Secured Obligations and shall not constitute payment thereof until applied as
provided in Section 15.
SECTION 15. APPLICATION OF PROCEEDS.
-----------------------
All proceeds held in any Collateral Account and all other proceeds
received by Collateral Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Pledged Collateral shall be
applied as provided in subsection 3 of the Intercreditor Agreement.
SECTION 16. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Collateral Agent, each Secured Party and
each Interest Rate Exchanger from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including, without
limitation, enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Collateral Agents's or such Secured
Party's or
XXII-14
<PAGE>
Interest Rate Exchanger's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) Pledgor shall pay to Collateral Agent promptly following written
demand the amount of any and all reasonable costs and reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, that Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Pledged
Collateral, (iii) the exercise or enforcement of any of the rights of Collateral
Agent hereunder, or (iv) the failure by Pledgor to perform or observe any of the
provisions hereof.
(c) In the event of any public sale described in Section 13, Pledgor
agrees to indemnify and hold harmless Collateral Agent, each Secured Party and
each Interest Rate Exchanger and each of their respective directors, officers,
employees and agents (collectively, called the "INDEMNITEES") from and against
any and all Indemnified Liabilities (as hereinafter defined); provided that
Pledgor shall not have an obligation to any Indemnitee hereunder with respect to
any Indemnified Liabilities to the extent such Indemnified Liabilities arise
from the bad faith, gross negligence or wilful misconduct of that Indemnitee as
determined by a final, non-appealable judgement of a court of competent
jurisdiction. This indemnity shall be in addition to any liability which
Pledgor may otherwise have and shall extend upon the same terms and conditions
to each Person, if any, that controls Collateral Agent or such Persons within
the meaning of the Securities Act.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively any
and all liabilities, obligations, losses, fees, costs, expenses, damages, or
claims, joint or several, to which any such Indemnitee may become subject or for
which any Indemnitee may be liable, under the Securities Act or otherwise,
insofar as such losses, fees, costs, expenses, damages, liabilities or claims
(or any litigation commenced or threatened in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact made by Pledgor or its Subsidiaries or based on information provided by
Pledgor or its Subsidiaries, contained in any preliminary prospectus,
registration statement, prospectus or other such document published or filed in
connection with such public sale, or any amendment or supplement thereto, or
arise out of or are based upon an omission or alleged omission by Pledgor or its
Subsidiaries or caused by the inaction of Pledgor or its Subsidiaries to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and any legal or other expenses reasonably
incurred by any Indemnitee in connection with any litigation, of any nature
whatsoever, commenced or threatened in respect thereof (including without
limitation any and all fees, costs and expenses whatsoever reasonably incurred
by any Indemnitee and counsel for any Indemnitee in investigating, preparing
for, defending against or providing evidence, producing documents or taking any
other action in respect of, any such commenced or threatened litigation or any
claims asserted).
SECTION 17. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.
-----------------------------------------------
This Agreement shall create a continuing security interest in the Pledged
Collateral and shall (a) remain in full force and effect until the payment in
full of all Secured Obligations
XXII-15
<PAGE>
(other than inchoate indemnification obligations with respect to claims, losses
or liabilities which have not yet arisen and are not yet due and payable), the
cancellation or termination of the Commitments and the cancellation or
expiration of all outstanding Letters of Credit, (b) be binding upon Pledgor,
its successors and assigns, and (c) inure, together with the rights and remedies
of Collateral Agent hereunder, to the benefit of Collateral Agent and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), but subject to the provisions of subsection 10.1 of the
Credit Agreement and subsection 10.1 of the AXEL Credit Agreement, any Secured
Party may assign or otherwise transfer any Loans held by it to any other Person,
and such other Person shall thereupon become vested with all the benefits in
respect thereof granted to Lenders herein or otherwise. Upon the payment in full
of all Secured Obligations (other than inchoate indemnification obligations with
respect to claims, losses or liabilities which have not yet arisen and are not
yet due and payable), the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Pledged Collateral
shall revert to Pledgor. Upon any such termination Collateral Agent will, at
Pledgor's expense, execute and deliver to Pledgor such documents as Pledgor
shall reasonably request to evidence such termination in accordance with the
terms of the Intercreditor Agreement and Pledgor shall be entitled to the
return, upon its request and at its expense, against receipt and without
recourse to Collateral Agent, of such of the Pledged Collateral as shall not
have been sold or otherwise applied pursuant to the terms hereof.
SECTION 18. COLLATERAL AGENT AS ADMINISTRATIVE AGENT.
----------------------------------------
(a) Collateral Agent has been appointed to act as Collateral Agent
hereunder by CA Administrative Agent on behalf of the Credit Agreement Lenders
and AXEL Administrative Agent on behalf of the AXEL Lenders pursuant to
Intercreditor Agreement and, by their acceptance of the benefits hereof,
Interest Rate Exchangers and shall be entitled to the benefits of the
Intercreditor Agreement. Collateral Agent shall be obligated, and shall have
the right hereunder, to make demands, to give notices, to exercise or refrain
from exercising any rights, and to take or refrain from taking any action
(including, without limitation, the release or substitution of Pledged
Collateral), solely in accordance with this Agreement and the Intercreditor
Agreement; provided that Collateral Agent shall exercise, or refrain from
--------
exercising, any remedies provided for in Section 12 in accordance with the
instructions of (i) Requisite Lenders or (ii) after payment in full of all
Financing Agreement Obligations under the Financing Agreements and any other
Loan Documents, the holders of a majority of the aggregate notional amount (or,
with respect to any Lender Interest Rate Agreement that has been terminated in
accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "REQUISITE OBLIGEES"). In furtherance of the foregoing provisions
of this Section 18(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Pledged Collateral hereunder, it being understood and agreed by such
Interest Rate Exchanger that all rights and remedies hereunder may be exercised
solely by Collateral Agent for the benefit of Secured Parties and Interest Rate
Exchangers in accordance with the terms of this Section 18(a).
XXII-16
<PAGE>
(b) Collateral Agent shall at all times be the same Person that is
appointed Collateral Agent under the Intercreditor Agreement. The Collateral
Agent may resign and a successor Collateral Agent may be appointed in the manner
provided in the Intercreditor Agreement. Upon the acceptance of any appointment
as Collateral Agent by a successor Collateral Agent, that successor Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Collateral Agent under this
Agreement, and the retiring or removed Collateral Agent under this Agreement
shall promptly (i) transfer to such successor Collateral Agent all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Collateral Agent under this
Agreement, and (ii) execute and deliver to such successor Collateral Agent such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Collateral Agent of the security interests created hereunder, whereupon such
retiring or removed Collateral Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Collateral
Agent's resignation or removal hereunder as Collateral Agent, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Collateral Agent hereunder.
SECTION 19. AMENDMENTS; ETC.
---------------
No amendment, modification, termination or waiver of any provision of
this Agreement, and no consent to any departure by Pledgor therefrom, shall in
any event be effective unless the same shall be in writing and signed by
Collateral Agent and, in the case of any such amendment or modification, by
Pledgor. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 20. NOTICES.
-------
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex, or three Business Days after depositing it in the United
States mail with postage prepaid and properly addressed; provided that notice to
--------
Collateral Agent and Pledgor shall not be effective until received. For the
purposes hereof, the address of each party hereto shall be as set forth under
such party's name on the signature pages hereof or, as to either party, such
other address as shall be designated by such party in a written notice delivered
to the other party hereto.
SECTION 21. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Collateral Agent in the exercise of
any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other
XXII-17
<PAGE>
power, right or privilege. All rights and remedies existing under this Agreement
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
SECTION 22. SEVERABILITY.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 23. HEADINGS.
--------
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
SECTION 24. GOVERNING LAW; TERMS.
--------------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined.
SECTION 25. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
XXII-18
<PAGE>
IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
SEALY CORPORATION
By: ______________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent
By: ______________________________________
Name:
Title:
XXII-19
<PAGE>
SCHEDULE I
Attached to and forming a part of the Holdings Pledge Agreement dated as
of December 18, 1997 between Sealy Corporation, as Pledgor, and Morgan Guaranty
Trust Company of New York, as Collateral Agent.
PART A
================================================================================
PERCENTAGE OF
STOCK NUMBER OUTSTANDING
CLASS OF CERTIFICATE PAR OF SHARES
STOCK ISSUER STOCK NOS. VALUE SHARES PLEDGED
================================================================================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
================================================================================
PART B
============================================
AMOUNT OF
DEBT ISSUER INDEBTEDNESS
============================================
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
============================================
XXII-20
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, [199_][200_], is delivered
pursuant to Section 6(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Holdings Pledge Agreement dated as of December 18, 1997, between the undersigned
and Morgan Guaranty Trust Company of New York, as Collateral Agent (the "PLEDGE
AGREEMENT," capitalized terms defined therein being used herein as therein
defined), and that the [Pledged Shares] [Pledged Debt] listed on this Pledge
Amendment shall be deemed to be part of the [Pledged Shares] [Pledged Debt] and
shall become part of the Pledged Collateral and shall secure all Secured
Obligations.
SEALY CORPORATION
By: ___________________________________
Name:
Title:
================================================================================
PERCENTAGE OF
STOCK NUMBER OUTSTANDING
CLASS OF CERTIFICATE PAR OF SHARES
STOCK ISSUER STOCK NOS. VALUE SHARES PLEDGED
================================================================================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
================================================================================
PART B
============================================
AMOUNT OF
DEBT ISSUER INDEBTEDNESS
============================================
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
============================================
XXII-21
<PAGE>
EXHIBIT XXIII
[FORM OF HOLDINGS SECURITY AGREEMENT]
HOLDINGS SECURITY AGREEMENT
This HOLDINGS SECURITY AGREEMENT (this "AGREEMENT") is dated as of
December 18, 1997 and entered into by and between SEALY CORPORATION, a Delaware
corporation ("GRANTOR"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("MORGAN GUARANTY"), as Collateral Agent, for and representative of (in such
capacity herein called "COLLATERAL AGENT") the Secured Parties (as hereinafter
defined) and any Interest Rate Exchangers (as hereinafter defined).
RECITALS
A. Sealy Mattress Company, an Ohio Corporation ("COMPANY"), Grantor,
the financial institutions from time to time parties thereto (the "CREDIT
AGREEMENT LENDERS"), Goldman Sachs Credit Partners L.P. ("GSCP"), as arranger
and syndication agent (in such capacity, "CA SYNDICATION AGENT"), Morgan
Guaranty, as administrative agent (in such capacity, "CA ADMINISTRATIVE
AGENT"), and Bankers Trust Company ("BTCO."), as documentation agent (in
such capacity, "CA DOCUMENTATION AGENT") have entered into a Credit Agreement
dated as of December 18, 1997 (said Credit Agreement, as it may hereafter be
amended, restated, supplemented or otherwise modified from time to time, being
the "CREDIT AGREEMENT") pursuant to which Credit Agreement Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Company.
B. Company, Grantor, the financial institutions from time to time
parties thereto (the "AXEL LENDERS"), GSCP, as arranger and syndication agent
(in such capacity, "AXEL SYNDICATION AGENT"), Morgan Guaranty, as
administrative agent (in such capacity, "AXEL ADMINISTRATIVE AGENT"), and
BTCo., as documentation agent (in such capacity, "AXEL DOCUMENTATION AGENT")
have entered into an AXEL Credit Agreement dated as of December 18, 1997 (said
AXEL Credit Agreement, as it may hereafter be amended, restated, supplemented or
otherwise modified from time to time, being the "AXEL CREDIT AGREEMENT"; the
Credit Agreement Lenders, the CA Syndication Agent, the CA Administrative Agent,
the CA Documentation Agent, the AXEL Lenders, the AXEL Syndication Agent, the
AXEL Administrative Agent, and the AXEL Documentation Agent each being a
"SECURED PARTY" and collectively the "SECURED PARTIES") pursuant to which
AXEL Lenders have made certain commitments, subject to the terms and conditions
set forth in the AXEL Credit Agreement, to extend certain credit facilities to
Company.
C. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreements (collectively, the "LENDER
INTEREST RATE
XXIII-1
<PAGE>
AGREEMENTS") with one or more CA Lenders or their Affiliates or AXEL Lenders or
their Affiliates (in such capacity, collectively, "INTEREST RATE EXCHANGERS").
D. Grantor has executed and delivered that certain Holdings Guaranty
dated as of December 18, 1997 (said Holdings Guaranty, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the
"GUARANTY") in favor of Collateral Agent for the benefit of Secured Parties
and any Interest Rate Exchangers, pursuant to which Grantor has guarantied the
prompt payment and performance when due of all obligations of Company under the
Finance Agreements and any other Loan Documents and all obligations of Company
under the Lender Interest Rate Agreements, including without limitation the
obligation of Company to make payments, if any, thereunder in the event of early
termination thereof.
E. It is a condition precedent to the initial extensions of credit by
Secured Parties under the Financing Agreements that Grantor shall have granted
the security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and to induce (i) the CA
Administrative Agent, the CA Syndication Agent and the Credit Agreement Lenders
to enter into the Credit Agreement, (ii) the Credit Agreement Lenders to make
their respective loans to, and issue Letters of Credit for the account of
Company, (iii) the AXEL Administrative Agent, the AXEL Syndication Agent and the
AXEL Lenders to enter into the AXEL Loan Agreement, (iv) the AXEL Lenders to
make their respective loans to Company and (v) to induce Interest Rate
Exchangers to enter into the Lender Interest Rate Agreements and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Grantor hereby agrees with the Collateral Agent as follows:
SECTION 1. DEFINED TERMS.
-------------
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to such terms in the
Credit Agreement;
(b) The following terms shall have the following meanings:
"ACCELERATION" shall mean any of the Credit Agreement Obligations or
the AXEL Credit Agreement Obligations have been declared, or have become,
immediately due and payable, or the commitments to extend credit of the Credit
Agreement Lenders or the AXEL Lenders shall have been terminated under Section 8
of the Credit Agreement or Section 7 of the AXEL Credit Agreement, respectively.
"ACCOUNTS" has the meaning assigned to that term in Section 2 of this
Agreement.
"AGREEMENT" means this Company Security Agreement dated as of December
18, 1997, as it may be amended, supplemented or otherwise modified from time to
time.
XXIII-2
<PAGE>
"ASSIGNED AGREEMENT" has the meaning assigned to that term in Section 2
of this Agreement.
"AXEL COMMITMENTS" shall mean the "Commitments" as defined in the AXEL
Credit Agreement.
"AXEL CREDIT AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"AXEL OBLIGATIONS" shall mean the "Obligations" as defined in the AXEL
Credit Agreement.
"COLLATERAL" has the meaning assigned to that term in Section 2 of this
Agreement.
"COLLATERAL ACCOUNTS" shall mean "Collateral Accounts" as defined in the
Intercreditor Agreement.
"COMMITMENTS" means the Credit Agreement Commitments and the AXEL
Commitments.
"CREDIT AGREEMENT" has the meaning assigned to that term in the recitals
to this Agreement.
"CREDIT AGREEMENT COMMITMENTS" shall mean the "Commitments" as defined in
the Credit Agreement.
"CREDIT AGREEMENT OBLIGATIONS" shall mean the "Obligations" as defined in
the Credit Agreement.
"EQUIPMENT" has the meaning assigned to that term in Section 2 of this
Agreement.
"EVENT OF DEFAULT" means any "Event of Default" as defined in any
Financing Agreement or the occurrence of an Event of Default in which Company is
the Defaulting Party and which results in the designation of an Early
Termination Date (as such terms are defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate
Agreement.
"FINANCING AGREEMENT" means either the Credit Agreement or the AXEL
Credit Agreement, and "Financing Agreements" means the Credit Agreement and the
AXEL Credit Agreement, collectively.
"FINANCING AGREEMENT OBLIGATIONS" means Credit Agreement Obligations
and AXEL Obligations.
XXIII-3
<PAGE>
"GRANTOR" has the meaning assigned to that term in the introduction of
this Agreement.
"HOLDINGS" has the meaning assigned to that term in the recitals to this
Agreement.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated as
of December 18, 1997, by and among CA Administrative Agent, AXEL Administrative
Agent and Collateral Agent.
"INTEREST RATE EXCHANGERS" has the meaning assigned to that term in the
recitals to this Agreement.
"INVENTORY" has the meaning assigned to that term in Section 2 of this
Agreement.
"LENDER INTEREST RATE AGREEMENT" has the meaning assigned to that term
in the recitals to this Agreement.
"LOAN" means any "Loan" as defined in any Financing Agreement, and
"LOANS" means all such Loans collectively.
"LOAN DOCUMENT" means any "Loan Document" as defined in any Financing
Agreement, and "LOAN DOCUMENTS" means all such Loan Documents collectively.
"NEGOTIABLE DOCUMENT OF TITLE" has the meaning assigned to that term in
Section 2 of this Agreement.
"POTENTIAL EVENT OF DEFAULT" means any "Potential Event of Default" as
defined in any Financing Agreement.
"RELATED CONTRACTS" has the meaning assigned to that term in Section 2 of
this Agreement.
"REQUISITE AXEL LENDERS" means "Requisite Lenders" as defined in the AXEL
Credit Agreement.
"REQUISITE CREDIT AGREEMENT LENDERS" means "Requisite Lenders" as defined
in the Credit Agreement.
"REQUISITE LENDERS" means (A) unless an Acceleration shall have occurred
and be continuing, the Requisite Credit Agreement Lenders and the Requisite AXEL
Lenders, and (B) if an Acceleration has occurred and is continuing, Secured
Parties holding more than 50% of the Financing Agreement Obligations.
XXIII-4
<PAGE>
"REQUISITE OBLIGEES" has the meaning assigned to that term in Section 23
of this Agreement.
"SECURED OBLIGATIONS" has the meaning assigned to that term in Section 2
of this Agreement.
"SECURED PARTIES" has the meaning assigned to that term in the recitals
to this Agreement.
SECTION 2. GRANT OF SECURITY.
-----------------
Grantor hereby assigns to Collateral Agent, and hereby grants to
Collateral Agent a security interest in, all of Grantor's right, title and
interest in and to the following, in each case whether now or hereafter existing
or in which Grantor now has or hereafter acquires an interest and wherever the
same may be located (the "COLLATERAL"):
(a) all equipment in all of its forms, all parts thereof and all
accessions thereto (any and all such equipment, parts and accessions being
the "EQUIPMENT");
(b) all inventory in all of its forms (including, but not limited to, (i)
all goods held by Grantor for sale or lease or to be furnished under
contracts of service or so leased or furnished, (ii) all raw materials, work
in process, finished goods, and materials used or consumed in the
manufacture, packing, shipping, advertising, selling, leasing, furnishing or
production of such inventory or otherwise used or consumed in Grantor's
business, (iii) all goods in which Grantor has an interest in mass or a
joint or other interest or right of any kind, and (iv) all goods which are
returned to or repossessed by Grantor) and all accessions thereto and
products thereof (all such inventory, accessions and products being the
"INVENTORY") and all negotiable and non-negotiable documents of title
(including without limitation warehouse receipts, dock receipts and bills of
lading) issued by any Person covering any Inventory (any such negotiable
document of title being a "NEGOTIABLE DOCUMENT OF TITLE");
(c) all accounts, contract rights, chattel paper, documents, instruments,
general intangibles and other rights and obligations of any kind and all
rights in, to and under all security agreements, leases and other contracts
securing or otherwise relating to any such accounts, contract rights,
chattel paper, documents, instruments, general intangibles or other
obligations (any and all such accounts, contract rights, chattel paper,
documents, instruments, general intangibles and other obligations being the
"ACCOUNTS", and any and all such security agreements, leases and other
contracts being the "RELATED CONTRACTS");
(d) all agreements and contracts to which Grantor is a party as of the
date hereof or becomes a party after the date hereof, as each such agreement
may be amended, supplemented or otherwise modified from time to time (said
agreements, as so amended, supplemented or otherwise modified, being
referred to herein individually as an "ASSIGNED AGREEMENT" and collectively
as the "ASSIGNED AGREEMENTS"), including
XXIII-5
<PAGE>
(i) all rights of Grantor to receive moneys due or to become due under or
pursuant to the Assigned Agreements, (ii) all rights of Grantor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to
the Assigned Agreements, (iii) all claims of Grantor for damages arising out
of any breach of or default under the Assigned Agreements, and (iv) all
rights of Grantor to terminate, amend, supplement, modify or exercise rights
or options under the Assigned Agreements, to perform thereunder and to
compel performance and otherwise exercise all remedies thereunder;
(e) all deposit accounts, including without limitation all deposit
accounts maintained with Collateral Agent;
(f) all trademarks, tradenames, tradesecrets, business names, patents,
patent applications, licenses, copyrights, registrations and franchise
rights, and all goodwill associated with any of the foregoing;
(g) to the extent not included in any other paragraph of this Section 2,
all other general intangibles (including without limitation tax refunds,
rights to payment or performance, choses in action and judgments taken on
any rights or claims included in the Collateral);
(h) all plant fixtures, business fixtures and other fixtures and storage
and office facilities, and all accessions thereto and products thereof;
(i) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(j) all proceeds, products, rents and profits of or from any and all of
the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Collateral Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss
or damage to or otherwise with respect to any of the foregoing Collateral.
For purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary or
involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and Grantor shall not be deemed to have granted a security
interest in, any of Grantor's rights or interests in any license, contract or
agreement to which Grantor is a party or any of its rights or interests
thereunder to the extent, but only to the extent, that such a grant would, under
the terms of such license, contract or agreement or otherwise, result in a
breach of the terms of, or constitute a default under any license, contract or
agreement to which Grantor is a party (other than to the extent that any such
term would be rendered ineffective pursuant to Section 9-318(4) of the Uniform
Commercial Code of any relevant jurisdiction or any other applicable law
(including the Bankruptcy Code) or principles of equity); provided,
--------
XXIII-6
<PAGE>
that immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and Grantor shall be deemed to have
granted a security interest in, all such rights and interests as if such
provision had never been in effect.
SECTION 3. SECURITY FOR OBLIGATIONS.
------------------------
This Agreement secures, and the Collateral is collateral security for,
the prompt payment or performance in full when due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or otherwise
(including the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
(S)362(a)), of all obligations and liabilities of every nature of Grantor now or
hereafter existing under or arising out of or in connection with the Guaranty
and all extensions or renewals thereof, whether for principal, interest
(including without limitation interest that, but for the filing of a petition in
bankruptcy with respect to Company, would accrue on such obligations, whether or
not a claim is allowed against Company for such interest in the related
bankruptcy proceeding), reimbursement of amounts drawn under Letters of Credit,
payments for early termination of Lender Interest Rate Agreements, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Collateral
Agent or any Lender or Interest Rate Exchanger as a preference, fraudulent
transfer or otherwise and all obligations of every nature of Grantor now or
hereafter existing under this Agreement (all such obligations of Grantor being
the "SECURED OBLIGATIONS").
SECTION 4. GRANTOR REMAINS LIABLE.
----------------------
Anything contained herein to the contrary notwithstanding, (a) Grantor
shall remain liable under any contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Collateral Agent of any of its rights hereunder
shall not release Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral, and (c) Collateral Agent
shall not have any obligation or liability under any contracts and agreements
included in the Collateral by reason of this Agreement, nor shall Collateral
Agent be obligated to perform any of the obligations or duties of Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
------------------------------
Grantor represents and warrants as follows:
(a) Ownership of Collateral. Except for the security interest created by
-----------------------
this Agreement, Grantor owns the Collateral free and clear of any Lien
subject to Liens permitted by the Financing Agreements.
XXIII-7
<PAGE>
(b) Location of Equipment and Inventory. All of the Equipment and
-----------------------------------
Inventory is, as of the date hereof, located at the places specified in
Schedule 5(b) annexed hereto.
-------------
(c) Negotiable Documents of Title. No Negotiable Documents of Title are
-----------------------------
outstanding with respect to any of the Inventory (other than in respect of
(i) Inventory with an aggregate value not in excess of $1,000,000 or (ii)
Inventory which, in the ordinary course of business, is in transit either
(A) from a supplier to Grantor, (B) between the locations specified in
Schedule 5(b) hereto, or (C) to customers of Grantor).
-------------
(d) Office Locations; Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where Grantor keeps its records
regarding the Accounts and all originals of all chattel paper that evidence
Accounts is, and has been for the four month period preceding the date
hereof, located at the places indicated on Schedule 5d. Grantor has not in
-----------
the past done, and does not now do, business under any other name (including
any trade-name or fictitious business name) except for those names set forth
on Schedule 5d.
-----------
XXIII-8
<PAGE>
SECTION 6. FURTHER ASSURANCES.
------------------
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that Collateral Agent may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable Collateral Agent to exercise and enforce its rights
and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, Grantor will: (i) mark conspicuously each item of
chattel paper included in the Accounts, each Related Contract and, at the
reasonable request of Collateral Agent, each of its records pertaining to the
Collateral, with a legend, in form and substance reasonably satisfactory to
Collateral Agent, indicating that such Collateral is subject to the security
interest granted hereby, (ii) at the reasonable request of Collateral Agent,
deliver and pledge to Collateral Agent hereunder all promissory notes and other
instruments (excluding checks) and all original counterparts of chattel paper
constituting Collateral, duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance reasonably
satisfactory to Collateral Agent, (iii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, or as Collateral Agent may reasonably request, in order to perfect and
preserve the security interests granted or purported to be granted hereby, (iv)
after the acquisition by Grantor of any item of Equipment which is covered by a
certificate of title under a statute of any jurisdiction under the law of which
indication of a security interest on such certificate is required as a condition
of perfection thereof, upon the reasonable request of Collateral Agent, execute
and file with the registrar of motor vehicles or other appropriate authority in
such jurisdiction an application or other document requesting the notation or
other indication of the security interest created hereunder on such certificate
of title, (v) upon the reasonable request of Collateral Agent, deliver to
Collateral Agent copies of all such applications or other documents filed during
such calendar quarter and copies of all such certificates of title issued during
such calendar quarter indicating the security interest created hereunder in the
items of Equipment covered thereby, and (vi) at Collateral Agent's reasonable
request, appear in and defend any action or proceeding that may affect Grantor's
title to or Collateral Agent's security interest in all or any part of the
Collateral.
(b) Grantor hereby authorizes Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor to the extent
permitted by applicable law. Grantor agrees that a carbon, photographic or
other reproduction of this Agreement or of a financing statement signed by
Grantor shall be sufficient as a financing statement and may be filed as a
financing statement in any and all jurisdictions.
SECTION 7. CERTAIN COVENANTS OF GRANTOR.
----------------------------
Grantor shall:
1. notify Collateral Agent of any change in Grantor's name, identity or
corporate structure within 30 days of such change;
XXIII-9
<PAGE>
2. give Collateral Agent 30 days' written notice following any change
in Grantor's chief place of business, chief executive office or residence or
the office where Grantor keeps its records regarding the Accounts and all
originals of all chattel paper that evidence Accounts;
3. pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to
the extent the validity thereof is being contested in good faith.
SECTION 8. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
---------------------------------------------------------
Grantor shall:
(a) keep the Equipment and Inventory at the places therefor specified on
Schedule 5(b) annexed hereto or, upon 30 days' written notice to Collateral
-------------
Agent following any change in location, at such other places in
jurisdictions where all action that Collateral Agent may reasonably request,
in order to perfect and protect any security interest granted or purported
to be granted hereby, or to enable Collateral Agent to exercise and enforce
its rights and remedies hereunder, with respect to such Equipment and
Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in working order,
ordinary wear and tear and damage by casualty excepted, and in accordance
with Grantor's past practices, and shall forthwith make or cause to be made
all repairs, replacements and other improvements in connection therewith
that are necessary in the Grantor's reasonable business judgment to such
end.
(c) keep correct and accurate records of the Inventory, itemizing and
describing the kind, type and quantity of Inventory, Grantor's cost therefor
and (where applicable) the current list prices for the Inventory;
(d) if any Inventory is in possession or control of any of Grantor's
agents or processors, upon the occurrence of an Event of Default, instruct
such agent or processor to hold all such Inventory for the account of
Collateral Agent and subject to the instructions of Collateral Agent; and
(e) promptly upon the issuance and delivery to Grantor of any Negotiable
Document of Title (other than any one or more Negotiable Documents of Title
covering (i) Inventory with an aggregate value not in excess of $1,000,000
or (ii) Inventory which, in the ordinary course of business, is in transit
either (A) from a supplier to Grantor, (B) between the locations specified
in Schedule 5(b) hereto, or (C) to customers of Grantor), deliver such
-------------
Negotiable Document of Title to Collateral Agent.
SECTION 9. INSURANCE.
---------
XXIII-10
<PAGE>
Grantor shall, at its own expense, maintain insurance with respect to the
Equipment and Inventory in accordance with the terms of the Financing
Agreements.
SECTION 10. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED CONTRACTS.
----------------------------------------------------------------
(a) Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts and
Related Contracts, and all originals of all chattel paper that evidence
Accounts, at the location therefor specified in Section 4 or, upon 30 days'
written notice to Collateral Agent following any change in location, at such
other location in a jurisdiction where all action that Collateral Agent may
request, in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder, with respect to such Accounts and
Related Contracts shall have been taken. Promptly upon the reasonable request of
Collateral Agent, Grantor shall deliver to Collateral Agent complete and correct
copies of each Related Contract.
(b) Grantor shall, maintain (i) complete records of each Account,
including records of all payments received, credits granted and merchandise
returned, and (ii) all documentation relating thereto in accordance with prudent
business practices.
(c) Except as otherwise provided in this subsection (c), Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
Grantor under the Accounts and Related Contracts. In connection with such
collections, Grantor shall take such action as Grantor or Collateral Agent may
deem necessary or advisable to enforce collection of amounts due or to become
due under the Accounts; provided, however, that Collateral Agent shall have the
-------- -------
right at any time, upon the occurrence and during the continuation of an Event
of Default and upon written notice to Grantor of its intention to do so, to
notify the account debtors or obligors under any Accounts of the assignment of
such Accounts to Collateral Agent and to direct such account debtors or obligors
to make payment of all amounts due or to become due to Grantor thereunder
directly to Collateral Agent, to notify each Person maintaining a lockbox or
similar arrangement to which account debtors or obligors under any Accounts have
been directed to make payment to remit all amounts representing collections on
checks and other payment items from time to time sent to or deposited in such
lockbox or other arrangement directly to Collateral Agent and, upon such
notification and at the expense of Grantor, to enforce collection of any such
Accounts and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as Grantor might have done. After
receipt by Grantor of the notice from Collateral Agent referred to in the
proviso to the preceding sentence, (i) any payments of Accounts, received by the
-------
Grantor shall be forthwith (and in any event within two Business Days) deposited
by the Grantor in the exact form received, duly indorsed by the Grantor to the
Collateral Agent if required, in a Collateral Account maintained under the sole
dominion and control of the Collateral Agent, subject to withdrawal by the
Collateral Agent for the account of the Secured Parties only as provided in
Section 20, (ii) until so turned over in accordance with the proceeding
subsection (i), all amounts and proceeds (including checks and other
instruments) received by Grantor in respect of the Accounts and the Related
Contracts shall be received in trust for the benefit of Collateral Agent
hereunder and shall be segregated from other funds of Grantor and (iii) Grantor
shall not
XXIII-11
<PAGE>
adjust, settle or compromise the amount or payment of any Account, or release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.
SECTION 11. DEPOSIT ACCOUNTS.
----------------
Upon the occurrence and during the continuation of an Event of Default,
Collateral Agent may exercise dominion and control over, and refuse to permit
further withdrawals (whether of money, securities, instruments or other
property) from any deposit accounts maintained with Collateral Agent
constituting part of the Collateral.
SECTION 12. LICENSE OF PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
-----------------------------------------------
Grantor hereby assigns, transfers and conveys to Collateral Agent,
effective upon the occurrence of any Event of Default, the nonexclusive right
and license to use all trademarks, tradenames, copyrights, patents or technical
processes owned or used by Grantor that relate to the Collateral and any other
collateral granted by Grantor as security for the Secured Obligations, together
with any goodwill associated therewith, all to the extent necessary to enable
Collateral Agent to use, possess and realize on the Collateral and to enable any
successor or assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of all successors, assigns and transferees of
Collateral Agent and its successors, assigns and transferees, whether by
voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed
in lieu of foreclosure or otherwise. Such right and license is granted free of
charge, without requirement that any monetary payment whatsoever be made to
Grantor.
SECTION 13. TRANSFERS AND OTHER LIENS.
-------------------------
Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise dispose
of any of the Collateral, except as permitted by the Financing Agreements;
or
(b) except for the security interest created by this Agreement and Liens
permitted by the Financing Agreements, create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure the indebtedness or
other obligations of any Person.
SECTION 14. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
-------------------------------------------
Grantor hereby irrevocably appoints Collateral Agent as Grantor's
attorney-in-fact, with full authority in the place and stead of Grantor and in
the name of Grantor, Collateral Agent or otherwise, from time to time, upon the
occurrence and during the continuance of an Event of Default, in Collateral
Agent's reasonable discretion to take any action and to execute any instrument
that Collateral Agent may reasonably deem necessary or advisable to accomplish
the purposes of this Agreement, including without limitation:
XXIII-12
<PAGE>
(a) to obtain and adjust insurance required to be maintained by Grantor
or paid to Collateral Agent pursuant to Section 9;
(b) to ask for, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any proceedings
that Collateral Agent may reasonably deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Collateral Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted under
this Agreement or the Credit Agreements) levied or placed upon or threatened
against the Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by Collateral Agent in its
reasonable discretion, any such payments made by Collateral Agent to become
obligations of Grantor to Collateral Agent, due and payable immediately
without demand;
(f) to sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though Collateral Agent were the absolute owner thereof for
all purposes, and to do, at Collateral Agent's option and Grantor's expense,
at any time or from time to time, all acts and things that Collateral Agent
reasonably deems necessary to protect, preserve or realize upon the
Collateral and Collateral Agent's security interest therein in order to
effect the intent of this Agreement, all as fully and effectively as Grantor
might do.
SECTION 15. COLLATERAL AGENT MAY PERFORM.
----------------------------
If Grantor fails to perform any agreement contained herein, Collateral
Agent may itself perform, or cause performance of, such agreement, and the
reasonable expenses of Collateral Agent incurred in connection therewith shall
be payable by Grantor under Section 21.
XXIII-13
<PAGE>
SECTION 16. STANDARD OF CARE.
----------------
The powers conferred on Collateral Agent hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the exercise of reasonable care in the custody of
any Collateral in its possession and the accounting for moneys actually received
by it hereunder, Collateral Agent shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral. Collateral Agent shall be deemed
to have exercised reasonable care in the custody and preservation of Collateral
in its possession if such Collateral is accorded treatment substantially equal
to that which Collateral Agent accords its own property.
SECTION 17. REMEDIES.
--------
If any Event of Default shall have occurred and be continuing, Collateral
Agent may exercise in respect of the Collateral, in addition to all other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Uniform Commercial Code as
in effect in any relevant jurisdiction (the "CODE") (whether or not the Code
applies to the affected Collateral), and also may (a) require Grantor to, and
Grantor hereby agrees that it will at its expense and upon request of Collateral
Agent forthwith, assemble all or part of the Collateral as directed by
Collateral Agent and make it available to Collateral Agent at a place to be
designated by Collateral Agent that is reasonably convenient to both parties,
(b) enter onto the property where any Collateral is located and take possession
thereof with or without judicial process, (c) prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or otherwise
prepare the Collateral for disposition in any manner to the extent Collateral
Agent deems appropriate, (d) take possession of Grantor's premises or place
custodians in exclusive control thereof, remain on such premises and use the
same and any of Grantor's equipment for the purpose of completing any work in
process, taking any actions described in the preceding clause (c) and collecting
any Secured Obligation, and (e) without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or private
sale, at any of Collateral Agent's offices or elsewhere, for cash, on credit or
for future delivery, at such time or times and at such price or prices and upon
such other terms as Collateral Agent may deem commercially reasonable.
Collateral Agent or any Secured Party or Interest Rate Exchanger may be the
purchaser of any or all of the Collateral at any such sale and Collateral Agent,
as agent for and representative of Secured Parties and Interest Rate Exchangers
(but not any Secured Party or Secured Parties or Interest Rate Exchanger or
Interest Rate Exchangers in its or their respective individual capacities unless
Requisite Obligees shall otherwise agree in writing), shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Secured Obligations as a credit on account of the purchase
price for any Collateral payable by Collateral Agent at such sale. Each
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of Grantor, and Grantor hereby waives (to the extent
permitted by applicable law) all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Grantor agrees that, to the extent
notice of sale shall be required by law, at least ten
XXIII-14
<PAGE>
days' notice to Grantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. Collateral Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Collateral Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Grantor hereby waives any
claims against Collateral Agent arising by reason of the fact that the price at
which any Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if Collateral Agent
accepts the first offer received and does not offer such Collateral to more than
one offeree. If the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantor shall be liable for
the deficiency and the reasonable fees of any attorneys employed by Collateral
Agent to collect such deficiency.
SECTION 18. PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT.
----------------------------------------------
In addition to the rights of the Collateral Agent and the Secured Parties
specified in Section 10 with respect to payments of Accounts, if an Event of
Default shall occur and be continuing, upon request of the Collateral Agent, all
proceeds received by the Grantor consisting of cash, checks and other near-cash
items shall be held by the Grantor in trust for the Collateral Agent and the
Secured Parties, segregated from other funds of the Grantor, and shall,
forthwith upon receipt by the Grantor, be turned over to the Collateral Agent in
the exact form received by the Grantor (duly indorsed by the Grantor to the
Collateral Agent, if required) and held by the Collateral Agent in a Collateral
Account maintained under the Intercreditor Agreement. All proceeds while held
by the Collateral Agent in a Collateral Account (or by the Grantor in trust for
the Collateral Agent and the Secured Parties) shall continue to be held as
collateral security for all the Secured Obligations and shall not constitute
payment thereof until applied as provided in Section 20.
SECTION 19. APPLICATION OF PROCEEDS.
-----------------------
Except as expressly provided elsewhere in this Agreement, all proceeds
held in any Collateral Account and all other proceeds received by Collateral
Agent in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied as provided in subsection 3 of
the Intercreditor Agreement.
SECTION 20. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Collateral Agent, each Secured Party
Lender and each Interest Rate Exchanger from and against any and all claims,
losses and liabilities in any way relating to, growing out of or resulting from
this Agreement and the transactions contemplated hereby (including, without
limitation, enforcement of this Agreement), except to the extent such claims,
losses or liabilities result from Collateral Agent's or such Secured Party's or
Interest Rate Exchanger's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
XXIII-15
<PAGE>
(b) Grantor shall pay to Collateral Agent promptly following written
demand the amount of any and all reasonable costs and reasonable expenses,
including the reasonable fees and reasonable expenses of its counsel and of any
experts and agents, that Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights of
Collateral Agent hereunder, or (iv) the failure by Grantor to perform or observe
any of the provisions hereof.
SECTION 21. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.
-----------------------------------------------
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations (other than inchoate indemnification obligations
with respect to claims, losses or liabilities which have not yet arisen and are
not yet due and payable), the cancellation or termination of the Commitments and
the cancellation or expiration of all outstanding Letters of Credit, (b) be
binding upon Grantor, its successors and assigns, and (c) inure, together with
the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement and subsection 10.1 of the AXEL Credit
Agreement, any Secured Party may assign or otherwise transfer any Loans held by
it to any other Person, and such other Person shall thereupon become vested with
all the benefits in respect thereof granted to Secured Parties herein or
otherwise. Upon the payment in full of all Secured Obligations (other than
inchoate indemnification obligations with respect to claims, losses or
liabilities which have not yet arisen and are not yet due and payable), the
cancellation or termination of the Commitments and the cancellation or
expiration of all outstanding Letters of Credit, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to Grantor.
Upon any such termination Collateral Agent will, at Grantor's expense, execute
and deliver to Grantor such documents as Grantor shall reasonably request to
evidence such termination in accordance with the terms of the Intercreditor
Agreement.
SECTION 22. COLLATERAL AGENT AS ADMINISTRATIVE AGENT.
----------------------------------------
(a) Collateral Agent has been appointed to act as Collateral Agent
hereunder by CA Administrative Agent on behalf of the Credit Agreement Lenders
and AXEL Administrative Agent on behalf of the AXEL Lenders pursuant to the
Intercreditor Agreement and, by their acceptance of the benefits hereof,
Interest Rate Exchangers, and shall be entitled to the benefits of the
Intercreditor Agreement. Collateral Agent shall be obligated, and shall have
the right hereunder, to make demands, to give notices, to exercise or refrain
from exercising any rights, and to take or refrain from taking any action
(including, without limitation, the release or substitution of Collateral),
solely in accordance with this Agreement and the Intercreditor Agreement;
provided that Collateral Agent shall exercise, or refrain from exercising, any
--------
remedies provided for in Section 18 in accordance with the instructions of (i)
Requisite Lenders or (ii) after payment in full of all Financing Agreement
Obligations under the Financing Agreements and any other Loan Documents, the
holders of a majority of the aggregate notional amount (or, with respect to any
Lender Interest Rate Agreement that has been terminated in accordance with its
terms, the amount then due and payable (exclusive of expenses and similar
XXIII-16
<PAGE>
payments but including any early termination payments then due) under such
Lender Interest Rate Agreement) under all Lender Interest Rate Agreements
(Requisite Lenders or, if applicable, such holders being referred to herein as
"REQUISITE OBLIGEES"). In furtherance of the foregoing provisions of this
Section 23(a), each Interest Rate Exchanger, by its acceptance of the benefits
hereof, agrees that it shall have no right individually to realize upon any of
the Collateral hereunder, it being understood and agreed by such Interest Rate
Exchanger that all rights and remedies hereunder may be exercised solely by
Collateral Agent for the benefit of Secured Parties and Interest Rate Exchangers
in accordance with the terms of this Section 23(a).
(b) Collateral Agent shall at all times be the same Person that is
appointed Collateral Agent under the Intercreditor Agreement. The Collateral
Agent may resign and a successor Collateral Agent may be appointed in the manner
provided in the Intercreditor Agreement. Upon the acceptance of any
appointment as Collateral Agent by a successor Collateral Agent, that successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Collateral
Agent under this Agreement, and the retiring or removed Collateral Agent under
this Agreement shall promptly (i) transfer to such successor Collateral Agent
all sums, securities and other items of Collateral held hereunder, together with
all records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Collateral Agent under this
Agreement, and (ii) execute and deliver to such successor Collateral Agent such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Collateral Agent of the security interests created hereunder, whereupon such
retiring or removed Collateral Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Collateral
Agent's resignation or removal hereunder as Collateral Agent, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Collateral Agent hereunder.
SECTION 23. AMENDMENTS; ETC.
---------------
No amendment, modification, termination or waiver of any provision of
this Agreement, and no consent to any departure by Grantor therefrom, shall in
any event be effective unless the same shall be in writing and signed by
Collateral Agent and, in the case of any such amendment or modification, by
Grantor. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
XXIII-17
<PAGE>
SECTION 24. NOTICES.
-------
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex, or three Business Days after depositing it in the United
States mail with postage prepaid and properly addressed; provided that notices
--------
to Collateral Agent and Grantor shall not be effective until received. For the
purposes hereof, the address of each party hereto shall be as set forth under
such party's name on the signature pages hereof or, as to either party, such
other address as shall be designated by such party in a written notice delivered
to the other party hereto.
SECTION 25. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Collateral Agent in the exercise of
any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 26. SEVERABILITY.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 27. HEADINGS.
--------
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
SECTION 28. GOVERNING LAW; TERMS.
--------------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined
XXIII-18
<PAGE>
herein or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined.
SECTION 29. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
XXIII-19
<PAGE>
IN WITNESS WHEREOF, Grantor and Collateral Agent have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
SEALY CORPORATION
By:
-------------------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent
By:
-------------------------------------
Name:
Title:
XXIII-20
<PAGE>
SCHEDULE 5(b)
TO HOLDINGS SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
XXIII-21
<PAGE>
EXHIBIT XXIV
[FORM OF MORTGAGE]
--------------------------------------------------------
MORTGAGE, ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
([**STATE**])
made from
[** SEALY OWNERSHIP ENTITY **],
"Mortgagor"
to
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent,
"Mortgagee"
Date: As of December 18, 1997
--------------------------------------------------------
PREPARED BY, RECORDING REQUESTED BY,
AND WHEN RECORDED MAIL TO:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022-4611
Attention: Francis J. Burgweger, Esq.
File #317,790-084[1]
-------------------
[16]NOTE: If this Mortgage or the Notes which this Mortgage secures are in
your possession, DO NOT DESTROY THEM. State law may require presentation of
this Mortgage and/or the Notes in order to obtain a termination or release of
this Mortgage upon satisfaction of the indebtedness secured hereby. The
termination or release must be recorded in the city, town, county or parish
records for the jurisdiction in which the land described in the Exhibit A is
---------
located.
XXIV-1
<PAGE>
TABLE OF CONTENTS
Page
Definition of Mortgaged Property,
Granting Clauses......................................................................... 1
SECTION 1
OBLIGATIONS OF BORROWER UNDER THE CREDIT AGREEMENT.......................... 8
SECTION 2
COVENANTS AND AGREEMENTS OF MORTGAGOR....................................... 8
2.1 Payment and Performance of Obligations......................................... 8
2.2 Assignment of Policies Upon Foreclosure........................................ 8
2.3 Inspections.................................................................... 9
2.4 Actions by Mortgagee To Preserve Mortgaged Property............................ 10
2.5 Action by Mortgagee to Protect Interests; Subrogation; Waiver of Offset........ 11
2.6 Restrictions on Transfer of Mortgaged Property by Mortgagor.................... 12
2.7 Incorporation by Reference; Full Performance Required; Survival of Warranties.. 13
2.8 Additional Security............................................................ 13
2.9 Further Acts................................................................... 13
2.10 Offsite Improvements........................................................... 14
2.11 Utilities...................................................................... 15
2.12 Leasehold Estate............................................................... 15
SECTION 3
ASSIGNMENT OF RENTS AND LEASES.............................................. 22
3.1 Assignment of Rents and Leases................................................. 22
XXIV-i
<PAGE>
Page
3.2 No Limitation of Rights......................................................... 22
3.3 Sale of Mortgaged Property...................................................... 23
3.4 Term of Assignment.............................................................. 23
3.5 Perfection Upon Recordation..................................................... 24
3.6 Bankruptcy Provisions........................................................... 24
SECTION 4
SECURITY AGREEMENT.......................................................... 24
4.1 Grant of Security; Incorporation by Reference................................... 24
4.2 Fixture Filing Financing Statements............................................. 25
4.3 Mortgagee as Secured Party...................................................... 25
SECTION 5
DEFAULTS AND REMEDIES....................................................... 25
5.1 Events of Default............................................................... 25
5.2 Fixtures........................................................................ 26
5.3 Remedies........................................................................ 26
5.4 Costs and Expenses.............................................................. 32
5.5 Additional Rights of Mortgagee.................................................. 32
5.6 Application of Proceeds......................................................... 32
SECTION 6
INDEMNIFICATION............................................................. 33
SECTION 7
TERMINATION................................................................. 33
XXIV-ii
<PAGE>
Page
SECTION 8
MISCELLANEOUS COVENANTS AND AGREEMENTS...................................... 34
8.1 Cumulative Rights; Waivers; Modifications....................................... 34
8.2 Partial Releases................................................................ 34
8.3 Severability.................................................................... 34
8.4 Subrogation..................................................................... 35
8.5 Mortgagee's Powers.............................................................. 35
8.6 Enforceability of Mortgage...................................................... 36
8.7 Interest........................................................................ 36
8.8 Choice of Law................................................................... 36
8.9 Counterparts.................................................................... 36
8.10 Recording References............................................................ 37
8.11 Notices......................................................................... 37
8.12 Successors and Assigns.......................................................... 37
8.13 Expenses........................................................................ 38
8.14 Nonforeign Entity............................................................... 38
8.15 Purpose of the Loans............................................................ 38
8.16 No Joint Venture or Partnership................................................. 39
8.17 Amendments and Waivers.......................................................... 39
8.18 Covenants and Agreements Run with Land.......................................... 39
XXIV-iii
<PAGE>
Page
8.19 Statements by Mortgagor......................................................... 39
8.20 Non-Waiver...................................................................... 39
8.21 Survival of Obligations......................................................... 40
8.22 Consent to Jurisdiction and Service of Process.................................. 40
8.23 Waiver of Jury Trial............................................................ 41
EXHIBIT A - LEGAL DESCRIPTION OF LAND
EXHIBIT B - DESCRIPTION OF ADDITIONAL MORTGAGED
PROPERTY
EXHIBIT C - UCC INFORMATION
SCHEDULE I - MORTGAGEE'S ADDITIONAL RIGHTS
XXIV-iv
<PAGE>
MORTGAGE, ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT AND FIXTURE FILING ([**STATE**])
THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND
FIXTURE FILING ([**STATE**]) (this "MORTGAGE") is dated as of December 18, 1997,
from [** SEALY OWNERSHIP ENTITY **], a _________ corporation ("MORTGAGOR"),
whose address is [** ________ **], to MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
a [** ________ **] corporation, as Administrative Agent for the Lenders listed
in the Credit Agreement (as hereinafter defined), having an address at [** _____
**] and all successors and assigns as agents (in such capacity, "AGENT"; Agent,
together with its successors and assigns, "MORTGAGEE").
All capitalized terms used but not otherwise defined herein shall have
the same meanings ascribed to such terms in the Credit Agreement.
MORTGAGOR IS THE OWNER OF THE RECORD INTEREST IN THE PARCELS OF LAND AS
INDICATED IN EXHIBIT A HERETO.
---------
THIS MORTGAGE COVERS GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO OR FIXTURES ON
THE LAND DESCRIBED IN EXHIBIT A HERETO. THIS MORTGAGE IS A FIXTURE FILING AND
---------
IS TO BE INDEXED, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OF EACH COUNTY
(OR, TO THE EXTENT SIMILAR RECORDS ARE MAINTAINED AT THE CITY OR TOWN LEVEL
INSTEAD OF THE COUNTY LEVEL, EACH SUCH CITY OR TOWN) IN WHICH SAID LAND OR ANY
PORTION THEREOF IS LOCATED.
NOW, THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, and the mutual covenants
herein contained, and in order to secure the Obligations (as hereinafter
defined), MORTGAGOR HEREBY COVENANTS AND AGREES WITH AND REPRESENTS AND WARRANTS
TO MORTGAGEE AS FOLLOWS:
A. GRANTING CLAUSES. Mortgagor hereby:
(i) grants, bargains, sells, assigns, pledges, transfers, mortgages
and conveys, as security for the Obligations, those portions of the following
described Mortgaged Property (as hereinafter defined) that constitute real
property under the laws of the State wherein located to Mortgagee, WITH POWER OF
SALE, pursuant to this Mortgage and Applicable Law, but subject to the Security
Agreement (as hereinafter defined) and the assignment made in paragraph (iii)
---------------
below, and subject to the Permitted Encumbrances, TO HAVE AND TO HOLD such
portions of the Mortgaged Property, to Mortgagee and its successors and assigns
forever, subject to all of the terms, conditions, covenants and agreements
herein set forth, for the security and benefit of Mortgagee and its successors
and assigns; and
<PAGE>
(ii) grants, as security for the Obligations, a security interest to
Mortgagee in that portion of the Mortgaged Property constituting fixtures or
personal property; and
(iii) assigns and transfers to Mortgagee, as security for the
Obligations, all of the Leases (as defined in Exhibit B) and all of the Rents
---------
(as hereinafter defined) and other benefits derived from any Leases, whether now
existing or hereafter created.
All of Mortgagor's right, title and interest in and to the following described
property now or hereafter located upon the Premises (as hereinafter defined), or
appurtenant thereto, or used or to be used in connection with the present or
future use, construction upon, leasing, sale, operation or occupancy of the
Premises is herein collectively referred to as the "MORTGAGED PROPERTY":
GRANTING CLAUSE FIRST
LAND
1. The parcel of land located at ______________ in the City
of_______________, County of _______________________ and State of
_________________, as more particularly described in Exhibit A attached hereto
---------
and by this reference incorporated herein, together with all strips and gores
within or adjoining such property, all estate, right, title, interest, claim or
demand whatsoever of Mortgagor in the streets, roads, sidewalks, alleys, and
ways adjacent thereto (whether or not vacated and whether public or private and
whether open or proposed), all vaults or chutes adjoining such land, all of the
tenements, hereditaments, easements, reciprocal easement agreements, rights
pursuant to any trackage agreement, rights to the use of common drive entries,
rights-of-way and other rights, privileges and appurtenances thereunto belonging
or in any way pertaining thereto, all reversions, remainders, dower and right of
dower, curtesy and right of curtesy, all of the air space and right to use said
air space above such property, all transferable development rights arising
therefrom or transferred thereto, all water and water rights (whether riparian,
appropriative or otherwise, and whether or not appurtenant) and shares of stock
evidencing the same, all mineral, mining, gravel, oil, gas, hydrocarbon
substances and other rights to produce or share in the production of anything
related to such property, all drainage, crop, timber, agricultural, and
horticultural rights with respect to such property, and all other appurtenances
appurtenant to such property, including without limitation, any now or hereafter
belonging or in anywise appertaining thereto, and all claims or demands of
Mortgagor, either at law or in equity, in possession or expectancy, now or
hereafter acquired, of, in or to the same (all of the foregoing being referred
to herein, collectively, as the "LAND");
GRANTING CLAUSE SECOND
IMPROVEMENTS
2. The Improvements described in Exhibit B attached hereto and by this
---------
reference incorporated herein. The Land and the Improvements are referred to
herein, collectively, as the "PREMISES";
XXIV-2
<PAGE>
GRANTING CLAUSE THIRD
RENTS, LEASES AND LEASE PROVISIONS
3. The Rents, Leases and Lease Provisions described in Exhibit B
---------
attached hereto and by this reference incorporated herein, and that certain
Subsidiary Pledge Agreement dated as of even date herewith from Mortgagor and
the other pledgors listed on the signature pages thereof, as debtors, to
Mortgagee, as secured party and as executed by any additional Subsidiary
Guarantor from time to time thereafter as the same may hereafter be amended,
modified, supplemented, restated or renewed (such Subsidiary Pledge Agreement,
together with any and all amendments, modifications, supplements, restatements,
extensions, renewals or replacements thereof are collectively referred to herein
as the "SUBSIDIARY PLEDGE AGREEMENT" and that certain Subsidiary Security
Agreement dated as of even date herewith from Mortgagor and the other grantors
listed on the signature pages thereof, as debtors, to Mortgagee, as secured
party, as the same may hereafter be amended, modified, supplemented, restated or
renewed (such Subsidiary Security Agreement, together with any and all
amendments, modifications, supplements, restatements, extensions, renewals or
replacements thereof are collectively referred to herein as the "SUBSIDIARY
SECURITY AGREEMENT") (the Subsidiary Pledge Agreement and the Subsidiary
Security Agreement are collectively referred to as the "SECURITY AGREEMENT");
GRANTING CLAUSE FOURTH
VARIOUS COLLATERAL
4. The Equipment, Materials, Specifications, Security Deposits,
Financing Commitments, Inventory, Negotiable Documents of Title, Rolling Stock,
Payment Rights, Accounts, Related Contracts, Assigned Related Agreements,
Deposit Accounts, Deposit Account Collateral, Intellectual Property and General
Intangibles described in Exhibit B attached hereto and by this reference
---------
incorporated herein and any other property described in Exhibit B and not
---------
described in any other Granting Clause (collectively, the "VARIOUS COLLATERAL"),
subject to the terms and provisions of the Security Agreement;
GRANTING CLAUSE FIFTH
REFUNDS
5. The Refunds described in Exhibit B attached hereto and by this
---------
reference incorporated herein, subject to the terms and provisions of the
Security Agreement;
GRANTING CLAUSE SIXTH
INSURANCE/CONDEMNATION PROCEEDS
6. The Insurance/Condemnation Proceeds described in Exhibit B
---------
attached hereto and by this reference incorporated herein, subject to the terms
and provisions of the Security Agreement and Section 6.11 of the Credit
------------
Agreement;
XXIV-3
<PAGE>
GRANTING CLAUSE SEVENTH
RECORDS AND PERMITS
7. The Records and Permits described in Exhibit B attached hereto and
---------
by this reference incorporated herein, subject to the terms and provisions of
the Security Agreement;
GRANTING CLAUSE EIGHTH
OPTIONS
8. The Options described in Exhibit B attached hereto and by this
---------
reference incorporated herein, subject to the terms and provisions of the
Security Agreement;
GRANTING CLAUSE NINTH
PROCEEDING RIGHTS
9. The Proceeding Rights described in Exhibit B attached hereto and by
---------
this reference incorporated herein, subject to the terms and provisions of the
Security Agreement;
GRANTING CLAUSE TENTH
ENCUMBRANCE RIGHTS
10. The Encumbrance Rights described in Exhibit B attached hereto and by
---------
this reference incorporated herein, subject to the terms and provisions of
the Security Agreement;
GRANTING CLAUSE ELEVENTH
GREATER ESTATE RIGHTS
11. The Greater Estate Rights described in Exhibit B attached hereto and
---------
by this reference incorporated herein, subject to the terms and provisions of
the Security Agreement;
GRANTING CLAUSE TWELFTH
AFTER ACQUIRED PROPERTY
12. All property hereafter acquired or constructed by Mortgagor of the
type described in the foregoing Granting Clauses and located upon the Premises,
or appurtenant thereto, or used or to be used in connection with the present or
future use, construction upon, leasing, sale, operation or occupancy of the
Premises, which shall forthwith, upon acquisition or construction thereof by
Mortgagor and without any act or deed by Mortgagor or Mortgagee, become subject
to the lien and security interest of this Mortgage as if such property were now
owned by Mortgagor and were specifically described in this Mortgage and were
specifically conveyed or encumbered hereby; and
XXIV-4
<PAGE>
GRANTING CLAUSE THIRTEENTH
ACCESSIONS AND PROCEEDS
13. All accessions, additions, replacements, substitutions, renewals
or attachments to, and proceeds of, any of the foregoing,
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee and its
successors and assigns, for the uses and purposes set forth herein, forever.
B. OBLIGATIONS.
This Mortgage is given to secure ratably and equally the payment and
performance of the following obligations (collectively referred to as the
"OBLIGATIONS"):
1. Payment of and performance of (a) all "Guarantied Obligations" (the
"GUARANTIED OBLIGATIONS") of Mortgagor under, and as defined in, that
certain Subsidiary Guaranty dated as of even date herewith (the "SUBSIDIARY
GUARANTY") from Mortgagor and other subsidiaries of Company and Holdings
(Company and Holdings collectively, "BORROWER") in favor of and for the
benefit of Mortgagee, pursuant to which Mortgagor is unconditionally and
irrevocably, as a primary obligor and not merely as a surety, guarantying
the due and punctual payment in full of the "Obligations" of Borrower under
and as defined in that certain Credit Agreement dated as of even date
herewith by and among Borrower, as borrower, Goldman Sachs Credit Partners,
as syndication agent and arranger, the financial institutions listed on the
signature pages thereof (each individually referred to herein as a "LENDER"
and collectively as "LENDERS") and Mortgagee, and any and all amendments,
modifications, supplements, restatements, extensions, renewals or
replacements thereof (such Senior Secured Revolving Credit Agreement and
any and all amendments, modifications, supplements, restatements,
extensions, renewals or replacements thereof are collectively referred to
herein as the "CREDIT AGREEMENT"); and (b) all obligations of Mortgagor
under, with respect to or arising in connection with this Mortgage,
including, without limitation, all obligations to Mortgagee for fees, costs
and expenses (including attorneys' fees and disbursements) as provided
therein and herein;
2. Payment and performance of all obligations of Mortgagor to the
Lenders and/or Mortgagee for fees, costs and expenses required to be paid
by Mortgagor under the other Loan Documents including, without limitation
fees, costs and expenses (including attorneys' fees and disbursements), all
becoming due as provided therein;
XXIV-5
<PAGE>
3. Payment of all sums advanced by the Lenders or Mortgagee in
accordance with the provisions of this Mortgage or the other Loan Documents
to protect the Mortgaged Property, with interest thereon at the rate
specified in Section 2.2.E of the Credit Agreement (the "AGREED RATE");
-------------
4. Payment of all sums advanced and costs and expenses incurred by the
Lenders or Mortgagee in accordance with the terms of the Loan Documents in
connection with the Obligations or any part thereof, any renewal, extension
or change of or substitution for the Obligations or any part thereof, or
the acquisition or perfection of the security therefor, whether such
advances, costs and expenses were made or incurred at the request of
Borrower, Mortgagor, Mortgagee or any Lender;
5. Payment of all other sums, with interest thereon, which may
hereafter be loaned to Mortgagor, or its successors or assigns, by the
Lenders or Mortgagee, or their respective successors or assigns, or by the
holder of any of the Notes, pursuant to an agreement that recites that the
repayment of such sums and Mortgagor's other obligations under such
agreement are secured by this Mortgage;
6. Payment of all sums with respect to the Obligations that would
become due but for the operation of the automatic stay under Section 362(a)
of the Bankruptcy Code, 11 U.S.C. (S)362(a), including, without limitation,
interest, fees and other charges that, but for the filing of a petition in
bankruptcy with respect to Mortgagor would accrue on the Obligations,
whether or not a claim is alleged against Mortgagor for such sums in any
such bankruptcy proceeding;
7. Due, prompt and complete performance of every obligation, covenant
and agreement of Mortgagor contained in any agreement now or hereafter
executed by Mortgagor which recites that the obligations thereunder are
secured by this Mortgage from and after the date on which all mortgage
recording taxes, general intangible taxes or other taxes payable in respect
of obligations have been paid; and
8. All renewals, extensions, amendments, modifications and changes and
supplements of, or substitutions or replacements for, all or any part of
the items described in Paragraphs 1 through 7 above.
----------------------
C. FUTURE ADVANCES.
In addition to all other indebtedness secured by this Mortgage, this
Mortgage shall also secure and constitute a first Lien on the Mortgaged Property
for:
XXIV-6
<PAGE>
1. Mortgagor's guaranty of all future advances (including all
extensions, renewals and modifications of such future advances) that relate
directly or indirectly to the Credit Agreement (including advances pursuant
to Section 2.1 thereof) or to this Mortgage and are made as provided in any
-----------
of the Loan Documents by the Lenders or Mortgagee to Borrower or Mortgagor
or otherwise as provided in any of the Loan Documents for any purpose so
related after the date of this Mortgage, and Mortgagor acknowledges that
the irrevocable and unconditional guaranty of such future advances is among
the Obligations; and
2. all sums advanced or paid pursuant to the terms of this Mortgage
by Mortgagee upon a default or Event of Default under the terms of this
Mortgage (a) for real estate taxes, charges and assessments that may be
imposed by law upon the Premises, (b) for premiums on insurance policies
covering the Premises, (c) for expenses incurred in upholding the Lien of
this Mortgage, including but not limited to the expenses of any litigation
to prosecute or defend the rights and Lien created by this Mortgage, (d) to
which Mortgagee becomes subrogated, upon payment, under recognized
principles of law or equity, or under express statutory authority or (e)
for any other purpose, in each case, with interest thereon at the Agreed
Rate; and
3. all other sums expended by Mortgagee in accordance with the terms
of this Mortgage (including without limitation the amounts advanced
pursuant to Sections 2.3, 2.4, 2.5 and 5.5 hereof),
------------ --- --- ---
just as if such advances were made on the date of this Mortgage. Any future
advances may be made in accordance with the terms of the Credit Agreement, or at
the option of Mortgagee, as provided herein or in the other Loan Documents. The
total amount of the indebtedness that may be secured by this Mortgage may
increase or decrease from time to time.
D. DEFINITIONS AND INTERPRETATION.
Supplementing the definitions listed below in this Paragraph D, the
-----------
definitions set forth in Section 1.1 of the Credit Agreement and the provisions
-----------
with respect to interpretation and construction of the Loan Documents as set
forth in Sections 1.3 and 9.16 of the Credit Agreement are hereby incorporated
------------ ----
by reference into this Mortgage with the same effect as if set forth in full
herein. The following terms used in this Mortgage shall have the following
meanings:
"APPLICABLE LAW" means, collectively, all statutes, laws, rules,
regulations, ordinances, orders, decisions, writs, judgments, decrees and
injunctions of governmental authorities (including Environmental Laws) affecting
Borrower or the Collateral or any part thereof (including the acquisition,
development, construction, renovation, occupancy, use, improvement, alteration,
management, operation, maintenance, repair or restoration thereof), whether now
or hereafter enacted and in force, and all authorizations relating thereto, and
all covenants, conditions and restrictions contained in any instruments, either
of record or known to Borrower, at any time in
XXIV-7
<PAGE>
force affecting any Property or any part thereof, including any such covenants,
conditions and restrictions which may (i) require improvements, repairs or
alterations in or to such Property or any part thereof or (ii) in any way limit
the use and enjoyment thereof; for purposes of usury, Applicable Law means the
law of the State of New York applicable to maximum rates of interest.
"SECURED PARTY" means Mortgagee, in its capacity as administrative agent
for and representative of the Lenders and any Interest Rate Exchangers (as
defined in the Security Agreement (defined below)).
"SECURITY AGREEMENT" means the Security Agreement executed and delivered
by Borrower and the Mortgagee on or before the Closing Date, pursuant to which
Borrower will pledge and grant a security interest in the Collateral described
therein to Mortgagee for the benefit of the Mortgagee and the Lenders, as such
Security Agreement may be amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms thereof and hereof.
"TRANSFER" means any conveyance, assignment, sale, mortgaging,
encumbrance, pledging, hypothecation, granting of a security interest in,
granting of options with respect to or other disposition of (directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, and
whether or not for consideration or of record) all or any portion of any legal
or beneficial interest (i) in all or any portion of any Property or (ii) in any
other assets of Borrower or any of Borrower's subsidiaries.
Section 1
OBLIGATIONS OF BORROWER UNDER THE CREDIT AGREEMENT
The "Obligations" of Borrower under and as defined in the Credit
Agreement include, without limitation: (a) the due and punctual payment of the
indebtedness, together with interest thereon and other amounts payable with
respect thereto, owed under the Notes up to the maximum aggregate principal
amount set forth in Section 2.1 of the Credit Agreement; (b) the due and
-----------
punctual payment of all reimbursement obligations in respect of Letters of
Credit together with interest thereon and other amounts payable with respect
thereto; and (c) the due and punctual payment of any fee payable in accordance
with Section 2.4 of the Credit Agreement (together with interest thereon and
-----------
other amounts payable with respect thereto).
XXIV-8
<PAGE>
Section 2
COVENANTS AND AGREEMENTS OF MORTGAGOR
2.1 PAYMENT AND PERFORMANCE OF OBLIGATIONS.
--------------------------------------
Mortgagor shall pay when due and perform the Obligations, including,
without limitation, all amounts payable under and with respect to the Subsidiary
Guaranty (including interest thereon as provided in the Subsidiary Guaranty);
all charges, fees and other sums (including, without limitation, attorneys' fees
and disbursements, late charges, prepayment charges and other amounts and all
costs of collection) to be paid by Mortgagor as provided in this Mortgage or in
the other Loan Documents; the principal and interest on any future advances
secured by this Mortgage; and the principal of and interest on any other
indebtedness secured by this Mortgage.
2.2 ASSIGNMENT OF POLICIES UPON FORECLOSURE.
---------------------------------------
In the event of foreclosure of this Mortgage or other transfer of
title or assignment of the Mortgaged Property, the acceptance by Mortgagee (or a
nominee of Mortgagee) of a deed to any part of the Mortgaged Property in lieu of
foreclosure of this Mortgage or in connection with a plan of reorganization
filed under Chapter 11 of the Bankruptcy Code, or the exercise by Mortgagee of
any remedy set forth herein, in extinguishment, in whole or in part, of the debt
secured hereby or upon the acceptance by Mortgagee (or a nominee of Mortgagee)
of a deed to any part of the Mortgaged Property in lieu of foreclosure of this
Mortgage but not in extinguishment, in whole or in part, of the debt secured
hereby, all right, title and interest of Mortgagor in and to all policies of
insurance required pursuant to Section 6.4 of the Credit Agreement shall inure
-----------
to the benefit of and pass to the successor in interest to Mortgagor or the
purchaser or grantee of the Mortgaged Property.
XXIV-9
<PAGE>
2.3 INSPECTIONS.
-----------
Mortgagee and its agents, representatives and employees are authorized
to enter, at any reasonable time and upon reasonable prior notice to Mortgagor,
upon or in any part of the Mortgaged Property as set forth in the Credit
Agreement for the purpose of inspecting the same and for the purpose of
performing any of the acts they are authorized to perform hereunder or under the
terms of the Loan Documents, including performing any architectural,
environmental and engineering audits and assessments. Mortgagee agrees that
employees of Mortgagor shall be entitled to accompany Mortgagee and its agents,
representatives and employees during any such inspection or other entry upon the
Mortgaged Property, and Mortgagee and its agents, representatives and employees
shall use reasonable efforts not to interfere with Mortgagor's operations at the
Premises in connection with such inspection or other entry. Mortgagor shall, at
Mortgagor's sole expense, conduct and complete all environmental investigations
(including Phase I, Phase II and Phase III environmental investigations),
inspections, monitoring, studies, sampling, testing, boring, reporting, clean
up, containment, remediation and/or removal of any Hazardous Materials as and
when required, and if the same are not timely conducted and completed by
Mortgagor due to the fault of Mortgagor or any of its employees, then Mortgagee
shall have the right to do so (at Mortgagee's option and without any obligation
to do so) on Mortgagor's behalf and at Mortgagor's expense. Mortgagor hereby
grants Mortgagee and its employees and agents an irrevocable and non-exclusive
royalty-free license, to enter the Mortgaged Property and to investigate
(including conducting Phase I, Phase II and Phase III environmental
investigations), inspect, monitor, study, sample, test and conduct borings, to
make such reports of the findings as may be required by Applicable Law, and to
clean up, contain, remediate and/or remove Hazardous Materials (but Mortgagee
shall have no obligation to do so). Without limitation of any other rights or
remedies of Mortgagee, Mortgagor hereby irrevocably appoints and constitutes
Mortgagee as its lawful attorney-in-fact, coupled with an interest and with full
power of substitution, for the purpose of taking any of the actions described in
the immediately preceding sentence and all acts incidental thereto. The costs
of any investigation, inspection, monitoring, studying, sampling, testing,
boring, clean-up, containment, remediation and/or removal shall be paid by
Mortgagor and shall be secured by this Mortgage. Notwithstanding the foregoing,
Mortgagee shall have no duty to make any inspection of the Mortgaged Property
(including, without limitation, any environmental inspection) and shall not
incur any liability for making or not making any such inspection, and shall not
be required to report the results of any such inspection to Mortgagor.
XXIV-10
<PAGE>
2.4 ACTIONS BY MORTGAGEE TO PRESERVE MORTGAGED PROPERTY.
---------------------------------------------------
From and after the occurrence of an Event of Default, Mortgagee may,
without obligation so to do and without releasing Mortgagor from any Obligation,
make any payment or perform any act required to be paid or performed by
Mortgagor under the terms of any of the Loan Documents, if Mortgagee in its sole
discretion shall deem such payment or act necessary or proper to protect the
security hereof. In connection therewith (without limiting its general and
other powers, whether conferred herein, in any other Loan Document or by law),
Mortgagee shall have and is hereby given the right (without limiting the rights
otherwise available to Mortgagee under any of the other Loan Documents or any
other provisions of this Mortgage), but not the obligation, after Mortgagor's
failure to cure within the period described above, and upon the occurrence and
during the continuance of an Event of Default: (a) to enter upon and take
possession of the Mortgaged Property, (b) to make additions, alterations,
repairs and improvements to the Mortgaged Property which Mortgagee may consider
necessary or proper to keep the Mortgaged Property in good condition and repair,
(c) to appear and participate in any action or proceeding affecting or which may
affect the security hereof or the rights or powers of Mortgagee, (d) to pay,
purchase, contest or compromise any claim, charge, Lien or debt which in the
judgment of Mortgagee may materially and adversely affect or appears to
materially and adversely affect the security of this Mortgage or to be prior or
superior hereto except for any claims, charges, Liens or debts being diligently
contested in good faith by Mortgagor in appropriate proceedings in accordance
with the terms of Sections 6.3 or 6.6 of the Credit Agreement, (e) to pay any
Impositions except those Impositions being diligently contested in good faith by
Mortgagor in appropriate proceedings in accordance with the terms of Section 6.3
of the Credit Agreement and to procure, maintain and pay premiums on the
insurance policies referred to herein, and (f) in exercising such powers, to pay
necessary expenses, including fees and disbursements of counsel or other
necessary and desirable consultants. No such advance or performance shall be
deemed to have cured any or Event of Default. Mortgagor shall, within ten (10)
days after Mortgagee's written demand therefor, pay to Mortgagee an amount equal
to all costs and expenses actually incurred by Mortgagee in accordance with the
provisions set forth herein and in the other Loan Documents in connection with
the exercise by Mortgagee of the foregoing rights including, without limitation,
costs of evidence of title and of endorsements to the Closing Date Mortgage
Policies, court costs, architectural or engineering studies, appraisals, surveys
and architect's, engineer's, accountant's, receiver's, trustee's and attorneys'
fees, together with interest thereon from the date of such expenditures at the
Agreed Rate. All sums advanced and all expenses incurred by Mortgagee in
accordance with the provisions set forth herein and in the other Loan Documents
in connection with such advances or actions and all other sums advanced or
expenses incurred by Mortgagee hereunder in accordance with the provisions set
forth herein and in the other Loan Documents (whether required or optional and
whether indemnified hereunder or not) shall be deemed Obligations owing by
Mortgagor and shall bear interest from the date incurred or paid by Mortgagee
until paid by Mortgagor at the Agreed Rate. All such amounts advanced or
incurred, and all such interest thereon, shall be a part of the Obligations and
shall be secured by this Mortgage. Mortgagee, upon making such advance, shall be
subrogated to all of the rights of the person receiving such advance.
XXIV-11
<PAGE>
2.5 ACTION BY MORTGAGEE TO PROTECT INTERESTS; SUBROGATION; WAIVER OF
----------------------------------------------------------------
OFFSET.
------
A. ACTION BY MORTGAGEE TO PROTECT INTERESTS. If the title,
interest or Lien, as the case may be, of Mortgagor or Mortgagee in and to the
Mortgaged Property or any part thereof, or the security of this Mortgage, or the
rights or powers of Mortgagee or Mortgagor hereunder, shall be attacked, either
directly or indirectly, or if any legal proceedings are commenced involving
Mortgagor (which proceedings require notice to Agent or the Lenders pursuant to
Section 6.1(x) of the Credit Agreement), Mortgagee or the Mortgaged Property,
Mortgagor shall promptly upon obtaining knowledge of the same give written
notice thereof to Mortgagee and at Mortgagor's own expense shall take all
reasonable steps diligently to defend against any such attack or proceedings,
employing attorneys reasonably acceptable to Mortgagee; and if an Event of
Default shall have occurred and be continuing, Mortgagee may take such
independent action in connection therewith as it may in its discretion deem
advisable, and all reasonable costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, actually incurred by Mortgagee in
connection therewith shall be an Obligation owing by Mortgagor and payable to
Mortgagee, within ten (10) days of Mortgagee's written demand for payment, and
shall bear interest at the Agreed Rate. Mortgagor agrees that, if Mortgagor
fails to perform any act which Mortgagor is required to perform under this
Section 2.5A, Mortgagee may (after ten (10) days' written notice to Mortgagor),
------------
but shall not be obligated to, perform or cause to be performed such act, and
any expense actually incurred by Mortgagee in connection therewith shall be an
Obligation owing by Mortgagor and payable to Mortgagee within ten (10) days of
Mortgagee's written demand for payment, and shall bear interest at the Agreed
Rate, and shall be secured by this Mortgage, and Mortgagee shall be subrogated
to all of the rights of the party receiving such payment. The liabilities of
Mortgagor as set forth in this Section 2.5 shall survive the termination of this
-----------
Mortgage or of any other Loan Document.
B. SUBROGATION. Mortgagor hereby waives any and all right to
claim or recover against Mortgagee and the Lenders, and their respective
officers, employees, agents and representatives, for loss of or damage to
Mortgagor, the Mortgaged Property, Mortgagor's other property or the property of
others under Mortgagor's control from any cause insured against or required to
be insured against by the provisions of this Mortgage.
C. WAIVER OF OFFSET. All sums payable by Mortgagor pursuant to
this Mortgage shall be paid (except as otherwise expressly provided herein or in
any other Loan Document) without notice, demand, counterclaim, setoff, deduction
or defense and without abatement, suspension, deferment, diminution or
reduction, and the Obligations and liabilities of Mortgagor hereunder shall in
no way be released, discharged or otherwise affected (except as otherwise
expressly provided herein) by reason of: (i) any damage to or destruction of or
any condemnation or similar taking of the Mortgaged Property or any part
thereof; (ii) any restriction or prevention of or interference by any third
party with any use of the Mortgaged Property or any part thereof; (iii) any
title defect or encumbrance or any eviction from the Premises or any part
thereof by title paramount or otherwise; (iv) any bankruptcy, insolvency,
reorganization,
XXIV-12
<PAGE>
composition, adjustment, dissolution, liquidation or other like proceeding
relating to Mortgagee or the Lenders, or any action taken with respect to this
Mortgage by any trustee or receiver of Mortgagee, or by any court, in any such
proceeding; (v) any claim which Mortgagor has or might have against Mortgagee;
(vi) any default or failure on the part of Mortgagee to perform or comply with
any of the terms hereof or of any other agreement with Mortgagor; or (vii) any
other occurrence whatsoever, whether or not Mortgagor shall have notice or
knowledge of any of the foregoing. Except as expressly provided herein,
Mortgagor waives all rights now or hereafter conferred by statute or otherwise
to any abatement, suspension, deferment, diminution or reduction of any sum
secured hereby and payable by Mortgagor.
2.6 RESTRICTIONS ON TRANSFER OF MORTGAGED PROPERTY BY MORTGAGOR.
-----------------------------------------------------------
The financial stability and managerial and operational ability of
Mortgagor are substantial and material considerations to Mortgagee and the
Lenders in their agreement to accept the Notes from Borrower and other Loan
Documents from Mortgagor and Borrower and to enter into the transactions
contemplated thereby. Mortgagor understands and acknowledges that a Transfer of
the Mortgaged Property may significantly and materially alter and reduce
Mortgagee's security for the Obligations. Therefore, in order to induce
Mortgagee and the Lenders to make the loans secured hereby, Mortgagor agrees
that, except as expressly permitted under the terms of the Credit Agreement,
Mortgagor will not Transfer the Mortgaged Property, or any portion thereof,
without the prior written consent of Mortgagee. In the event of any Transfer of
the Mortgaged Property, or any portion thereof, that is not expressly permitted
under the terms of the Credit Agreement, or consented to by Mortgagee in
writing, Mortgagee shall have the absolute right at its option, without prior
demand or notice, to declare all of the Obligations immediately due and payable.
Consent to one such Transfer shall not be deemed to be a waiver of the right to
require consent to future or successive Transfers. If consent should be given
to a Transfer and if this Mortgage is not released to the extent of the
transferred portion of the Mortgaged Property by a writing signed by Mortgagee,
as required by Applicable Law, and recorded in the proper city, town, county or
parish records, then (unless otherwise provided in the Credit Agreement) any
such Transfer shall be subject to this Mortgage and any such transferee shall
assume all obligations hereunder and agree to be bound by all provisions
contained herein. Any such assumption shall not, however, release Mortgagor or
any maker or guarantor of the Obligations from any liability thereunder without
the prior written consent of Mortgagee. This covenant shall run with the land
and remain in full force and effect until all of the Obligations are fully paid
(or this Mortgage is released of record), and Mortgagee may, without notice to
Mortgagor, deal with any transferees with reference to the Obligations in the
same manner as Mortgagor, without in any way altering or discharging Mortgagor's
liability or the liability of any guarantor of Mortgagor with respect thereto.
The provisions of this Section 2.6 shall apply to each and every Transfer of the
-----------
Mortgaged Property or any portion thereof, regardless of whether or not
Mortgagee has consented to or waived, by its action or inaction, its rights with
respect to any previous Transfer.
XXIV-13
<PAGE>
2.7 INCORPORATION BY REFERENCE; FULL PERFORMANCE REQUIRED; SURVIVAL OF
------------------------------------------------------------------
WARRANTIES.
----------
Mortgagor hereby makes to Mortgagee all of the affirmative and
negative covenants relating to the Mortgaged Property that are set forth in
Sections 6 and 7 of the Credit Agreement, which affirmative and negative
---------- -
covenants are incorporated herein by reference as of the date hereof. All
representations, warranties and covenants of Mortgagor made to Mortgagee in the
Loan Documents or incorporated by reference therein shall run to the benefit of
Mortgagee, shall survive the execution and delivery of this Mortgage and shall
remain continuing obligations, warranties and representations of Mortgagor so
long as any portion of the Obligations has accrued and remains outstanding and
Mortgagor shall fully and faithfully satisfy and perform all such Obligations,
representations, warranties and covenants as required by the terms of the Loan
Documents. In the event of a conflict between the provisions of this Mortgage
and the Credit Agreement, it is the intention of Mortgagor and Mortgagee that
both such documents shall be read together and construed, to the fullest extent
possible, to be in concert with each other. In the event of a conflict that
cannot be resolved as aforesaid, the provisions of the Credit Agreement shall
control and govern and Mortgagor shall comply therewith.
2.8 ADDITIONAL SECURITY.
-------------------
No other security now existing, or hereafter taken, to secure the
Obligations shall be impaired or affected by the execution of this Mortgage; and
all additional security shall be taken, considered and held as cumulative. The
taking of additional security, execution of partial releases of the security, or
any extension of the time of payment or performance of the Obligations shall not
diminish the force, effect or Lien of this Mortgage and shall not affect or
impair the liability of any maker, surety, guarantor or endorser for the payment
or performance of said Obligations. Neither the acceptance of this Mortgage nor
its enforcement, whether by court action or pursuant to the power of sale or
other powers herein contained, shall prejudice or in any manner affect
Mortgagee's right, to realize upon or enforce any other security now or
hereafter held by Mortgagee, it being agreed that Mortgagee shall be entitled to
enforce this Mortgage and any other security now or hereafter held by Mortgagee
in such order and manner as it may in its absolute discretion determine.
XXIV-14
<PAGE>
2.9 FURTHER ACTS.
------------
XXIV-15
<PAGE>
Mortgagor shall do and perform all acts as required under Section 7.2
-----------
of the Credit Agreement or as necessary to keep valid and effective the Lien
hereof and to carry into effect its objective and purposes, in order to protect
the lawful owner and holder of this Mortgage and the other Obligations.
Promptly upon request, from time to time, of Mortgagee and at Mortgagor's
expense, Mortgagor shall execute, acknowledge and deliver to Mortgagee such
other and further instruments and do such other acts as in the reasonable
opinion of Mortgagee may be necessary or reasonably requested by Mortgagee to
(a) grant to Mortgagee a first priority perfected Lien on all of the Mortgaged
Property to secure all of the Obligations, (b) grant to Mortgagee, to the
fullest extent permitted by Applicable Law, the right to foreclose on the
Mortgaged Property nonjudicially, upon the occurrence and during the continuance
of an Event of Default, (c) correct any defect or error which may be discovered
in the contents of this Mortgage (including, without limitation, all exhibits
and/or schedules hereto) or any other Loan Document or in the recording or
filing of this Mortgage or any other Loan Document, (d) identify more fully and
subject to the Liens created hereby and by the other Loan Documents any property
intended by the terms hereof and of the other Loan Documents to be covered
hereby and thereby (including any renewals, additions, substitutions,
replacements or appurtenances to the Mortgaged Property), (e) assure the first
priority of this Mortgage and of such Liens, and (f) otherwise effectuate the
intent of this Mortgage. In the event of the acquisition by Mortgagor or any
affiliate of Mortgagor of any greater estate in the Premises or in any other
part of the Mortgaged Property or the acquisition by Mortgagor of any after
acquired property as described in Granting Clause Twelfth, Mortgagor shall
-----------------------
notify Mortgagee and, concurrently with the consummation of such acquisition,
shall execute and record (and shall cause Grantor's affiliate, as the case may
be, to execute and record) an instrument sufficient in Mortgagee's sole
discretion to extend and spread the Lien of this Mortgage to encumber such
acquired interest or after acquired interest as a first priority mortgage Lien.
To the full extent permitted under Applicable Law and in accordance with the
grants made by Mortgagor in Granting Clause Eleventh and Granting Clause Twelfth
------------------------ -----------------------
whether or not Mortgagor has executed and recorded the instrument described in
the preceding sentence, this Mortgage shall automatically be a Lien on such
acquired interest or after acquired interest. Upon request by Mortgagee,
Mortgagor shall supply evidence of fulfillment of each of the covenants herein
contained concerning which a request for such evidence has been made. Mortgagor
hereby irrevocably appoints Mortgagee as its attorney-in-fact, coupled with an
interest and with full power of substitution, to take the above actions and to
perform such obligations on behalf of Mortgagor, at Mortgagor's sole expense, if
Mortgagor fails to fully comply with Mortgagor's obligations under this Section
-------
2.9. Without limiting the generality of the foregoing, Mortgagor shall promptly
---
and, insofar as not contrary to Applicable Law, at Mortgagor's own expense,
record, rerecord, file and refile in such offices, at such times and as often as
may be necessary, this Mortgage, additional mortgages, deeds of trust and deeds
to secure debt, and every other instrument in addition or supplemental hereto,
including applicable financing statements, as may be necessary to create,
perfect, maintain and preserve the Liens (and priority thereof) intended to be
created hereby and by the other Loan Documents and the rights and remedies of
Mortgagee hereunder and thereunder. Upon request by Mortgagee, Mortgagor shall
supply evidence reasonably satisfactory to Mortgagee of fulfillment of each of
the covenants herein contained concerning which a request for such evidence has
been made.
XXIV-16
<PAGE>
2.10 OFFSITE IMPROVEMENTS.
--------------------
Mortgagor shall not construct or install improvements or Equipment (as
defined in Exhibit B hereto) necessary or desirable for the operation of the
---------
Premises on real property or any interest in real property (for example, an
easement, license or lease) that is not subject to the Lien of this Mortgage
without the prior written consent of Mortgagee (which consent may be granted or
withheld in Mortgagee's sole discretion), but only to the extent that: (a) the
construction or installation of such improvements or Equipment on such other
real property is commercially reasonable when compared to, and commercially
preferable to, construction or installation on the real property that is subject
to the Lien of this Mortgage; and (b) Mortgagor grants Mortgagee rights
(including, but not limited to, easements or reciprocal easement agreements)
with respect to such improvements, Equipment and land that are appurtenant to
the Land encumbered by this Mortgage and are sufficient in Mortgagee's judgment
(i) to enable Mortgagee and any future owner or holder of Mortgagor's interest
in the Premises to enjoy the full and unrestricted use of such improvements and
Equipment and (ii) to continue Mortgagee's first priority Lien on any such
Equipment. Mortgagor's obligations under this Section 2.10 shall be full
------------
recourse obligations of Mortgagor and shall survive any assignment or
foreclosure of this Mortgage, the acceptance by Mortgagee (or a nominee of
Mortgagee) of a deed to any part of the Mortgaged Property in lieu of
foreclosure or in connection with a plan of reorganization filed under Chapter
11 of the Bankruptcy Code, or the exercise by Mortgagee of any remedy set forth
herein.
2.11 UTILITIES.
---------
Mortgagor shall pay or cause to be paid prior to becoming delinquent
all utility charges which are incurred for the benefit of the Mortgaged Property
or which may become a Lien against the Mortgaged Property for gas, steam,
electricity, telephone, water, sewer services and all other utilities furnished
to the Mortgaged Property and all other assessments or charges of a similar
nature, whether public or private, affecting or related to the Mortgaged
Property or any portion thereof, whether or not such taxes, assessments or
charges are or may become Liens thereon.
2.12 HAZARDOUS MATERIALS AND ENVIRONMENTAL LAWS.
------------------------------------------
Mortgagor shall exercise all due diligence in order to comply with any
and all applicable Environmental Laws. Without limiting the foregoing,
Mortgagor shall comply with the provisions of Section 6.7 of the Credit
-----------
Agreement.
2.13 LEASEHOLD ESTATE.
----------------
This Section 2.13 shall apply only if Mortgagor's interest in either
------------
the Land or the Improvements is as the tenant under a leasehold estate at the
Premises (the "SUBJECT LEASE"). If Mortgagor is a tenant under a Subject Lease,
Mortgagor hereby covenants, represents and warrants to Mortgagee with respect to
the Subject Lease as follows:
XXIV-17
<PAGE>
A. No default by Mortgagor as lessee has occurred and is
continuing under the Subject Lease and no event has occurred which, with
the passage of time or service of notice, or both would constitute an event
of default under the Subject Lease. The Subject Lease is in full force and
effect. Mortgagor has obtained from the lessor with respect to the Subject
Lease all consents to this Mortgage required to be obtained from such
lessor and Mortgagor has provided (or within 5 days from the date hereof
shall provide) such lessor with all notices required to be given to such
lessor with respect to this Mortgage together with copies of all documents
required to be delivered to such lessor with respect to this Mortgage under
the terms of the Subject Lease.
B. All rents, additional rents, percentage rents and all other
charges due and payable under the Subject Lease have been fully paid
through a date no earlier than 30 days before the date hereof.
C. The Subject Lease covers 100% of that part of the Land and
Improvements that are not owned in fee by Mortgagor, and Mortgagor is the
owner of the entire lessee's interest in and under the Subject Lease and
has the right and authority under the Subject Lease to execute this
Mortgage and to encumber Mortgagor's interest therein.
D. Mortgagor shall, at its sole cost and expense, promptly and
timely perform and observe all the terms, covenants and conditions required
to be performed and observed by Mortgagor as lessee under the Subject Lease
(including, but not limited to, the payment of all rent, additional rent,
percentage rent and other charges required to be paid under the Subject
Lease).
E. If Mortgagor shall violate any of the covenants specified in
Section 2.13D above, Mortgagor grants Mortgagee the right (but not the
-------------
obligation), to take any action as may be necessary to prevent or cure any
default of Mortgagor under the Subject Lease, if necessary to protect
Mortgagee's interest hereunder, and Mortgagee shall have the right to enter
all or any portion of the Premises at such times and in such manner as
Mortgagee deems necessary, in order to prevent or to cure any such default.
Mortgagee may exercise its rights under this Section 2.12E at any time
-------------
after, but only after, Mortgagor shall have (i) received from the lessor
under the Subject Lease or any other Person notice of such default, and
(ii) failed to promptly commence curing such default.
F. No action taken or payment or made by Mortgagee to prevent any
default by Mortgagor under the Subject Lease shall remove or waive, as
between Mortgagor and Mortgagee, the default which occurred hereunder by
virtue of the default by Mortgagor under the Subject Lease. All sums
actually expended by Mortgagee in accordance with the terms of this Section
-------
2.13 in order to cure any such default shall be paid by Mortgagor to
----
Mortgagee, within ten (10) days of Mortgagee's written demand, with
interest thereon at the Agreed Rate. All such indebtedness shall be deemed
to be secured by this Mortgage.
XXIV-18
<PAGE>
G. Mortgagor shall, promptly upon obtaining knowledge of the
following events, notify Mortgagee in writing of (i) the occurrence of any
material default by the lessor under the Subject Lease or the occurrence of
any event which, with the passage of time or service of notice, or both,
would constitute a material default by the lessor under the Subject Lease,
and (ii) the receipt by Mortgagor of any notice (written or otherwise) from
the lessor under the Subject Lease noting or claiming the occurrence of any
default by Mortgagor under the Subject Lease or the occurrence of any event
which, with the passage of time or service of notice, or both, would
constitute a default by Mortgagor under the Subject Lease. Mortgagor shall
deliver to Mortgagee a copy of any such written notice of default.
H. Promptly upon demand by Mortgagee from time to time, Mortgagor
shall use reasonable efforts (other than payment to the lessor) to obtain
from the lessor under the Subject Lease and furnish to Mortgagee the
estoppel certificate of such lessor stating the date through which rent has
been paid and whether or not there are any defaults under its lease and
specifying the nature of such claimed defaults, if any, and stating any
other information that the lessor is obligated to provide.
I. Mortgagor shall promptly notify Mortgagee, in writing, of any
request made by either party to the Subject Lease for arbitration or
appraisal proceedings pursuant to the Subject Lease and of the institution
of any arbitration or appraisal proceedings, as well as of all proceedings
thereunder, and shall promptly deliver to Mortgagee a copy of the
determination of the arbitrators or appraisers in each such arbitration or
appraisal proceeding. Mortgagee shall have the right (but not the
obligation), following the delivery of written notice by Mortgagor, to
participate in the appointment of any arbitrator or appraiser to be
appointed by Mortgagor and (to the extent permitted under the Subject
Lease) to participate (at Mortgagee's expense unless an Event of Default
shall have occurred and be continuing, in which case at Mortgagor's
expense) in such arbitration or appraisal proceedings in association with
Mortgagor or on its own behalf as an interested party. Mortgagor shall
promptly notify Mortgagee, in writing, upon learning of the institution of
any legal proceedings involving obligations under the Subject Lease.
Mortgagee may intervene (at Mortgagee's expense unless an Event of Default
shall have occurred and be continuing, in which case at Mortgagor's
expense) in any such legal proceedings and be made a party to them.
Mortgagor shall promptly provide Mortgagee with a copy of any decision
rendered in connection with such proceedings.
J. Mortgagor shall promptly execute, acknowledge and deliver to
Mortgagee such instruments as may reasonably be required to permit
Mortgagee (subject to the provisions of Section 2.13E above) (i) to cure
-------------
any default under the Subject Lease or (ii) to take such other action
required to enable Mortgagee to cure or remedy the matter in default and
preserve the security interest of Mortgagee under this Mortgage with
respect to the Subject Lease. Mortgagor hereby irrevocably appoints
Mortgagee as its true and lawful
XXIV-19
<PAGE>
attorney-in-fact, coupled with an interest and with full power of
substitution, to do, in its name or otherwise, any and all acts and to
execute any and all documents (in each case only upon Mortgagor's failure
or refusal to do so) which are necessary to preserve any rights of
Mortgagor under or with respect to the Subject Lease, including, without
limitation, the right to effectuate any extension or renewal of the Subject
Lease, or to preserve any rights of Mortgagor whatsoever in respect of any
part of the Subject Lease.
K. Mortgagor shall not, without Mortgagee's prior written
consent, surrender, terminate, forfeit, or suffer or permit the surrender,
termination or forfeiture of, or change, modify or amend in a material or
adverse manner, the Subject Lease. Consent to one amendment, change,
agreement or modification shall not be deemed to be a waiver of the right
to require consent to other, future or successive amendments, changes,
agreements or modifications. The acquisition by Mortgagor or any affiliate
of Mortgagor of any lessor's interest in the Subject Lease or of any fee
holder's interest in the property subject to the Subject Lease shall not
require Mortgagee's consent and shall not be a breach of the covenants set
forth in this Section 2.13K provided that: (i) such acquisition is
-------------
accomplished by Mortgagor in such a manner so as to avoid a merger of the
interests of lessor and lessee in the Subject Lease; and (ii) Mortgagor,
concurrently with the consummation of such acquisition, executes and
records an instrument sufficient in Mortgagee's sole discretion to extend
and spread the Lien of this Mortgage to encumber such acquired interest as
a first priority mortgage Lien. To the full extent permitted under
Applicable Law and in accordance with the grant made by Mortgagor in
Granting Clause Twelfth, whether or not Mortgagor has executed and recorded
-----------------------
the instrument described in the preceding sentence, this Mortgage shall
automatically be a Lien on such acquired interest.
L. Notwithstanding anything to the contrary herein contained
with respect to the Subject Lease:
(i) The Lien of this Mortgage attaches to all of Mortgagor's
rights and remedies at any time arising under or pursuant to
Subsection 365(h) of the Bankruptcy Code, including, without
limitation, all of Mortgagor's rights to remain in possession of the
Land.
(ii) Mortgagor shall not, without Mortgagee's written consent,
elect to treat the Subject Lease as terminated under Subsection
365(h)(1) of the Bankruptcy Code. Any such election made without
Mortgagee's prior written consent shall be void. If any lessor of the
Subject Lease rejects the Subject Lease under Section 365 of the
Bankruptcy Code, Mortgagor shall remain in possession of the Premises.
Neither the Lien of this Mortgage nor Mortgagee's rights with respect
to the Subject Lease shall be affected or impaired by any lessor's
rejection of the Subject Lease under Section 365 of the Bankruptcy
Code.
XXIV-20
<PAGE>
(iii) As security for the Obligations, Mortgagor hereby
unconditionally assigns, transfers and sets over to Mortgagee all of
Mortgagor's claims and rights to the payment of damages arising from
any rejection by any lessor of the Subject Lease under the Bankruptcy
Code. Mortgagee and Mortgagor shall proceed jointly or in the name of
Mortgagor (and Mortgagor hereby irrevocably appoints Mortgagee as its
attorney-in-fact, coupled with an interest and with full power of
substitution, from and after the occurrence of an Event of Default, to
proceed in the name of Mortgagor and to otherwise take such actions as
Mortgagee may deem necessary or desirable) in respect of any claim,
suit, action or proceeding relating to the rejection of the Subject
Lease, including, without limitation, the right to file and prosecute
any proofs of claim, complaints, motions, applications, notices and
other documents in any case in respect of such lessor under the
Bankruptcy Code. This assignment constitutes a present, irrevocable
and unconditional assignment of the foregoing claims, rights and
remedies, and shall continue in effect until this Mortgage has been
released of record or all of the Obligations secured by this Mortgage
shall have been satisfied and discharged in full. Any amounts
received by Mortgagee or Mortgagor as damages arising out of the
rejection of the Subject Lease as aforesaid shall be applied first to
all reasonable costs and expenses of Mortgagee (including, without
limitation, attorneys' fees and costs) incurred in connection with the
exercise of any of its rights or remedies under this Section 2.13L and
-------------
then in accordance with the other applicable provisions of this
Mortgage.
(iv) If, pursuant to Subsection 365(h)(2) of the Bankruptcy
Code, Mortgagor seeks to offset, against the rent reserved in the
Subject Lease, the amount of any damages caused by the nonperformance
by the lessor thereunder of any of such lessor's obligations under the
Subject Lease after the rejection by lessor of the Subject Lease under
the Bankruptcy Code, Mortgagor shall, prior to effecting such offset,
notify Mortgagee in writing of its intent so to do, setting forth the
amounts proposed to be so offset, and, in the event Mortgagee objects,
Mortgagor shall not effect any offset of the amounts so objected to by
Mortgagee. If Mortgagee has failed to object as aforesaid within ten
(10) days after notice from Mortgagor in accordance with the first
sentence of this Section 2.13L(iv), Mortgagor may proceed to offset
-----------------
the amounts set forth in Mortgagor's notice.
(v) If any action, proceeding, motion or notice shall be
commenced or filed in respect of any lessor or the Land or any portion
thereof in connection with any case under the Bankruptcy Code,
Mortgagee and Mortgagor shall cooperatively conduct and control any
such litigation (provided that after the occurrence and during the
continuance of an Event of Default, Mortgagee shall have the exclusive
right (but not the obligation) to control such litigation, and
Mortgagor hereby irrevocably appoints Mortgagee as its attorney-in-
fact, coupled with an interest and with full power of substitution for
such purpose) with counsel agreed upon between
XXIV-21
<PAGE>
Mortgagor and Mortgagee (or, if an Event of Default shall then have
occurred and be continuing, counsel selected by Mortgagee) in
connection therewith. Within ten (10) days after Mortgagee's written
demand upon Mortgagor, Mortgagor shall pay to Mortgagee, as
applicable, all reasonable costs and expenses (including reasonable
attorneys' fees and costs) actually paid or incurred by Mortgagee in
connection with the cooperative prosecution or conduct of any such
proceedings. All such costs and expenses shall be secured by the Lien
of this Mortgage.
(vii) Mortgagor shall promptly, after obtaining knowledge
thereof, notify Mortgagee orally of any filing by or against any
lessor of a petition under the Bankruptcy Code. Mortgagor shall
thereafter promptly give written notice of such filing to Mortgagee,
setting forth any information available to Mortgagor as to the date of
such filing, the court in which such petition was filed, and the
relief sought therein. Mortgagor shall promptly deliver to Mortgagee,
following its receipt thereof, copies of any and all notices,
summonses, pleadings, applications and other documents received by
Mortgagor in connection with any such petition and any proceedings
relating thereto.
M. The occurrence of any of the following events shall, at
Mortgagee's option, constitute an "Event of Default" hereunder in which
event Mortgagee shall have all of the rights and remedies available to it
under Section 5 hereof:
---------
(i) A breach or default under any material condition or
obligation contained in the Subject Lease which is not cured within
any applicable cure period provided therein to Mortgagor (provided,
--------
however, that upon the occurrence and during the continuance of any
-------
breach or default under any condition or obligation contained in the
Subject Lease, and prior to the expiration of all applicable cure
periods, Mortgagee shall have the cure rights set forth in Section
-------
2.13E of this Mortgage);
-----
(ii) The occurrence of any event or condition which gives the
lessor under the Subject Lease a right to terminate or cancel, as
against Mortgagor, the Subject Lease and the expiration of any notice,
grace or cure period with respect thereto; or
(iii) Mortgagor's failure to permit Mortgagee and/or its
representatives at all reasonable times upon reasonable prior written
notice to make investigation or examination concerning Mortgagor's
performance and observance of the terms, covenants and conditions of
the Subject Lease.
N. To the extent permitted by Applicable Law, the price payable
by Mortgagor or any other party in the exercise of the right of redemption,
if any (which right Mortgagor has waived), from any sale under or decree of
foreclosure of this Mortgage shall include all rents and other amounts paid
and other sums advanced by Mortgagee on behalf of
XXIV-22
<PAGE>
Mortgagor as the lessee under the Subject Lease in accordance with the
provisions of this Mortgage and the other Loan Documents.
O. Mortgagor hereby grants and assigns to Mortgagee a security
interest in all prepaid rent and security deposits and all other security
which the lessor under the Subject Lease may hold now or later for the
performance of Mortgagor's obligations as the lessee under the Subject
Lease.
P. Mortgagor shall not, without Mortgagee's written consent,
fail to exercise any option or right to renew or extend the term of the
Subject Lease if such renewal or extension is necessary to extend the term
of the Subject Lease to a date which is at least twelve (12) months after
the Maturity Date (any such renewal or extension, a "REQUIRED EXTENSION").
Mortgagor shall effect each Required Extension at least six (6) months (or
the earliest date permitted under the Subject Lease, if later) prior to the
date of termination of any such option or right, shall give immediate
written notice thereof to Mortgagee, and shall execute, acknowledge,
deliver and record any document reasonably requested by Mortgagee to
evidence the Lien of this Mortgage on such extended or renewed lease term;
provided, however, Mortgagor shall not be required to effect any
-------- -------
particular Required Extension to the extent Mortgagor shall have received
the prior written consent of Mortgagee (which consent may be withheld by
Mortgagee in its sole and absolute discretion) allowing Mortgagor to forego
effecting such Required Extension. If Mortgagor shall fail to exercise any
such option or right to effect any Required Extension as aforesaid,
Mortgagee may exercise the option or right to effect any Required Extension
(provided that unless an Event of Default shall have occurred and be
continuing, Mortgagee shall have no right to determine the amount of rent
payable under the Subject Lease during any such extension period without
Mortgagor's prior written consent thereto, which consent shall not be
unreasonably withheld or delayed) as Mortgagor's agent and attorney-in-fact
pursuant to Section 2.13J of this Mortgage, or in Mortgagee's own name or
-------------
in the name of and on behalf of a nominee of Mortgagee, as Mortgagee may
determine in the exercise of its sole and absolute discretion.
Q. Subject to the provisions of the Credit Agreement, Mortgagor
shall not assign its interest in the Subject Lease or sublease all or any
of the Mortgaged Property without the prior written consent of Mortgagee,
which consent may be withheld by Mortgagee in its sole discretion. All
subleases entered into by Mortgagor after the date of this Mortgage shall
provide, and Mortgagor shall use reasonable efforts to ensure that all
existing subleases modified, amended or renewed by Mortgagor after the date
of this Mortgage shall provide, that such subleases are, at the option and
election of Mortgagee, subordinate to the Lien of this Mortgage and any
extensions, replacements and modifications of this Mortgage and the
Obligations and that if Mortgagee forecloses under this Mortgage or enters
into a new lease with the lessor under the Subject Lease whether or not
pursuant to the provisions for a new lease, if any, contained in the
Subject Lease, then the sublessee shall attorn to Mortgagee or its
assignee(s) and the sublease will remain in full
XXIV-23
<PAGE>
force and effect in accordance with its terms notwithstanding the
termination of the Subject Lease.
R. Mortgagor hereby represents that the Subject Lease has not
been amended, modified, extended, renewed, substituted or assigned except
as described in Exhibit A-2 hereto and that Mortgagor has delivered to
-----------
Mortgagee true, accurate and complete copies of all items noted on Exhibit
-------
A-2. Upon the request of Mortgagee, Mortgagor shall deposit with Mortgagee
---
the tenant's original fully executed copy of the Subject Lease, as further
security to Mortgagee, until this Mortgage is released of record or all of
the Obligations are fully paid and performed. Mortgagor hereby represents
that the Subject Lease or a legally valid memorandum thereof has been
properly filed or recorded in the city, town, county or parish records (as
appropriate) in which the Land covered thereby is located and that the
filing and recording data for the same is accurately set forth in Exhibit
-------
A-2 hereto.
---
S. Mortgagor shall not waive, excuse, condone or in any way
release or discharge the lessor under the Subject Lease of or from such
lessor's material obligations, covenants and/or conditions under the
Subject Lease without the prior written consent of Mortgagee.
The generality of the provisions of this Section 2.13 relating to the Subject
------------
Lease shall not be limited by other provisions of this Mortgage setting forth
particular obligations of Mortgagor which are also required of Mortgagor with
respect to the Subject Lease or the Premises.
XXIV-24
<PAGE>
Section 3
ASSIGNMENT OF RENTS AND LEASES
3.1 ASSIGNMENT OF RENTS AND LEASES.
------------------------------
In furtherance of and in addition to the assignment made by Mortgagor
in Granting Clause Third of this Mortgage, Mortgagor hereby absolutely and
---------------------
unconditionally assigns, sells, transfers and conveys to Mortgagee all of its
right, title and interest in and to all Leases, whether now existing or
hereafter entered into, and all of its right, title and interest in and to all
Rents. It is the intention of Mortgagor and Mortgagee that this assignment be
treated and construed as an absolute assignment and not an assignment for
additional security only. So long as no Event of Default shall have occurred
and be continuing, Mortgagor shall have a revocable license from Mortgagee to
exercise all rights extended to the landlord under the Leases, including the
right to observe, perform, comply with and discharge all of the obligations of
the landlord thereunder, the right to demand and receive performance under the
Leases, the right to enforce all rights and exercise all remedies under the
Leases, the right to terminate or amend any Lease and the right to receive and
collect all Rents and to hold the Rents in trust for use in the payment and
performance of the Obligations and to otherwise use the same; provided, however,
-------- -------
that such rights may be exercised by Mortgagor only to the extent they are not
restricted under Section 7.9 of the Credit Agreement. The foregoing license is
granted subject to the conditional limitation that no Event of Default shall
have occurred and be continuing. Upon the occurrence and during the continuance
of an Event of Default, whether or not legal proceedings have commenced, and
without regard to waste, adequacy of security for the Obligations or solvency of
Mortgagor, the license herein granted shall automatically expire and terminate,
without notice by Mortgagee (any such notice being hereby expressly waived by
Mortgagor).
3.2 NO LIMITATION OF RIGHTS.
-----------------------
The assignment of Rents and Leases herein made shall not be construed
to limit in any way Mortgagee's other rights hereunder, including the right to
accelerate the Obligations upon an Event of Default. Monies received under the
assignments herein made shall not be deemed to have been applied in payment of
any portion of the Obligations unless and until such monies actually are applied
thereto by Mortgagee.
3.3 SALE OF MORTGAGED PROPERTY.
--------------------------
A. FREE AND CLEAR OF ASSIGNMENTS. Upon any sale of any of the
Mortgaged Property by or for the benefit of Mortgagee pursuant to Section 5
---------
hereof, the Rents attributable to the part of the Mortgaged Property so sold
shall be included in such sale and shall pass to the purchaser free and clear of
(i) the assignment by Mortgagor in Granting Clause Third of this Mortgage and
---------------------
(ii) the provisions of this Section 3.
---------
XXIV-25
<PAGE>
B. NO OBLIGATIONS ON MORTGAGEE. It is neither the intent nor the
effect of this Mortgage nor the other Loan Documents (other than any
Subordination, Non-Disturbance and Attornment Agreement between Mortgagee and
any Tenant) to impose any obligation on Mortgagee, including (i) any liability
under the covenant of quiet enjoyment contained in any Lease or contained in any
Applicable Law, in the event of a sale of the Mortgaged Property or any part
thereof pursuant to this Mortgage or (ii) any liability to any Tenant arising
(whether in connection with the elimination of such Tenant's equity of
redemption in the Mortgaged Property or otherwise) out of (A) the naming of such
Tenant as a party defendant in any action to foreclose this Mortgage, or (B) the
sale of the Mortgaged Property pursuant to the power of sale reserved to
Mortgagee herein. Notwithstanding anything herein to the contrary, under no
circumstances shall Mortgagee be subject to any offsets, claims or defenses
which a Tenant might have against Mortgagor or any prior landlord with respect
to any Lease, whether or not Mortgagee shall have succeeded to the interests of
landlord under any such Lease.
3.4 TERM OF ASSIGNMENT.
------------------
The assignment and grant made in Granting Clause Third of this
---------------------
Mortgage and in this Section 3 shall continue in effect until release of this
---------
Mortgage of record or indefeasible payment in full of the Obligations. The
execution of this Mortgage constitutes and evidences the irrevocable consent of
Mortgagor to the entry upon and the taking possession of the Premises, or any
part thereof, by Mortgagee pursuant to such grant in accordance with the terms
set forth in this Mortgage and the terms hereof whether by foreclosure or other
remedy and at Mortgagee's option and election, with or without application for a
receiver. Mortgagor represents and warrants to Mortgagee that Mortgagee has
taken all actions necessary to obtain, and Mortgagee shall (upon recordation of
this Mortgage) have, as and to the extent permitted under Applicable Law, a
valid and fully perfected, first priority, present assignment of the Rents
arising out of the Leases and all security for such Leases, including cash or
securities deposited as security under such Leases subject to the prior right of
the Tenants making such deposits. Mortgagee has no obligation whatsoever in
respect of security for any Leases except and only to the extent such security
is actually delivered to Mortgagee, whether or not Mortgagor now has or
previously had possession of such security.
3.5 PERFECTION UPON RECORDATION.
---------------------------
Mortgagor acknowledges and agrees that, upon recordation of this
Mortgage, Mortgagee's interest in the Rents shall be deemed to be fully
perfected, ``choate" and enforced as to Mortgagor and all third parties,
including, without limitation, any subsequently appointed trustee in any case
under the Bankruptcy Code, without the necessity of (a) commencing a foreclosure
action with respect to this Mortgage, (b) furnishing notice to Mortgagor or
Tenants under the Leases, (c) making formal demand for the Rents, (d) taking
possession of the Premises as a lender-in-possession, (e) obtaining the
appointment of a receiver of the rents and profits of the Premises, (f)
sequestering or impounding the Rents or (g) taking any other affirmative action.
XXIV-26
<PAGE>
3.6 BANKRUPTCY PROVISIONS.
---------------------
Without limitation of the provisions of Section 4 hereof or the
---------
absolute nature of the assignment of the Rents hereunder, Mortgagor and
Mortgagee agree that (a) this Mortgage shall constitute a "security agreement"
for purposes of Section 552(b) of the Bankruptcy Code, (b) the security interest
created by this Mortgage extends to property of Mortgagor acquired before the
commencement of a case in bankruptcy and to all amounts paid as Rents and (c)
such security interest shall extend to all Rents acquired by the estate after
the commencement of any case in bankruptcy. Without limitation of the absolute
nature of the assignment of the Rents hereunder, to the extent Mortgagor (or
Mortgagor's bankruptcy estate) shall be deemed to hold any interest in the Rents
after the commencement of a voluntary or involuntary bankruptcy case, Mortgagor
hereby acknowledges and agrees that such Rents are and shall be deemed to be
"cash collateral" under Section 363 of the Bankruptcy Code. Mortgagor may not
use the cash collateral without the consent of Mortgagee and/or an order of any
bankruptcy court pursuant to 11 U.S.C. 363(c)(2), and Mortgagor hereby waives
any right it may have to assert that such Rents do not constitute cash
collateral. No consent by Mortgagee to the use of cash collateral by Mortgagor
shall be deemed to constitute Mortgagee's approval, as the case may be, of the
purpose for which such cash collateral was expended.
XXIV-27
<PAGE>
Section 4
SECURITY AGREEMENT
4.1 GRANT OF SECURITY; INCORPORATION BY REFERENCE.
---------------------------------------------
This Mortgage shall, in addition to constituting a mortgage Lien as to
those parts of the Mortgaged Property classified as real property (including
fixtures to the extent they are real property), constitute a security agreement
within the meaning of the Uniform Commercial Code or within the meaning of the
common law with respect to those parts of the Mortgaged Property classified as
personal property (including fixtures to the extent they are personal property).
Mortgagor hereby grants Mortgagee a security interest in and to those parts of
the Mortgaged Property classified as personal property (including (a) fixtures
to the extent they are personal property and (b) personal property and fixtures
that are leased, but only to the extent Mortgagor can grant to Mortgagee a
security interest therein without breaching the terms of such lease)
(collectively, the "PERSONAL PROPERTY COLLATERAL") for the benefit of
Mortgagee to further secure the payment and performance of the Obligations and
the performance of all of Mortgagor's Obligations, covenants and agreements
under the other Loan Documents. Mortgagee shall have all rights granted to the
Secured Party pursuant to the Security Agreement. The provisions set forth in
the Security Agreement are hereby incorporated by reference into this Mortgage
with the same effect as if set forth in full herein. In the event of a conflict
between the provisions of Section 4 of this Mortgage and the Security Agreement,
---------
it is the intention of Mortgagor and Mortgagee that both such documents shall be
read together and construed, to the fullest extent possible, to be in concert
with each other. In the event of a conflict that cannot be resolved as
aforesaid, the provisions of the Security Agreement shall control and govern and
Mortgagor shall comply therewith.
4.2 FIXTURE FILING FINANCING STATEMENTS.
-----------------------------------
Portions of the Mortgaged Property are goods which are or are to
become fixtures, and the real estate concerned is described in Exhibit A hereto,
---------
Mortgagor expressly covenants and agrees that the filing of this Mortgage in the
real property records of the county where the Premises is located shall operate,
at the time of filing therein, as a financing statement filed as a fixture
filing in accordance with Section 9-401(1)(b) of the Uniform Commercial Code of
the state in which the Premises is located. The address of Mortgagor (the
debtor) and the address of Mortgagee (the secured party) appear in Exhibit C
---------
attached to this Mortgage. The name of the record owner of the Land appears in
Exhibit A attached hereto.
---------
4.3 MORTGAGEE AS SECURED PARTY.
--------------------------
If and to the extent that Mortgagee shall act as the secured party for
any security interest created in the Mortgaged Property, Mortgagor acknowledges
and agrees that Mortgagee may do so. As such, Mortgagee shall have all the
rights of the secured party, and shall observe all of the requirements of the
secured party, contained in this Section 4 and the Security Agreement.
---------
XXIV-28
<PAGE>
Section 5
DEFAULTS AND REMEDIES
5.1 EVENTS OF DEFAULT.
-----------------
The occurrence of any of the following events ("EVENTS OF DEFAULT")
shall, as provided in the Credit Agreement, make all amounts then remaining
unpaid on the Obligations due and payable, all without further demand,
presentment, notice or other requirements of any kind, all of which are hereby
expressly waived by Mortgagor, and this Mortgage and the Lien evidenced or
created hereby shall be subject to foreclosure and may be foreclosed or the
Mortgaged Property may be sold pursuant to the power of sale reserved to
Mortgagee herein, in any manner provided for herein or provided for by law:
A. Any "Event of Default" as defined in the Credit Agreement
shall occur (after giving effect to any applicable notice or grace periods
provided therein), including, without limitation, any such event caused by a
failure to pay when due any fee due under the Credit Agreement or any
installment of principal of or interest on the Obligations; or
B. Any "Event of Default" described in Section 2.12M hereof
-------------
shall occur, if Mortgagor is the tenant under a Subject Lease.
5.2 FIXTURES.
--------
Upon the occurrence and during the continuance of any of the Events of
Default, Mortgagee may, to the extent permitted under Applicable Law, elect to
treat the fixtures included in the Mortgaged Property either as real property or
as personal property, or both, and proceed to exercise such rights as apply
thereto. With respect to any sale of real property included in the Mortgaged
Property made under the powers of sale herein granted and conferred, Mortgagee
may, to the extent permitted by Applicable Law, include in such sale any
personal property and fixtures included in the Mortgaged Property and relating
to such real property.
XXIV-29
<PAGE>
5.3 REMEDIES.
--------
A. RIGHTS OF MORTGAGEE; RIGHTS OF ENTRY; RIGHTS OF SALE. Upon the
occurrence and during the continuance of any of the Events of Default, in
addition to all other powers, rights and remedies herein granted or by law or at
equity conferred, Mortgagee, in its sole discretion and at its sole election and
without further demand, may do any one or more of the following in any order or
manner that Mortgagee elects, it being expressly understood that no remedy
provided herein is intended to be exclusive of any other remedy provided herein
or in any of the other Loan Documents, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given herein or now or
hereafter existing under Applicable Law (including all rights and remedies
provided under the applicable provisions of the laws of the state in which the
Premises is located):
(i) Mortgagee may either foreclose upon all or any portion
of the Mortgaged Property or sell all or any portion of the Mortgaged
Property pursuant to the power of sale granted to Mortgagee herein (the
power of sale permitted and provided by applicable statute being hereby
expressly granted by Mortgagor to Mortgagee) with respect to all or any
portion of the Mortgaged Property, provided that Mortgagee may proceed
--------
as to both real and personal property in accordance with its and their
rights and remedies as to real property as required by Applicable Law, and
no such sale shall affect any other rights which Mortgagee may have or
enjoy at law or pursuant to this Mortgage, including, without limitation,
the right to seek a personal or deficiency judgment against Mortgagor. And
in addition Mortgagee shall have all of the rights and remedies of a
mortgagee under a mortgage granted, conferred or permitted by Applicable
Law, and shall, to the extent permitted by Applicable Law, have the right
and power, but not the obligation, to enter upon and take immediate
possession of the Premises or any part thereof, without interference from
Mortgagor to exclude Mortgagor therefrom, to hold, use, operate, manage and
control such real property, to make all such repairs, replacements,
additions and improvements to the same as Mortgagee in its sole discretion
deems necessary, and to demand, collect and retain the Rents as provided in
Section 3 hereof.
---------
(ii) Mortgagee, with respect to any or all of the Mortgaged
Property, in lieu of or in addition to exercising any other power, right or
remedy herein granted or by law or equity conferred, may, without notice,
demand or declaration of default, which are hereby waived by Mortgagor, and
without regard to the solvency of Mortgagor and without regard to the then
value of the Mortgaged Property or waste, proceed by an action or actions
in equity or at law for the seizure and sale of the Mortgaged Property or
any part thereof, for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power, right or remedy
herein granted or by law or equity conferred, for the foreclosure or sale
of the Mortgaged Property or any part thereof under the judgment or decree
of any court of competent jurisdiction, for the appointment of a receiver
(without any requirement to post a receiver's bond and without regard to
the value of the Mortgaged
XXIV-30
<PAGE>
Property or solvency of Mortgagor) pending any foreclosure hereunder or the
sale of any Mortgaged Property or any part thereof or for the enforcement
of any other appropriate equitable or legal remedy. Such receiver shall
have the power to collect the rents, issues, profits, earnings, and income
from the Mortgaged Property and shall have all other powers which may be
necessary or usual in such cases for the protection, possession, control,
management and operation of the Mortgaged Property. Such receiver may apply
the net income from the Mortgaged Property as payment of the Obligations
secured hereby in the manner and order set forth in the applicable Loan
Documents. Mortgagor agrees that a receiver may be appointed without any
notice to Mortgagor whatsoever and hereby waives notice.
(iii) Mortgagee shall have all of the rights and remedies of an
assignee and secured party granted by Applicable Law, including the Uniform
Commercial Code, and shall, to the extent permitted by Applicable Law, have
the right and power, but not the obligation, to take possession of the
Personal Property Collateral, and for that purpose Mortgagee may enter upon
any premises on which any or all of the Personal Property Collateral is
located and take possession of and operate such Personal Property
Collateral or remove the same therefrom. Mortgagee, pursuant to Section 9-
501(4) of the Uniform Commercial Code, as such Section is currently
constituted or may be hereafter amended, shall have the option of
proceeding under the Uniform Commercial Code as to that portion of the
Mortgaged Property constituting personal property or of proceeding as to
the Mortgaged Property and without regard to the adequacy of Mortgagee's
security for the Obligations, or any part or component thereof, including
both the real and personal property, in accordance with Mortgagee's rights
and remedies in respect of the real property. Mortgagee may require
Mortgagor to assemble the Personal Property Collateral and make it
available to Mortgagee at a place to be designated by Mortgagee which is
reasonably convenient to both parties. The following presumptions shall
exist and shall be deemed conclusive with regard to the exercise by
Mortgagee of any of its remedies with respect to the Personal Property
Collateral:
XXIV-31
<PAGE>
(a) If notice is required by Applicable Law, ten (10) days'
prior written notice of the time and place of any public sale or of
the time after which any private sale or any other intended
disposition thereof is to be made shall be reasonable notice to
Mortgagor. No such notice is necessary if such property is
perishable, threatens to decline speedily in value or is of a type
customarily sold on a recognized market.
(b) Without in any way limiting the right and authority of
Mortgagee to sell or otherwise dispose of Personal Property Collateral
in a commercially reasonable manner, the following, or any of them,
shall be considered commercially reasonable: (1) Mortgagee may hold a
public sale of the Personal Property Collateral in New York, New York
or in the city, town or county where the Personal Property Collateral
is located or in the city, town or county where the Premises to which
such Personal Property Collateral relates, if any, is located, after
having provided Mortgagor with ten (10) days' notice of such sale and
after having published notice of such sale by an advertisement not
less than three inches in height and one column in width in a
newspaper of general circulation where the Personal Property
Collateral is located or where the Premises to which such Personal
Property Collateral relates, if any, is located, as Mortgagee
determines to be appropriate (which advertisement may be placed in the
"classified" section), for a period of not less than five issues
commencing not more than ten days prior to the sale; (2) the Personal
Property Collateral may be sold for cash; and (3) Mortgagee or any
other person owning, directly or indirectly, any interest in any of
the Obligations may be a purchaser at such sale.
(c) If Mortgagee in good faith believes that the Securities
Act of 1933 or any other state or Federal law prohibits or restricts
the customary manner of sale or distribution of any of such property,
Mortgagee may sell such property privately in a commercially
reasonable manner or in any other commercially reasonable manner
deemed advisable by Mortgagee at such price or prices as Mortgagee
determines in the sole discretion of Mortgagee. Mortgagor recognizes
that such prohibition or restriction may cause such property to have
less value than it otherwise would have and that, consequently, such
sale or disposition by Mortgagee may result in a lower sales price
than if the sale were otherwise held.
(iv) Mortgagee shall, subject to any mandatory requirements of
Applicable Law, sell or have sold the Mortgaged Property or interests
therein or any part thereof at one or more sales, as an entirety or in
separate parcels, at such place or places and otherwise in such manner and
upon such notice as may be required by law or by this Mortgage, or, in the
absence of any such requirement, as Mortgagee may deem appropriate.
Mortgagee shall make a conveyance to the purchaser or purchasers thereof
without, to the extent permitted by Applicable Law, any warranties express
or implied. Subject to Applicable
XXIV-32
<PAGE>
Law, Mortgagee may postpone the sale of such Mortgaged Property or
interests therein or any part thereof by public announcement at the time
and place of such sale, and from time to time thereafter may further
postpone such sale by public announcement made at the time of sale fixed by
the preceding postponement. Sale of a part of the Mortgaged Property or
interests therein or any defective or irregular sale hereunder will not
exhaust the power of sale, and sales may be made from time to time until
all such property is sold without defect or irregularity or the Obligations
are paid and performed in full. Mortgagee shall have the right to appoint
one or more auctioneers or attorneys-in-fact to act in conducting the
foreclosure sale and executing a deed to the purchaser. It shall not be
necessary for any of the Mortgaged Property at any such sale to be
physically present or constructively in the possession of Mortgagee and,
subject to Applicable Law, Mortgagor shall deliver all of the Mortgaged
Property to the purchaser at such sale. If it should be impossible or
impracticable to take actual delivery of the Mortgaged Property, then the
title and right of possession to the Mortgaged Property shall pass to the
purchaser at such sale as completely as if the same had been actually
present and delivered.
(v) Mortgagee may, personally or by its agents or attorneys,
take such steps to protect and enforce its rights whether by action, suit
or proceeding in equity or at law for the specific performance of any
covenant, condition or agreement in the Subsidiary Guaranty, in this
Mortgage or in any of the other Loan Documents or in aid of the execution
of any power herein or therein granted, or sale of the Mortgaged Property
as herein permitted or for any foreclosure hereunder, or for the
enforcement of any other appropriate legal or equitable remedy or otherwise
as Mortgagee shall elect.
(vi) In the event Mortgagor shall fail to pay any amounts due
and owing in accordance with the terms of this Mortgage, the Subsidiary
Guaranty or the other Loan Documents, Mortgagee, at its right and option,
may institute an action or proceeding at law or in equity for the
collection of any sums due and unpaid and may prosecute any such action or
proceeding to judgment or final decree. Mortgagee may enforce any such
judgment or final decree against Mortgagor as provided in this Mortgage,
and against any guarantor of the Obligations, as provided in any guarantee.
Mortgagee may collect moneys adjudged or decreed to be payable to Mortgagee
and shall be entitled to recover such judgment either before, after or
during the pendency of any proceeding for the enforcement of the provisions
of this Mortgage or any such guarantee. The right of Mortgagee to recover
such judgment shall not be affected by any entry or sale, by the exercise
of any other right, power or remedy provided by and for the enforcement of
the provisions of this Mortgage or of the Loan Documents or the foreclosure
of the Lien hereof or sale of the Mortgaged Property hereunder. In case of
insolvency or bankruptcy proceedings against Mortgagor or any
reorganization or liquidation proceedings, Mortgagee shall be entitled to
prove the whole amount of Obligations due and owing under this Mortgage and
any of the other Loan Documents without deducting therefrom any proceeds
obtained from the sale of the whole or any part of the Mortgaged Property;
provided, however, that in no instance shall Mortgagee receive a greater
-------- -------
amount than the Obligations and any other payments,
XXIV-33
<PAGE>
charges or costs due and owing to Mortgagee under any of the Loan Documents
from the aggregate amount of the proceeds of the sale of the Mortgaged
Property and the distribution from the estates of Mortgagor.
B. RIGHT TO PURCHASE. Mortgagee (or any other person owning,
directly or indirectly, any interest in any of the Obligations) and its agents
and attorneys shall have the right to become the purchaser at any sale made
pursuant to the provisions of this Section 5.3 and shall have the right to
-----------
credit upon the amount of the bid made therefor the amount payable to it out of
the net proceeds of such sale. All other sales shall be, to the extent
permitted by Applicable Law, on a cash basis. Recitals contained in any
conveyance to any purchaser at any sale made hereunder will conclusively
establish the truth and accuracy of the matters therein stated, including
without limitation nonpayment of the Obligations and advertisement and conduct
of such sale in the manner provided herein or provided by law. Mortgagor does
hereby ratify and confirm all legal acts that Mortgagee may do in carrying out
the provisions of this Mortgage.
C. CONVEYANCE OF TITLE UPON SALE. Any sale of the Mortgaged
Property or any part thereof in accordance with the provisions of this Section
-------
5.3 will operate to divest all right, title, interest, claim and demand of
---
Mortgagor in and to the property sold and will be a perpetual bar against
Mortgagor. Nevertheless, if requested by Mortgagee so to do, Mortgagor shall
join in the execution, acknowledgement and delivery of all proper conveyances,
assignments and transfers of the property so sold. Subject to Applicable Law,
any purchaser at a foreclosure sale will receive immediate possession of the
property purchased, and Mortgagor agrees that if Mortgagor retains possession of
the property or any part thereof subsequent to such sale, Mortgagor will be
considered a tenant at sufferance of the purchaser, and will, if Mortgagor
remains in possession after demand to remove, be guilty of forcible detainer and
will be subject to eviction and removal, forcible or otherwise, with or without
process of law, and all damages to Mortgagor by reason thereof are hereby
expressly waived by Mortgagor.
D. WAIVER OF RIGHTS AND DEFENSES. Mortgagor acknowledges that it
is aware of and has had the advice of counsel of its choice with respect to its
rights under Applicable Law with respect to this Mortgage, the Obligations and
the Mortgaged Property. Nevertheless, Mortgagor hereby (i) waives and
relinquishes (to the maximum extent permitted by Applicable Law) and (ii) agrees
that Mortgagor shall not (subject to any mandatory requirements of Applicable
Law) at any time hereafter have or assert, any right under any Applicable Law
pertaining to: marshalling, whether of assets or Liens, the sale of property in
the inverse order of alienation, the exemption of homesteads, the administration
of estates of decedents, appraisement, valuation, stay, extension, redemption,
statutory right of redemption, the maturing or declaring due of the whole or any
part of the Obligations, notice of intention of such maturing or declaring due,
other notice (whether of defaults, advances, the creation, existence, extension
or renewal of any of the Obligations or otherwise, except for rights to notices
expressly granted in the Credit Agreement, herein or in the other Loan
Documents), subrogation, or abatement, suspension, deferment, diminution or
reduction of any of the Obligations (including, without limitation, set-off),
now or hereafter in force.
XXIV-34
<PAGE>
E. RIGHT TO SUBORDINATE. Mortgagee, at its option, is authorized
to foreclose this Mortgage or sell the Mortgaged Property or any portion
thereof, subject to the rights of any tenants of the Premises, and the failure
to make any such tenants parties to any such foreclosure or sale proceedings and
to foreclose their rights will not be, nor be asserted by Mortgagor to be, a
defense to any proceedings instituted by Mortgagee to collect the Obligations.
F. RIGHT TO PRESERVE OBLIGATIONS. Mortgagee shall, to the extent
permitted by Applicable Law, have the option to proceed with foreclosure or to
exercise the power of sale in satisfaction of any installment or part of the
Obligations that has not been paid or performed without declaring the whole of
the Obligations as immediately mature, and such foreclosure or sale may be made
subject to the unmatured part of the Obligations, and it is agreed that such
foreclosure, if so made, shall not in any manner affect the unmatured part of
the Obligations, but as to such unmatured part of the Obligations, this
Mortgage, the Subsidiary Guaranty and the Credit Agreement shall remain in full
force and effect just as though no foreclosure or sale had been made. Several
foreclosures or sales may be made without exhausting the right of foreclosure or
the power of sale for any unmatured part of the Obligations, it being the
purpose to provide for a foreclosure and sale of the security for any matured
portion of the Obligations without exhausting the power of foreclosure and the
power to sell the Mortgaged Property for any other part of the Obligations.
G. NO WAIVER. No delay or omission of Mortgagee to exercise any
right or power accruing upon any Event of Default shall impair any such right or
power, or shall be construed to be a waiver of any such right or power or any
such Event of Default or an acquiescence thereto. Every power and remedy
provided by this Mortgage may be exercised, from time to time, as often as may
be deemed expedient by Mortgagee. Nothing in this Mortgage, the Subsidiary
Guaranty or any of the other Loan Documents shall affect the obligation of
Mortgagor to pay and perform the Obligations in the manner and at the time and
place, respectively, expressed therein.
H. RIGHT TO DISCONTINUE PROCEEDINGS. If Mortgagee shall have
proceeded to enforce any right or remedy under this Mortgage by foreclosure,
entry or otherwise and such proceedings shall have been discontinued or
abandoned for any reason or such proceedings shall have resulted in a final
determination adverse to Mortgagee, then and in every such case Mortgagor and
Mortgagee shall be restored to their former positions and rights hereunder, and
all rights, power and remedies of Mortgagee shall continue as if no such
proceedings had occurred or had been taken.
XXIV-35
<PAGE>
I. NOTICES TO THIRD PARTIES. Mortgagee shall have the right, but
not the obligation, to notify franchisors or ground lessors of any Event of
Default or any exercise of remedies by Mortgagee hereunder, and Mortgagee shall
have the right, but not the obligation, to notify other third parties of any
Event of Default or exercise of remedies by Mortgagee hereunder, whether or not
Mortgagee has agreed with any franchisor, ground lessor or other third party to
provide such notice.
5.4 COSTS AND EXPENSES.
------------------
All costs and expenses (including, without limitation, reasonable
attorneys' fees, legal expenses, title premiums, title report and work charges,
filing fees, general intangible taxes and mortgage, mortgage registration,
transfer, stamp and other excise taxes) actually incurred by Mortgagee in
perfecting, protecting, or enforcing its rights hereunder, whether or not an
Event of Default shall have occurred, shall be payable by Mortgagor within ten
(10) days after written demand by Mortgagee accompanied by (upon Mortgagor's
request) such reasonable documentation of such costs and expenses as is
reasonably available to Mortgagee, as the case may be, and shall bear interest
at the Agreed Rate from the date such cost or expense is incurred until the date
of payment. All such costs, expenses and interest, shall be part of the
Obligations and shall be secured by this Mortgage.
5.5 ADDITIONAL RIGHTS OF MORTGAGEE.
------------------------------
Mortgagee shall have the right, at its election, to exercise any and
all other remedies in the Subsidiary Guaranty, in the Credit Agreement or in any
of the Loan Documents or available at law or in equity, including, but not
limited to, the additional rights if any set forth on Schedule I attached hereto
----------
and by this reference incorporated herein.
5.6 APPLICATION OF PROCEEDS.
-----------------------
A. The proceeds of any sale of the Mortgaged Property or any part
thereof made pursuant to this Section 5 shall be applied as follows:
---------
FIRST: to the payment of all costs and expenses incident to the
enforcement of this Mortgage, including, a reasonable
compensation to the agents, attorneys and in-house counsel of
Mortgagee;
SECOND: to the payment or prepayment of the Obligations, in such order as
Mortgagee shall elect; and
THIRD: the remainder, if any, after full and final payment of the
Obligations shall be paid to Mortgagor or such other person or
persons as may be entitled thereto by law;
XXIV-36
<PAGE>
provided, however, that if Applicable Law require such proceeds to be paid or
-------- -------
applied in a manner other than as set forth above in this Section 5.6A, then
------------
such proceeds shall be paid or applied in accordance with such Applicable Law.
B. Upon any sale made under the powers of sale herein granted
and conferred, the receipt of Mortgagee will be sufficient discharge to the
purchaser or purchasers at any sale for the purchase money, and such purchaser
or purchasers and the heirs, devisees, personal representatives, successors and
assigns thereof will not, after paying such purchase money and receiving such
receipt of Mortgagee, be obligated to see to the application thereof or be in
any way answerable for any loss, misapplication or non-application thereof.
Section 6
INDEMNIFICATION
Pursuant to and in accordance with the provisions set forth more fully
in Section 10.3 of the Credit Agreement, Mortgagor shall defend, indemnify, pay
and hold harmless Mortgagee and the other Indemnitees (as defined in the Credit
Agreement) from and against any and all claims, liabilities, losses, damages,
penalties, fines, forfeitures, judgments, and expenses or other Obligations of
any kind or nature whatsoever (including reasonable fees and disbursements of
counsel to such Indemnitees) incurred on account of any matter or thing or
alleged action or failure to act by Mortgagee, whether in suit or not, arising
out of the operation, leasing, management, maintenance, repair, use or occupancy
of the Premises (should Mortgagee elect to enter upon and assume the same upon
an Event of Default), the construction of Improvements on or about the Premises,
any accident, injury, death or damage to any Person or property occurring in, on
or about the Premises or any street, drive, sidewalk, curb or passageway
adjacent thereto, any misappropriation by Mortgagor of any prepayments of Rent
or Security Deposits paid or payable by Mortgagor pursuant to this Mortgage,
prior to payment in full of the Obligations of Mortgagor to Mortgagee or in
connection therewith, except to the extent that such suit, claim or damage is
caused by the gross negligence or willful misconduct of Mortgagee.
XXIV-37
<PAGE>
Section 7
TERMINATION
If all of the Obligations shall be paid in full pursuant to the terms
and conditions of this Mortgage and the other Loan Documents, or if this
Mortgage shall be released of record in accordance with the provisions of the
Credit Agreement or the other Loan Documents, then Mortgagee shall, promptly
after the request of Mortgagor, execute, acknowledge and deliver to Mortgagor
proper instruments evidencing the termination and release of this Mortgage.
Mortgagor shall pay all reasonable legal fees and other expenses incurred by
Mortgagee for preparing and reviewing such instruments and the execution and
delivery thereof, and Mortgagee may require payment of the same prior to
delivery of such instruments. Upon the receipt by Mortgagor of terminations or
releases signed by Mortgagee, and in recordable form and evidencing the
termination of this Mortgage, Mortgagor shall promptly and at its own expense
record or file such terminations or releases in each of the cities, towns,
counties and parishes, as appropriate, in which portions of the Mortgaged
Property may be located, in such a manner so as to effect a release of all of
the Mortgaged Property of record. Upon the request of Mortgagee, Mortgagor
shall promptly deliver to Mortgagee evidence reasonably satisfactory to
Mortgagee of such recordation or filing. The obligations of Mortgagor under this
Section 7 shall survive the termination of this Mortgage.
---------
Section 8
MISCELLANEOUS COVENANTS AND AGREEMENTS
8.1 CUMULATIVE RIGHTS; WAIVERS; MODIFICATIONS.
-----------------------------------------
Each and every right, power and remedy hereby granted to Mortgagee
shall be cumulative and not exclusive, and each and every right, power and
remedy whether specifically hereby granted or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by Mortgagee, and the exercise of any such right, power or remedy will
not be deemed a waiver of the right to exercise, at the same time or thereafter,
any other right, power or remedy. No delay or omission by Mortgagee in the
exercise of any right, power or remedy will impair any such right, power or
remedy or operate as a waiver thereof or of any other right, power or remedy
then or thereafter existing. All changes to and modifications of this Mortgage
must be in writing and signed by Mortgagor and Mortgagee.
8.2 PARTIAL RELEASES.
----------------
No release from the Lien of this Mortgage of any part of the Mortgaged
Property by Mortgagee shall in any way alter, vary or diminish the force or
effect of this Mortgage on the balance of the Mortgaged Property or the priority
of the Lien of this Mortgage on the balance of the Mortgaged Property.
XXIV-38
<PAGE>
8.3 SEVERABILITY.
------------
In case any provision in or obligation under this Mortgage shall be
invalid, illegal or unenforceable in any jurisdiction or under any set of
circumstances, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction or under any other set of circumstances, shall not in any way be
affected or impaired thereby. If any Lien evidenced or created by this Mortgage
is invalid or unenforceable, in whole or in part, as to any part of the
Obligations, or is invalid or unenforceable, in whole or in part, as to any part
of the Mortgaged Property, such portion, if any, of the Obligations as is not
secured by all of the Mortgaged Property hereunder shall be paid prior to the
payment of the portion of the Obligations secured by all of the Mortgaged
Property, and all payments made on the Obligations (including, without
limitation, cash and/or property received in connection with sales of Mortgaged
Property pursuant to Section 5 hereof) shall, unless prohibited by Applicable
---------
Law or unless Mortgagee, in its sole and absolute discretion, otherwise elects,
be deemed to have been first paid on and applied to payment in full of the
unsecured or partially secured portion of the Obligations, and the remainder to
the secured portion of the Obligations.
8.4 SUBROGATION.
-----------
This Mortgage is made with full substitution and subrogation of
Mortgagee in and to all covenants and warranties by others heretofore given or
made in respect of the Mortgaged Property or any part thereof. If any or all of
the proceeds of the indebtedness secured hereby have been used to extinguish,
extend or renew any indebtedness heretofore existing against all or any portion
of the Mortgaged Property or to satisfy any indebtedness or obligation secured
by a Lien of any kind (including Liens securing the payment of any taxes), such
proceeds have been advanced by Mortgagee at Mortgagor's request and, to the
extent of such funds so used, the indebtedness and obligations in this Mortgage
shall be subrogated to and extend to all of the rights, claim, Liens, titles and
interests heretofore existing against the Mortgaged Property (or such portion
thereof) to secure the indebtedness or obligation so extinguished, paid,
extended or renewed, and the former rights, claims, Liens, titles and interests,
if any, shall not be waived but rather shall be continued in full force and
effect and in favor of Mortgagee and shall be merged with the Lien created
herein as cumulative security for the repayment of the indebtedness and
satisfaction of the Obligations, but the terms of the Loan Documents shall
govern and control the relationship between Mortgagor and Mortgagee.
XXIV-39
<PAGE>
8.5 MORTGAGEE'S POWERS.
------------------
Without affecting the liability of any other Person liable for the
payment of any obligations herein mentioned and without affecting the Lien of
this Mortgage upon any portion of the Mortgaged Property not then or theretofore
released as security for the full amount of all unpaid Obligations, from time to
time, regardless of consideration and without notice to or consent by the holder
of any subordinate Lien, right, title or interest in or to the Mortgaged
Property, Mortgagee may, (a) release any persons liable, (b) extend the maturity
or alter any of the terms of any such Obligation, (c) modify the interest rate
payable on the principal balance of the Obligations, (d) grant other
indulgences, (e) release or reconvey, or cause to be released or reconveyed at
any time at Mortgagee's option any parcel, portion or all of the Mortgaged
Property, (f) take or release any other or additional security for any
obligations herein mentioned, or (g) make compositions or other arrangements
with debtors in relation thereto.
8.6 ENFORCEABILITY OF MORTGAGE.
--------------------------
This Mortgage is deemed to be and may be enforced from time to time as
an assignment, chattel mortgage, contract, deed of trust, deed to secure debt,
financing statement, real estate mortgage, or security agreement, and from time
to time as any one or more thereof, as is appropriate under Applicable Law. A
carbon, photographic or other reproduction of this Mortgage or any financing
statement in connection herewith shall be sufficient as a financing statement
for any and all purposes.
8.7 INTEREST.
--------
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE AMOUNT
OF INTEREST REQUIRED HEREUNDER OR UNDER THE CREDIT AGREEMENT, THE NOTES OR ANY
OF THE OTHER LOAN DOCUMENTS SHALL BE LIMITED TO THE MAXIMUM AMOUNT IN ACCORDANCE
WITH SECTION [** _____ **] OF THE CREDIT AGREEMENT. ONE OF THE PURPOSES OF THIS
PARAGRAPH IS TO PROVIDE RECORD NOTICE OF THE RIGHT OF MORTGAGEE TO INCREASE OR
DECREASE THE INTEREST RATE ON ANY OF THE OBLIGATIONS IN ACCORDANCE WITH THE
TERMS OF THE LOAN DOCUMENTS WHERE THE TERMS AND PROVISIONS OF SUCH LOAN
DOCUMENTS PROVIDE FOR A VARIABLE INTEREST RATE.
XXIV-40
<PAGE>
8.8 CHOICE OF LAW.
-------------
Insofar as permitted by otherwise Applicable Law, this Mortgage and
the Obligations shall be and the other Loan Documents provide that they are to
be construed under and governed by the laws of the State of New York without
regard to conflict of law rules and principles; provided, however, that the laws
-------- -------
of the place in which the Mortgaged Property is located shall apply to the
extent, and only to the extent, necessary to permit Mortgagor to create the Lien
of this Mortgage and to permit Mortgagee to perfect the Lien of this Mortgage
and to enforce or realize upon their rights and remedies hereunder with respect
to such Mortgaged Property.
8.9 COUNTERPARTS.
------------
This Mortgage and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed and acknowledged in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature and acknowledgement pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature and
acknowledgement pages are physically attached to the same document. Mortgagee
shall also have the option to exercise all rights and remedies available to
Mortgagee hereunder and under Applicable Law as though each counterpart hereof
were a separate mortgage, deed of trust, deed to secure debt, chattel mortgage
or other security instrument covering only the portions of the Mortgaged
Property located in the city, town, county or parish wherein such counterpart is
recorded.
8.10 RECORDING REFERENCES.
--------------------
Unless otherwise specified in Exhibit A hereto, all recording
---------
references in Exhibit A are to the official real property records of the city,
---------
town, county or parish, as appropriate, in which the Land is located.
XXIV-41
<PAGE>
8.11 NOTICES.
-------
All notices, requests and demands to be made hereunder shall be made
in accordance with Section 10.8 of the Credit Agreement.
8.11 SUCCESSORS AND ASSIGNS.
----------------------
This Mortgage shall be the joint and several obligation of Mortgagor
and all of its heirs, devisees, representatives, trustees, successors and
assigns, including successors in interest of Mortgagor in and to any part of the
Mortgaged Property, and all references in this Mortgage to Mortgagor shall be
deemed to include all of the foregoing Persons. This Mortgage shall be
assignable by Mortgagee in accordance with the provisions for assignment of the
Loans set forth in the Credit Agreement and shall inure to the benefit of
Mortgagee, and all of its heirs, successors, substitutes and assigns including,
without limitation, (a) any other Eligible Assignee under the terms of the
Credit Agreement, and (b) any and all other banks, lending institutions and
parties which may participate in the indebtedness evidenced by the Notes or any
of them (all such banks, lending institutions and parties who participate in the
indebtedness evidenced by the Notes or any of them being referred to herein as
the "PARTICIPANTS"). The Participants may, by agreement among them, provide
for and regulate the exercise of their rights and remedies hereunder, but
Mortgagor and all others shall be entitled to rely on the releases, waivers,
consents, approvals, notifications and other acts of Mortgagee, without inquiry
into any such agreements or the existence of required consents or approvals of
the Participants therefor. As used herein, the term "MORTGAGEE" shall mean, at
any particular time, any Person holding any interest of Mortgagee hereunder (as
provided in and subject to the provisions of Sections 9.5 and 10.1 of the
Credit Agreement) at that time including, without limitation, any Eligible
Assignee designated as Agent under the Credit Agreement. Any waiver, consent,
approval, notification or other action required or permitted to be obtained from
or taken by Mortgagee may be obtained from or taken by the agent or agents of
Mortgagee appointed from time to time for that purpose. Mortgagor and all
others shall be entitled to rely on the waivers, consents, approvals,
notifications and other acts of Mortgagee. As of the date of this Mortgage,
Mortgagee is the Person identified as Mortgagee in the introductory paragraph of
this Mortgage. Notwithstanding any other provision contained herein, if any
property interest granted by this Mortgage does not vest on the execution and
delivery of this Mortgage, it shall vest, if at all, no later than 20 years and
364 days after the death of the last surviving descendant of Joseph P. Kennedy
(the late father of the former President of the United States) who is alive on
the execution and delivery of this Mortgage.
8.13 EXPENSES.
--------
The provisions set forth in Section 10.2 of the Credit Agreement are
incorporated herein by this reference and shall apply with the same force and
effect as if the terms of such section was set forth herein in full.
XXIV-42
<PAGE>
8.14 NONFOREIGN ENTITY.
-----------------
Section 1445 of the Internal Revenue Code of 1986, as amended (the
"INTERNAL REVENUE CODE") provides that a transferee of a U.S. real property
interest must withhold tax if the transferor is a foreign person. To inform
Mortgagee that the withholding of tax will not be required in the event of the
disposition of the Premises, or any portion thereof, pursuant to the terms of
this Mortgage, Mortgagor hereby certifies, under penalty of perjury, that:
(i) Mortgagor is not a foreign corporation, foreign partnership,
foreign trust or foreign estate, as those terms are defined in the Internal
Revenue Code and the regulations promulgated thereunder; and
(ii) Mortgagor's U.S. employer identification number is
_______________; and
(iii) Mortgagor's principal place of business is [** _______ **].
It is understood that Mortgagee may disclose the contents of this certification
to the Internal Revenue Service and that any false statement contained herein
could be punished by fine, imprisonment or both. Mortgagor covenants and agrees
to execute such further certificates, which shall be signed under penalty of
perjury, as Mortgagee shall reasonably require. The covenant set forth herein
shall survive the foreclosure of the Lien of this Mortgage or acceptance of a
deed in lieu thereof.
8.15 PURPOSE OF THE LOANS.
--------------------
Mortgagor hereby represents and agrees that the Loans evidenced or
guaranteed by the Loan Documents and secured by this Mortgage are being obtained
for business or commercial purposes, and the proceeds thereof will not be used
for personal, family, residential, household or agricultural purposes.
8.16 NO JOINT VENTURE OR PARTNERSHIP.
-------------------------------
The relationship created hereunder or under the other Loan Documents
is that of creditor/debtor. The Lenders individually and collectively, do not
owe any fiduciary or special obligation to Mortgagor and/or any of Borrower's
partners, agents, or representatives. Nothing herein or in any other Loan
Document is intended to create a joint venture, partnership, tenancy-in-common,
or joint tenancy relationship between Mortgagor, any other Loan Party or
Subsidiary thereof and Agent and the Lenders nor to grant the Agent or the
Lenders any interest in the Mortgaged Property other than that of mortgagee or
lender.
XXIV-43
<PAGE>
8.17 AMENDMENTS AND WAIVERS.
----------------------
No amendment, modification, termination or waiver of any provision of
this Mortgage or consent to any departure by any Loan Party therefrom, shall in
any event be effective without the written concurrence of Mortgagee. Any waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on Mortgagor in any case
shall entitle Mortgagor to any other or further notice or demand in similar or
other circumstances.
8.18 COVENANTS AND AGREEMENTS RUN WITH LAND.
--------------------------------------
All of Mortgagor's covenants and agreements hereunder shall run with
the land.
8.19 STATEMENTS BY MORTGAGOR.
-----------------------
Mortgagor shall, within ten (10) days after written notice thereof
from Mortgagee, deliver to Mortgagee a written statement stating the outstanding
principal amount of the Guarantied Obligations under the Subsidiary Guaranty,
any accrued and unpaid interest thereon and any other amounts secured by this
Mortgage and stating whether any offset or defense then known to Mortgagor after
inquiry exists against such principal and interest.
8.20 NON-WAIVER.
----------
A. CERTAIN ACTIONS NOT A RELEASE OF MORTGAGOR. Mortgagor shall not
be relieved of Mortgagor's obligation to pay and perform the Obligations at the
time and in the manner provided in the Subsidiary Guaranty and the other Loan
Documents by reason of, and the rights of Mortgagee hereunder shall not be
affected by, (i) any failure of Mortgagee to comply with any request of
Mortgagor or any guarantor to take any action to foreclose this Mortgage or
otherwise enforce any of the provisions of the Subsidiary Guaranty, the Credit
Agreement or any other Loan Document, (ii) any release, regardless of
consideration, of the whole or any part of the Mortgaged Property or any other
security for the Obligations, (iii) any alteration, extension, renewal, change,
modification, release, amendment, compromise or cancellation, in whole or in
part, of any term, covenant or provision of any of the Loan Documents, including
any increase or decrease in the principal amount of the Obligations or any
increase or decrease in the rate of interest applicable thereto or any extension
of time for payment thereof, or (iv) any agreement or stipulation between
Mortgagee and any subsequent owner or owners of the Mortgaged Property or other
Person extending the time of payment or otherwise modifying or supplementing the
terms of this Mortgage, the Subsidiary Guaranty, the Credit Agreement or any
other Loan Document, without first having obtained the consent of Mortgagor, and
in the latter event, Mortgagor shall continue to be obligated to pay and perform
the Obligations at the time and in the manner provided in the Subsidiary
Guaranty and the other Loan Documents, as so extended, modified and
supplemented, unless expressly released and discharged from such obligation by
Mortgagee in writing.
XXIV-44
<PAGE>
B. PRIORITY OVER SUBORDINATE LIENS. Without affecting the liability
of any other Person liable for the payment and performance of the Obligations
and without affecting the Lien of this Mortgage or of any other Loan Document
upon any portion of the Mortgaged Property not then or theretofore released as
security for the payment and performance in full of all of the Obligations, from
time to time, regardless of consideration and without notice to or consent by
the holder of any subordinate Lien, encumbrance, right, title or interest in or
to the Mortgaged Property, Mortgagee may, (i) release any persons liable for the
payment or performance of the Obligations, (ii) extend the maturity or alter any
of the terms of any of the Obligations as provided in the Loan Documents, (iii)
modify the interest rate payable on the principal balance of the Obligations as
provided in the Loan Documents, (iv) grant other indulgences, (v) release or
reconvey, or cause to be released or reconveyed at any time at Mortgagee's
option any parcel, portion or all of the Mortgaged Property, (vi) take or
release any other or additional security for the Obligations herein mentioned,
or (vii) make compositions or other arrangements with debtors in relation
thereto.
8.21 SURVIVAL OF OBLIGATIONS.
-----------------------
This Mortgage shall continue to secure the entire Obligations until
the entire Obligations are paid in full or until this Mortgage has been released
of record by Mortgagee pursuant to the terms of the Credit Agreement or any of
the other Loan Documents.
8.22 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST MORTGAGOR ARISING OUT OF OR
RELATING TO THE SUBSIDIARY GUARANTY, THIS MORTGAGE OR ANY OTHER LOAN DOCUMENT,
OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS MORTGAGE, MORTGAGOR, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY:
(i) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(ii) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(iii) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO MORTGAGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION
10.8 OF THE CREDIT AGREEMENT;
XXIV-45
<PAGE>
(iv) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER MORTGAGOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(v) AGREES THAT MORTGAGEE RETAINS THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST MORTGAGOR IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(vi) AGREES THAT THE PROVISIONS OF THIS SECTION 8.22 RELATING TO
------------
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
8.23 WAIVER OF JURY TRIAL.
--------------------
EACH OF THE PARTIES TO THIS MORTGAGE HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THE SUBSIDIARY GUARANTY, THIS MORTGAGE OR ANY OTHER LOAN DOCUMENT
OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN
TRANSACTION OR THE LENDER/GUARANTOR RELATIONSHIP THAT IS BEING ESTABLISHED
HEREBY AND THEREBY. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. Each party
hereto acknowledges that this waiver is a material inducement to enter into a
business relationship, that each has already relied on this waiver in entering
into this Mortgage and the other Loan Documents, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 8.23 AND EXECUTED BY EACH OF THE
------------
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS MORTGAGE OR ANY OF THE OTHER LOAN
DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE
UNDER THE CREDIT AGREEMENT OR GUARANTIED UNDER THE SUBSIDIARY GUARANTY. In the
event of litigation, this Mortgage may be filed as a written consent to a trial
by the court.
XXIV-46
<PAGE>
8.24 MORTGAGEE'S ADDITIONAL RIGHTS.
-----------------------------
The provisions of Schedule I attached hereto are made a part hereof.
----------
LXIX.
MISCELLANEOUS COVENANTS AND AGREEMENTS
[TO COME.]
[ THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY ]
XXIV-47
<PAGE>
IN WITNESS WHEREOF, Mortgagor has on the date set forth in the
acknowledgement hereto, effective as of the date first above written, caused
this instrument to be duly EXECUTED AND DELIVERED.
Mortgagor:
---------
[** SEALY OWNERSHIP ENTITY **],
a _____________
By:
By:
By:______________________________________
Name:
Title:
S-1
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
ON THE ____ DAY OF ___________ IN THE YEAR 1997 BEFORE ME, THE UNDERSIGNED,
A NOTARY PUBLIC IN AND FOR SAID STATE, PERSONALLY APPEARED
__________________, PERSONALLY KNOWN TO ME OR PROVED TO ME ON THE BASIS OF
SATISFACTORY EVIDENCE TO BE THE INDIVIDUALS WHOSE NAMES ARE SUBSCRIBED TO
THE WITHIN INSTRUMENT AND ACKNOWLEDGED TO ME THAT THEY EXECUTED THE SAME IN
THEIR CAPACITIES, AND THAT BY THEIR SIGNATURES ON THE INSTRUMENT, THE
INDIVIDUALS EXECUTED THE INSTRUMENT.
__________________________________________________
(SIGNATURE AND OFFICE OF INDIVIDUAL TAKING
ACKNOWLEDGEMENT)
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
ON THE ____ DAY OF __________ IN THE YEAR 1997 BEFORE ME, THE UNDERSIGNED,
A NOTARY PUBLIC IN AND FOR SAID STATE, PERSONALLY APPEARED ______________,
PERSONALLY KNOWN TO ME OR PROVED TO ME ON THE BASIS OF SATISFACTORY
EVIDENCE TO BE THE INDIVIDUAL WHOSE NAME IS SUBSCRIBED TO THE WITHIN
INSTRUMENT AND ACKNOWLEDGED TO ME THAT HE EXECUTED THE SAME IN HIS
CAPACITY, AND THAT BY HIS SIGNATURE ON THE INSTRUMENT, THE INDIVIDUAL
EXECUTED THE INSTRUMENT.
__________________________________________________
(SIGNATURE AND OFFICE OF INDIVIDUAL TAKING
N-1
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION OF LAND
The Name of the Record Owner of the Land is [** SEALY OWNERSHIP ENTITY. **]
[See Attached Page(s) for Legal Description]
Exh. A-1
<PAGE>
EXHIBIT B
---------
DESCRIPTION OF ADDITIONAL MORTGAGED PROPERTY
All of Mortgagor's right, title and interest in and to the following, in each
case whether now or hereafter existing or in which Mortgagor now has or
hereafter acquires an interest, now or hereafter located upon or attached to or
to be incorporated in (regardless of where located) the Premises or appurtenant
thereto, or used or to be used in connection with the present or future use,
construction upon, leasing, sale, operation or occupancy of the Premises:
(1) all right, title and interest of Mortgagor in and to all buildings,
structures, fixtures, tenant improvements and other improvements of every
kind and description now or hereafter located in or on the Premises,
including all Materials, water, sanitary and storm sewers, drainage,
electricity, steam, gas, telephone and other utility facilities, parking
areas, roads, driveways, walks and other site improvements; and all additions
and betterments thereto and all renewals, substitutions and replacements
thereof, owned or to be owned by Mortgagor or in which Mortgagor has or shall
acquire an interest, to the extent of Mortgagor's interest therein (all of
the foregoing being referred to herein, collectively, as the
"IMPROVEMENTS");
(2) all supplies and materials in which Mortgagor has an interest
arising in conjunction with Mortgagor's ownership or operation of the
Premises, including any supplies or materials intended for incorporation or
installation in the Improvements, prior to the time the same are so
incorporated or installed, including building materials and components (all
of the foregoing being referred to herein, collectively, as the
"MATERIALS");
(3) all equipment, machinery, apparatus, fittings, fixtures, furniture,
furnishings and articles of personal property of every kind and nature
whatsoever owned or leased (but only to the extent Mortgagor can grant to
Mortgagee a security interest therein without breaching the terms of such
lease) now or in the future by Mortgagor, and either located upon the
Premises, or any part thereof, or used in connection with the present use,
maintenance, operation or occupancy of the Improvements as a manufacturing
plant and/or warehouse or any other future occupancy or use of the
Improvements, including all heating, lighting, laundry, incinerating,
compacting, loading, unloading, landscaping, garage and power equipment and
supplies, tools, engines, pipes, pumps, tanks, motors, generators, conduits,
switchboards, plumbing, fittings, lifting, cleaning, fire prevention, fire
extinguishing, refrigerating, ventilating, and communications apparatus, rack
and shelving systems, air cooling and air conditioning apparatus, elevators,
escalators, shades, awnings, screens, storm doors and windows, carpeting,
computers, software, telephone switchboards, partitions, ducts, compressors,
cables, boilers, stokers, furnaces, tables, desks, chairs, telephones,
bathroom fixtures, cleaning equipment and supplies, and all additions,
substitutions and
Exh. B-1
<PAGE>
replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all of Mortgagor's present and future "goods", "equipment" and
"fixtures" (as such terms are defined in the Uniform Commercial Code) and
other personal property, including without limitation any such personal
property and fixtures which are leased (but only to the extent Mortgagor can
grant to Mortgagee a security interest therein without breaching the terms of
such lease), and all repairs, attachments, betterments, renewals,
replacements, substitutions and accessions thereof and thereto (all of the
foregoing being referred to herein, collectively, as the "EQUIPMENT");
Exh. B-2
<PAGE>
(4) all right, title and interest now owned or hereafter acquired by
Mortgagor in and to all options and rights of first refusal to purchase or
lease any Mortgaged Property or any portion thereof or interest therein, and
in and to any greater estate in the Premises or any other part of any
Mortgaged Property including, but not limited to all rights of first refusal
to purchase the fee estate in the Land (all of the foregoing being referred
to herein as the "OPTIONS");
(5) all the right, in the name and on behalf of Mortgagor, to appear in
and defend any action or proceeding brought with respect to any Mortgaged
Property, and to commence any action or proceeding to protect the interest of
Mortgagor in any Mortgaged Property (collectively, the "PROCEEDING
RIGHTS");
(6) subject to the terms of the Credit Agreement, all of Mortgagor's
right and power to encumber further any Mortgaged Property or any part
thereof (the "ENCUMBRANCE RIGHTS");
(7) all rights, titles, interests, estates or other claims, both in law
and in equity, which Mortgagor now has or may hereafter acquire in the
Premises or in and to any greater estate in the Premises or in and to any
greater estate in any Mortgaged Property (the "GREATER ESTATE RIGHTS");
(8) all prepaid rent and security deposits and all other security which
the lessor under any ground lease may hold now or later for the performance
of Mortgagor's obligations as the lessee under any such ground lease
("SECURITY DEPOSITS");
(9) subject to the terms of Section 6.4 of the Credit Agreement, all
insurance policies and the proceeds thereof, now or hereafter in effect with
respect to the Premises or any other Mortgaged Property, including, without
limitation, any and all title insurance proceeds, and all unearned premiums
and premium refunds, accrued, accruing or to accrue under insurance policies,
and all awards made for any taking of or damage to all or any part of the
Premises or any other Mortgaged Property by eminent domain, or by any
purchase in lieu thereof, and all awards resulting from a change of grade of
streets or for severance damages, and all other proceeds of the conversion,
voluntary or involuntary, of any Mortgaged Property into cash or other
liquidated claims, and all judgments, damages, awards, settlements and
compensation (including interest thereon) heretofore or hereafter made to the
present and all subsequent owners of any Mortgaged Property or any part
thereof for any injury to or decrease in the value thereof for any reason
(collectively, the "INSURANCE/CONDEMNATION PROCEEDS");
(10) all right, title and interest of Mortgagor as landlord in and to
all leaseholds and all leases, subleases, licenses, franchises, concessions
or grants of other possessory interests, tenancies, and any other agreements
affecting the use, possession or occupancy of the Premises (or any other part
of any Mortgaged Property) or any part thereof, whether now or
Exh. B-3
<PAGE>
hereafter existing or entered into (including, without limitation, any use or
occupancy arrangements created pursuant to Section 365(d) of the Bankruptcy
Code or otherwise in connection with the commencement or continuance of any
bankruptcy, reorganization, arrangement, insolvency, dissolution,
receivership or similar proceedings, or any assignment for the benefit of
creditors, in respect of any tenant or occupant of any portion of the
Premises (or any other part of any Mortgaged Property)) and all amendments,
modifications, supplements, extensions or renewals thereof, and all
guaranties thereof or of leasing commissions, whether now or hereafter
existing and all amendments, modifications, supplements, extensions or
renewals thereof, (all of the foregoing being collectively referred to as the
"LEASES"), and all rents, issues, profits, royalties (including all oil and
gas or other hydrocarbon substances), earnings, receipts, revenues, accounts,
accounts receivable, security deposits and other deposits (subject to the
prior right of the tenants making such deposits) and income, including,
without limitation, fixed, additional and percentage rents, vending receipts,
service charges, telephone charges, and all other fees, charges, accounts and
other payments for the use or occupancy of facilities and/or the services
rendered and goods provided in connection therewith, and all operating
expense reimbursements, reimbursements for increases in taxes, sums paid by
tenants to Mortgagor to reimburse Mortgagor for amounts originally paid or to
be paid by Mortgagor or Mortgagor's agents or affiliates for which such
tenants were liable, as, for example, tenant improvements costs in excess of
any work letter, lease takeover costs, moving expenses and tax and operating
expense pass-throughs for which a tenant is solely liable, parking,
maintenance, common area, tax, insurance, utility and service charges and
contributions, proceeds of sale of electricity, gas, heating, air-
conditioning and other utilities and services, deficiency rents and
liquidated damages, and other benefits now or hereafter derived from any
portion of the Premises or otherwise due and payable or to become due and
payable as a result of any ownership, use, possession, occupancy or operation
thereof and/or services rendered, goods provided and business conducted in
connection therewith (including any payments received pursuant to Section
502(b) of the Bankruptcy Code or otherwise in connection with the
commencement or continuance of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or other
occupants of any portion of the Premises and all claims as a creditor in
connection with any of the foregoing) and all cash or security deposits,
advance rentals, and all deposits or payments of a similar nature relating
thereto, now or hereafter, including during any period of redemption, derived
from the Premises or any other portion of any Mortgaged Property and all
proceeds from the cancellation, surrender, sale or other disposition of the
Leases (all of the foregoing being referred to collectively, as the
"RENTS") and the right to receive and apply the Rents to the payment of the
Obligations, subject to the right hereinafter given to Mortgagor to collect
the Rents;
(11) the right to enforce, whether at law or in equity or by any other
means, all terms, covenants and provisions of the Leases (collectively, the
"LEASE PROVISIONS");
Exh. B-4
<PAGE>
(12) all impounds paid by Mortgagor pursuant to the provisions of the
Mortgage and all refunds or rebates of real and personal property taxes or
charges in lieu of taxes, heretofore or now or hereafter assessed or levied
against the Premises or any other part of any Mortgaged Property, including
interest thereon, and the right to receive the same, whether such refunds or
rebates relate to fiscal periods before or during the term hereof
(collectively, the "REFUNDS");
(13) any loan commitment for financing of the Improvements, including
refinancing of any existing loans, and all amounts to be advanced to or on
behalf of Mortgagor thereunder (collectively, the "FINANCING COMMITMENTS");
(14) all motor vehicle equipment in all of its forms, wherever located,
now or hereafter existing (including, but not limited to, all trucks,
tractors, trailers, forklifts and automobiles), and all parts thereof
(whether or not at any time of determination incorporated or installed
therein or attached thereto, and including, without limitation, spare parts
and tires), and all additions and accessions to, and replacements for, any of
the foregoing Mortgaged Property (any and all such motor vehicle equipment,
parts, additions, accessions and replacements being the "ROLLING STOCK");
(15) any and all accounts receivable and rights to payment for use or
occupancy of space or for goods sold or leased or for services rendered,
whether or not yet earned by performance, arising from the operation of the
Improvements (including the use or occupancy thereof) or any other facility
on the Premises, including, without limitation, (a) all accounts arising from
the operation of any Improvements (specifically including any accounts
receivable) and (b) all rights to receive payment under Leases, all
substitutions therefor, proceeds thereof (whether cash or non-cash, movable
or immovable, tangible or intangible) received upon the sale, exchange,
transfer, collection or other disposition or substitution thereof and any and
all of the foregoing and proceeds therefrom (all of the foregoing being
referred to herein, collectively, as the "PAYMENT RIGHTS");
(16) subject to the terms of the Credit Agreement, all accounts, goods,
contract rights, chattel paper, documents, instruments, general intangibles,
accounts receivable, other rights to payment of any nature and other rights
and obligations of any kind and all rights in, to and under all security
agreements, pledges, chattel mortgages, leases and other contracts securing
or otherwise relating to any such accounts, goods, contract rights, chattel
paper, documents, instruments, general intangibles, accounts receivable,
other rights to payment of any nature or other obligations (any and all such
accounts, goods, contract rights, chattel paper, documents, instruments,
general intangibles, accounts receivable, other rights to payment of any
nature and other obligations, together with the Payment Rights being the
"ACCOUNTS", and any and all such security agreements, pledges, chattel
mortgages, leases and other contracts being the "RELATED CONTRACTS");
Exh. B-5
<PAGE>
(17) all franchise agreements, management agreements, agreements for the
acquisition of the Mortgaged Property or any portion thereof, license
agreements and all similar future agreements, as each such agreement may be
amended, supplemented, replaced or otherwise modified from time to time (said
agreements, as so amended, supplemented, replaced or otherwise modified,
being referred to herein individually as an "ASSIGNED RELATED AGREEMENT" and
collectively as the "ASSIGNED RELATED AGREEMENTS"), including without
limitation (i) all rights of Mortgagor to receive moneys due or to become due
under or pursuant to the Assigned Related Agreements, (ii) all rights of
Mortgagor to receive proceeds of any insurance, indemnity, warranty or
guaranty with respect to the Assigned Related Agreements, (iii) all claims of
Mortgagor for damages arising out of any breach of or default under the
Assigned Related Agreements, and (iv) all rights of Mortgagor to terminate,
amend, supplement, modify or exercise rights or options under the Assigned
Related Agreements, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder;
(18) all abstracts of title, plans, specifications, operating manuals,
computer programs, computer data, maps, surveys, studies, reports,
appraisals, architectural, engineering and construction drawings and
contracts, or whatever kind or character, whether now or hereafter existing,
relating to the Premises (all of the foregoing being referred to herein as
the "SPECIFICATIONS");
(19) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Mortgaged Property or
are otherwise necessary or helpful in the collection thereof or realization
thereupon (collectively, the "RECORDS");
(20) at such times and to the extent the granting of a security interest
therein is permitted by Applicable Law, all approvals, authorizations,
building permits, certifications, entitlements, exemptions, franchises,
licenses, orders, variances, plat plan approvals, environmental approvals
(including, without limitation, an environmental impact statement or report
if required under Applicable Law), air pollution authorities to construct and
permits to operate, sewer and waste discharge permits, national pollutant
discharge elimination system permits, water permits, zoning and land use
entitlements and all other permits, whether now existing or hereafter issued
to or obtained by or on behalf of Mortgagor, that relate to or concern in any
way the Premises and are given or issued by any governmental or quasi-
governmental authority, whether now existing or hereafter created (as the
same may be amended, modified, renewed or extended from time to time, and
including all substitutions and replacements therefor) (collectively, the
"PERMITS");
(21) subject to the terms of the Credit Agreement, all proceeds,
products, rents and profits of or from any and all of the foregoing Mortgaged
Property and, to the extent not
Exh. B-6
<PAGE>
otherwise included, all payments under insurance (whether or not Mortgagee is
the loss payee thereof), or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing
Mortgaged Property. For purposes hereof, the term "PROCEEDS" includes
whatever is receivable or received when Mortgaged Property or proceeds are
sold, exchanged, collected or otherwise disposed of, whether such disposition
is voluntary or involuntary;
provided, however, that in no event shall the Mortgaged Property include, and no
-------- -------
Mortgagor shall be deemed to have granted a security interest in, any of
Mortgagor's rights or interests in any agreement to which Mortgagor is a party
or any of its rights or interests thereunder to the extent but only to the
extent that such a grant would result in a breach of the terms of, or constitute
a default under, any such agreement, and the other party to such agreement has
not consented to the granting of such security interest in such agreement (other
than to the extent that any such term would be rendered ineffective pursuant to
Section 9-318(4) of the Uniform Commercial Code of any relevant jurisdiction or
any other Applicable Law (including the Bankruptcy Code) or principles of
equity); and provided further, that immediately upon the ineffectiveness, lapse
-------- -------
or termination of any such provision, the Mortgaged Property shall include and
Mortgagor shall be deemed to have granted a security interest in, all such
rights or interests in the applicable Mortgaged Property as if such provision
had never been in effect.
The term "Premises" means the Premises described in the Mortgage to which this
Exhibit B is attached.
---------
Exh. B-7
<PAGE>
EXHIBIT C
---------
UCC INFORMATION
DEBTOR:
------
Name: [** Sealy Ownership Entity **]
Corporate Structure:
Notice Address:
Principal Place of Business:
SECURED PARTY:
-------------
Secured Party acts as Agent for the Lenders (the "LENDERS") party from time to
time to the Credit Agreement dated as of even date herewith among [** _____ **]
the Lenders and Secured Party, as it may hereafter be amended, restated,
replaced, supplemented or otherwise modified from time to time. Information
regarding the security interest held by the Lenders, for which Secured Party
acts as Agent, may be obtained by contacting Secured Party at the address set
forth above.
Exh. C-8
<PAGE>
SCHEDULE I
MORTGAGEE'S ADDITIONAL RIGHTS
[To Come]
Sch.I-1
<PAGE>
EXHIBIT XXV
[FORM OF COLLATERAL ACCESS AGREEMENT]
RECORDING REQUESTED BY:
O'Melveny & Myers LLP
AND WHEN RECORDED MAIL TO:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022
Attn: _____________________
Re: [Name of Company]
--------------------------------------------------------------------------------
Space above this line for recorder's use only
REAL PROPERTY HOLDER'S WAIVER AND CONSENT AGREEMENT
This REAL PROPERTY HOLDER'S WAIVER AND CONSENT AGREEMENT (this
"AGREEMENT") is dated as of ___________, [199_][200_] and entered into by
_________________________, a ____________________ ("REAL PROPERTY HOLDER"), to
and for the benefit of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a
___________________ having offices at ______________________________
("ADMINISTRATIVE AGENT"), as administrative agent for the financial
institutions ("LENDERS") which are or may hereafter become parties to the
Credit Agreement (as hereinafter defined).
R E C I T A L S
- - - - - - - -
9.1 ____________________, a _______________ corporation
("COMPANY"), has possession of and occupies all or a portion of the property
described on Exhibit A annexed hereto (the "PREMISES").
---------
9.2 Company's interest in the Premises [arises under the lease
agreement (the "LEASE")][is subject to the [mortgage][deed of trust] (the
"MORTGAGE")] more particularly described on Exhibit B annexed hereto,
---------
pursuant to which Real Property Holder has rights, upon the terms and conditions
set forth therein, to take possession of, and otherwise assert control over, the
Premises.
Sch.I-1
<PAGE>
9.3 Administrative Agent and Lenders have entered into that certain
Credit Agreement dated as of December 18, 1997 (said Credit Agreement, as
amended, supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT") with [Company], [Sealy Mattress Company, an Ohio corporation of
which Company is a subsidiary ("BORROWER")], Sealy Corporation, a Delaware
corporation ("HOLDINGS"), and Company has executed [a guaranty,] a security
agreement and other collateral documents in relation to the Credit Agreement.
9.4 [Company's guaranty of] the extensions of credit made by
Lenders to [Company] [Borrower] under the Credit Agreement will be secured, in
part, by all raw materials, work-in-process and finished goods inventory of
Company (including, without limitation, all inventory of Company now or
hereafter located on the Premises (the "INVENTORY")) and all equipment,
machinery and other goods used in Company's business (including, without
limitation, all equipment of Company now or hereafter located on the Premises
(the "EQUIPMENT" and, together with the Inventory, the "COLLATERAL")).
9.5 Administrative Agent has requested that Real Property Holder
execute this Agreement as a condition to the extension of credit to [Company]
[Borrower] under the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Real Property Holder hereby represents and warrants to, and
covenants and agrees with, Administrative Agent as follows:
1. Real Property Holder hereby (a) waives and releases unto
Administrative Agent and its successors and assigns any and all rights granted
by or under any present or future laws to levy or distraint for rent or any
other charges which may be due to Real Property Holder against the Collateral,
and any and all other claims, liens and demands of every kind which it now has
or may hereafter have against the Collateral, and (b) agrees that any rights it
may have in or to the Collateral, no matter how arising (to the extent not
effectively waived pursuant to clause (a) of this paragraph 1), shall be second
and subordinate to the rights of Administrative Agent in respect thereof. Real
Property Holder acknowledges that the Collateral is and will remain personal
property and not fixtures even though it may be affixed to or placed on the
Premises.
2. Real Property Holder certifies that (a) Real Property Holder is the
[landlord under the Lease][beneficiary under the Mortgage], (b) the
[Lease][Mortgage] is in full force and effect and has not been amended,
modified, or supplemented except as set forth on Exhibit B annexed hereto, (c)
---------
there is no defense, offset, claim or counterclaim by or in favor of Real
Property Holder against Company under the [Lease][Mortgage] or against the
obligations of Real Property Holder under the [Lease][Mortgage], (d) no notice
of default has been given under or in connection with the [Lease][Mortgage]
which has not been cured, and Real Property Holder has no knowledge of
Sch.I-2
<PAGE>
the occurrence of any other default under or in connection with the
[Lease][Mortgage], and (e) except as disclosed to Administrative Agent, no
portion of the Premises is encumbered in any way by any deed of trust or
mortgage lien or ground or superior lease.
3. Real Property Holder consents to the installation or placement of the
Collateral on the Premises, and Real Property Holder grants to Administrative
Agent a license to enter upon and into the Premises to do any or all of the
following with respect to the Collateral: assemble, have appraised, display,
remove, maintain, prepare for sale or lease, repair, transfer, or sell (at
public or private sale). In entering upon or into the Premises, Administrative
Agent hereby agrees to indemnify, defend and hold Real Property Holder harmless
from and against any and all claims, judgments, liabilities, costs and expenses
incurred by Real Property Holder caused solely by Administrative Agent's
entering upon or into the Premises and taking any of the foregoing actions with
respect to the Collateral. Such costs shall include, without limitation, any
damage to the Premises made by Administrative Agent in severing and/or removing
the Collateral therefrom.
4. Real Property Holder agrees that it will not prevent Administrative
Agent or its designee from entering upon the Premises at all reasonable times to
inspect or remove the Collateral. In the event that Real Property Holder has
the right to, and desires to, obtain possession of the Premises [(either through
expiration of the Lease or termination thereof due to the default of Company
thereunder)] [(through the exercise of its rights under the Mortgage upon a
default by Company thereunder)], Real Property Holder will deliver notice (the
"REAL PROPERTY HOLDER'S NOTICE") to Administrative Agent to that effect.
Within the 45 day period after Administrative Agent receives the Real Property
Holder's Notice, Administrative Agent shall have the right, but not the
obligation, to cause the Collateral to be removed from the Premises. During
such 45 day period, Real Property Holder will not remove the Collateral from the
Premises nor interfere with Administrative Agent's actions in removing the
Collateral from the Premises or Administrative Agent's actions in otherwise
enforcing its security interest in the Collateral. Notwithstanding anything to
the contrary in this paragraph, Administrative Agent shall at no time have any
obligation to remove the Collateral from the Premises.
5. Real Property Holder shall send to Administrative Agent a copy of any
notice of default under the [Lease][Mortgage] sent by Real Property Holder to
Company. In addition, Real Property Holder shall send to Administrative Agent a
copy of any notice received by Real Property Holder of a breach or default under
any other lease, mortgage, deed of trust, security agreement or other instrument
to which Real Property Holder is a party which may affect Company's rights in,
or possession of, the Premises.
6. All notices to Administrative Agent under this Agreement shall be in
writing and sent to Administrative Agent at its address set forth on the
signature page hereof by telefacsimile, by United States mail, or by overnight
delivery service.
Sch.I-3
<PAGE>
7. The provisions of this Agreement shall continue in effect until Real
Property Holder shall have received Administrative Agent's written certification
that all amounts advanced under the Credit Agreement have been paid in full.
8. This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and shall be construed and enforced in
accordance with, the internal laws of the State of ___________, without regard
to conflicts of laws principles.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the day and year first set forth above.
[NAME OF REAL PROPERTY HOLDER]
By: _________________________________
Name:
Title:
By its acceptance hereof, as of the day and year first set forth above,
Administrative Agent agrees to be bound by the provisions hereof.
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Administrative Agent
By: _________________________________
Name:
Title:
Sch.I-4
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION OF PREMISES
Sch.I-5
<PAGE>
EXHIBIT B
---------
DESCRIPTION OF [LEASE] [MORTGAGE]
Sch.I-6
<PAGE>
EXHIBIT XXV
[FORM OF COLLATERAL ACCESS AGREEMENT]
RECORDING REQUESTED BY:
O'Melveny & Myers LLP
AND WHEN RECORDED MAIL TO:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022
Attn: _____________________
Re: [Name of Company]
-------------------------------------------------------------------------------
Space above this line for recorder's use only
REAL PROPERTY HOLDER'S WAIVER AND CONSENT AGREEMENT
This REAL PROPERTY HOLDER'S WAIVER AND CONSENT AGREEMENT (this
"AGREEMENT") is dated as of ___________, [199_][200_] and entered into by
_________________________, a ____________________ ("REAL PROPERTY HOLDER"), to
and for the benefit of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a
___________________ having offices at ______________________________
("ADMINISTRATIVE AGENT"), as administrative agent for the financial
institutions ("LENDERS") which are or may hereafter become parties to the
Credit Agreement (as hereinafter defined).
R E C I T A L S
- - - - - - - -
9.1 ____________________, a _______________ corporation
("COMPANY"), has possession of and occupies all or a portion of the property
described on Exhibit A annexed hereto (the "PREMISES").
---------
9.2 Company's interest in the Premises [arises under the lease
agreement (the "LEASE")][is subject to the [mortgage][deed of trust] (the
"MORTGAGE")] more particularly described on Exhibit B annexed hereto,
---------
pursuant to which Real Property Holder has rights, upon the terms and conditions
set forth therein, to take possession of, and otherwise assert control over, the
Premises.
9.3 Administrative Agent and Lenders have entered into that
certain Credit Agreement dated as of December 18, 1997 (said Credit Agreement,
as amended, supplemented
XXV-1
<PAGE>
or otherwise modified from time to time, being the "CREDIT AGREEMENT") with
[Company], [Sealy Mattress Company, an Ohio corporation of which Company is a
subsidiary ("BORROWER")], Sealy Corporation, a Delaware corporation
("HOLDINGS"), and Company has executed [a guaranty,] a security agreement and
other collateral documents in relation to the Credit Agreement.
9.4 [Company's guaranty of] the extensions of credit made by
Lenders to [Company] [Borrower] under the Credit Agreement will be secured, in
part, by all raw materials, work-in-process and finished goods inventory of
Company (including, without limitation, all inventory of Company now or
hereafter located on the Premises (the "INVENTORY")) and all equipment,
machinery and other goods used in Company's business (including, without
limitation, all equipment of Company now or hereafter located on the Premises
(the "EQUIPMENT" and, together with the Inventory, the "COLLATERAL")).
9.5 Administrative Agent has requested that Real Property Holder
execute this Agreement as a condition to the extension of credit to [Company]
[Borrower] under the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Real Property Holder hereby represents and warrants to, and
covenants and agrees with, Administrative Agent as follows:
1. Real Property Holder hereby (a) waives and releases unto
Administrative Agent and its successors and assigns any and all rights granted
by or under any present or future laws to levy or distraint for rent or any
other charges which may be due to Real Property Holder against the Collateral,
and any and all other claims, liens and demands of every kind which it now has
or may hereafter have against the Collateral, and (b) agrees that any rights it
may have in or to the Collateral, no matter how arising (to the extent not
effectively waived pursuant to clause (a) of this paragraph 1), shall be second
and subordinate to the rights of Administrative Agent in respect thereof. Real
Property Holder acknowledges that the Collateral is and will remain personal
property and not fixtures even though it may be affixed to or placed on the
Premises.
2. Real Property Holder certifies that (a) Real Property Holder is the
[landlord under the Lease][beneficiary under the Mortgage], (b) the
[Lease][Mortgage] is in full force and effect and has not been amended,
modified, or supplemented except as set forth on Exhibit B annexed hereto, (c)
---------
there is no defense, offset, claim or counterclaim by or in favor of Real
Property Holder against Company under the [Lease][Mortgage] or against the
obligations of Real Property Holder under the [Lease][Mortgage], (d) no notice
of default has been given under or in connection with the [Lease][Mortgage]
which has not been cured, and Real Property Holder has no knowledge of the
occurrence of any other default under or in connection with the
[Lease][Mortgage], and (e) except as disclosed to Administrative Agent, no
portion of the Premises is encumbered in any way by any deed of trust or
mortgage lien or ground or superior lease.
XXV-2
<PAGE>
3. Real Property Holder consents to the installation or placement of the
Collateral on the Premises, and Real Property Holder grants to Administrative
Agent a license to enter upon and into the Premises to do any or all of the
following with respect to the Collateral: assemble, have appraised, display,
remove, maintain, prepare for sale or lease, repair, transfer, or sell (at
public or private sale). In entering upon or into the Premises, Administrative
Agent hereby agrees to indemnify, defend and hold Real Property Holder harmless
from and against any and all claims, judgments, liabilities, costs and expenses
incurred by Real Property Holder caused solely by Administrative Agent's
entering upon or into the Premises and taking any of the foregoing actions with
respect to the Collateral. Such costs shall include, without limitation, any
damage to the Premises made by Administrative Agent in severing and/or removing
the Collateral therefrom.
4. Real Property Holder agrees that it will not prevent Administrative
Agent or its designee from entering upon the Premises at all reasonable times to
inspect or remove the Collateral. In the event that Real Property Holder has
the right to, and desires to, obtain possession of the Premises [(either through
expiration of the Lease or termination thereof due to the default of Company
thereunder)] [(through the exercise of its rights under the Mortgage upon a
default by Company thereunder)], Real Property Holder will deliver notice (the
"REAL PROPERTY HOLDER'S NOTICE") to Administrative Agent to that effect.
Within the 45 day period after Administrative Agent receives the Real Property
Holder's Notice, Administrative Agent shall have the right, but not the
obligation, to cause the Collateral to be removed from the Premises. During
such 45 day period, Real Property Holder will not remove the Collateral from the
Premises nor interfere with Administrative Agent's actions in removing the
Collateral from the Premises or Administrative Agent's actions in otherwise
enforcing its security interest in the Collateral. Notwithstanding anything to
the contrary in this paragraph, Administrative Agent shall at no time have any
obligation to remove the Collateral from the Premises.
5. Real Property Holder shall send to Administrative Agent a copy of any
notice of default under the [Lease][Mortgage] sent by Real Property Holder to
Company. In addition, Real Property Holder shall send to Administrative Agent a
copy of any notice received by Real Property Holder of a breach or default under
any other lease, mortgage, deed of trust, security agreement or other instrument
to which Real Property Holder is a party which may affect Company's rights in,
or possession of, the Premises.
6. All notices to Administrative Agent under this Agreement shall be in
writing and sent to Administrative Agent at its address set forth on the
signature page hereof by telefacsimile, by United States mail, or by overnight
delivery service.
7. The provisions of this Agreement shall continue in effect until Real
Property Holder shall have received Administrative Agent's written certification
that all amounts advanced under the Credit Agreement have been paid in full.
8. This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and shall be construed and enforced in
accordance with, the internal laws of the State of ___________, without regard
to conflicts of laws principles.
XXV-3
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the day and year first set forth above.
[NAME OF REAL PROPERTY HOLDER]
By:
-----------------------------
Name:
Title:
By its acceptance hereof, as of the day and year first set forth above,
Administrative Agent agrees to be bound by the provisions hereof.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By:
-----------------------------
Name:
Title:
XXV-4
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION OF PREMISES
XXV-5
<PAGE>
EXHIBIT B
---------
DESCRIPTION OF [LEASE] [MORTGAGE]
XXV-6
<PAGE>
EXHIBIT XXVI
[FORM OF SUBORDINATION PROVISIONS]
"INDEBTEDNESS" means (i) all obligations for borrowed money or for the
deferred purchase price of property or services (including, without limitation,
all obligations contingent or otherwise in connection with acceptance, letter of
credit or similar facilities, but excluding any such obligations incurred under
ERISA and any accrued expenses or trade payables, (ii) all obligations evidenced
by bonds, notes, debentures or other similar instruments, (iii) all indebtedness
created or arising under any sale and leaseback arrangement, conditional sale or
other title retention agreement with respect to property owned or acquired
(whether or not the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (iv) all rental obligations under capital leases to the extent not
included in clause (iii) above to the extent properly classified as a liability
on a balance sheet in conformity with GAAP, (v) all guarantees (direct or
indirect) to the extent properly classified as a liability on a balance sheet in
conformity with GAAP, all contingent reimbursement obligations under undrawn
letters of credit and all other contingent obligations in respect of, or
obligations to purchase or otherwise acquire or to assure payment of,
Indebtedness of others and (vi) indebtedness of others secured by any lien upon
property, whether or not assumed, but only to the extent of the lesser of such
property's fair market value and the stated amount of such obligation.
"PERSON" means an individual, a partnership, a corporation, an association,
a limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"SENIOR AGENT" shall mean Morgan Guaranty Trust Company of New York, as
Administrative Agent for the Lenders under the Senior Credit Agreements, and its
successors in such capacity, or if there is then no acting Administrative Agent
under the Senior Credit Agreements, financial institutions holding a majority in
principal amount of the Senior Debt outstanding thereunder.
"SENIOR CREDIT AGREEMENTS" shall mean, collectively, (i) the Credit
Agreement dated as of December 18, 1997 and (ii) the AXEL Credit Agreement dated
as of December 18, 1997, in each case by and among the Borrower, Sealy
Corporation, the financial institutions listed therein as Lenders, Senior Agent,
Goldman Sachs Credit Partners L.P., as Syndication Agent, and Bankers Trust
Company, as Documentation Agent, as each such agreement has heretofore been and
may hereafter be amended, restated, modified or supplemented from time to time,
together with any credit agreement or similar document from time to time
executed by the Borrower to evidence any Refinancing (as defined in the
definition of Senior Indebtedness) or successive Refinancings.
1
<PAGE>
"SENIOR DEBT DOCUMENTS" shall mean the Senior Credit Agreements and all
other documents and instruments delivered or filed in connection with the
creation or incurrence of any Senior Indebtedness (including, without
limitation, the promissory notes, guaranties, security agreements, pledge
agreements and mortgages executed and delivered by the Borrower, Sealy
Corporation and the subsidiaries of the Borrower in respect of the Obligations
under the Senior Credit Agreements).
"SENIOR INDEBTEDNESS" shall mean (i) all Obligations (as defined in the
Senior Credit Agreements) now or hereafter incurred pursuant to and in
accordance with the terms of the Senior Debt Documents, (ii) any additional
Indebtedness incurred under or pursuant to the Senior Credit Agreements and the
other Senior Debt Documents whether such Obligations or additional Indebtedness
involve principal prepayment charges, interest (including, without limitation,
interest accruing after the filing of a petition initiating any proceeding under
the Bankruptcy Code, whether or not allowed as a claim in such proceeding),
indemnities (other than inchoate indemnification obligations with respect to
claims, losses or liabilities which have not yet arisen after all other
Obligations have been repaid in full and all commitments to lend thereunder have
terminated) or reimbursement of fees, expenses or other amounts, and (iii) any
indebtedness incurred (other than those not due and payable when all other
Obligations have been repaid and Commitments are terminated) for the purpose of
refinancing, restructuring, extending or renewing (collectively, "REFINANCING")
the obligations of the Borrower under the Senior Credit Agreements as set forth
in clauses (i) and (ii) above.
"SENIOR LENDERS" shall mean the financial institutions party to either of
the Senior Credit Agreements as "Lenders" from time to time.
1. SUBORDINATION.
(a) Agreement to Subordinate. The Borrower and, by its acceptance hereof,
------------------------
each Holder agree that the indebtedness of the Borrower evidenced by this Note,
whether for principal, interest on any other amount payable under or in respect
hereof and all rights or claims arising out of or associated with such
Indebtedness (the "SUBORDINATED OBLIGATIONS"), shall be junior and subordinate
in right of payment to the prior payment in full in cash of all Senior
Indebtedness, in accordance with the provisions of this Section X. Each holder
of Senior Indebtedness shall be deemed to have acquired Senior Indebtedness in
reliance upon the agreements of the Borrower and the holder of this Note
contained in this Section X. The provisions of this Section X shall be
reinstated if at any time any payment of any of the Senior Indebtedness is
rescinded or must otherwise be returned by any holder of Senior Indebtedness or
any representative of such holder upon the insolvency, bankruptcy or
reorganization of the Borrower. Any provision of this Note to the contrary
notwithstanding, the Borrower shall not make, and no Holder shall accept, any
payment or prepayment of principal, or prepayment of other amounts due
thereunder, of any kind whatsoever (including without limitation by distribution
of assets, set off, exchange or any other manner) with respect to the
Subordinated Obligations at any time when any of the Senior Indebtedness remains
outstanding. Holder may receive interest payments in respect of the Subordinated
Obligations in accordance with the terms of this Note except to the extent and
at the times prohibited or restricted
2
<PAGE>
by the provisions of this Section X. In no event shall the Holder commence any
action or proceeding to contest the provisions of this Section X or the priority
of the Liens (as defined in the Senior Credit Agreements) granted to the holders
of the Senior Indebtedness by the Borrower. No Holder shall take, accept or
receive any collateral security from the Borrower for the payment of the
Subordinated Obligations.
(b) Liquidation Dissolution. Bankruptcy. In the event of any insolvency,
-----------------------------------
bankruptcy, dissolution, winding up, liquidation, arrangement, reorganization,
marshalling of assets or liabilities, composition, assignment for the benefit of
creditors or other similar proceedings relating to the Borrower, its debts, its
property or its operations, whether voluntary or involuntary, including, without
limitation the filing of any petition or the taking of any action to commence
any of the foregoing (which, in the case of action by a third party, is not
dismissed within 60 days) (a "BANKRUPTCY EVENT"), all Senior Indebtedness shall
first be paid in full in cash or other immediately available funds before Holder
shall be entitled to receive or retain any payment or distribution of assets of
the Borrower with respect to any Subordinated Obligations. In the event of any
such Bankruptcy Event, any payment or distribution of assets to which Holder
would be entitled if the Subordinated Obligations were not subordinated to the
Senior Indebtedness in accordance with this Section X, whether in cash,
property, securities or otherwise, shall be paid or delivered by the debtor,
custodian, trustee or agent or other Person making such payment or distribution,
or by the Holder if received by it, directly to the Senior Agent on behalf of
the holders of the Senior Indebtedness for application to the payment of the
Senior Indebtedness remaining unpaid, to the extent necessary to make payment in
full in cash or other immediately available funds of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or distribution
to or for the holders of the Senior Indebtedness.
(c) No Payments with Respect to Subordinated Obligations in Certain
---------------------------------------------------------------
Cicumstances.
------------
(i) In circumstances in which Section X(b) is not applicable, no
payment of any nature (including, without limitation, any distribution of
assets) in respect of the Subordinated Obligations (including, without
limitation, pursuant to any judgment with respect thereto or on account of the
purchase or redemption or other acquisition of Subordinated Obligations, by set
off, prepayment exchange or other manner) shall be made by or on behalf of the
Borrower if, at the time of such payment:
(A) a default in the payment when due (whether at the maturity
thereof, or upon acceleration of maturity or otherwise and without giving
effect to any applicable grace periods) of all or any portion of the Senior
Indebtedness (whether of principal, interest or any other amount with
respect thereto) shall have occurred, and such default shall not have been
cured or waived in accordance with the terms of the Senior Debt Documents;
or
3
<PAGE>
(B) subject to the last sentence of this Section X(c), (x) the
Borrower shall have received notice from the Senior Agent or the Lenders of
the occurrence of one or more Events of Default (as defined in either of
the Senior Credit Agreement) in respect of any Senior Indebtedness (other
than payment defaults described in Section X(c)(i)(A) above), (y) each such
Event of Default shall not have been cured or waived in accordance with the
terms of the Senior Debt Documents, and (z) 180 days shall not have elapsed
since the date such notice was received.
The Borrower may resume payments (and may make any payments
missed due to the application of Section X(c)(i) in respect of the
Subordinated Obligations or any judgment with respect thereto:
(A) in the case of a default referred to in clause (A) of this
Section X(c)(i), upon a cure or waiver thereof in accordance with the terms
of the Senior Debt Documents; or
(B) in the case of an Event of Default or Events of Default
referred to in clause (B) of this Section X(c)(i), upon the earlier to
occur of (1) the cure or waiver of all such Events of Default in accordance
with the terms of the Senior Debt Documents, or (2) the expiration of such
period of 180 days.
(ii) Following any acceleration of the maturity of any Senior
Indebtedness and as long as such acceleration shall continue unrescinded and
unannulled, such Senior Indebtedness shall first be paid in full in cash, or
provision for such payment shall be made in a manner reasonably satisfactory to
the holders of the Senior Indebtedness, before any payment is made on account of
or applied on the Subordinated Obligations.
(iii) The Borrower shall give prompt written notice to the Holder of
(i) any default in respect of Senior Obligations referred to in Section
X(c)(i)(A) and (ii) any notice of the type described in Section X(c)(i)(B) from
the Senior Agent.
(d) When Distribution Must Be Paid Over. In the event that Holder shall
-----------------------------------
receive any payment or distribution of assets that Holder is not entitled to
receive or retain under the provisions of this Note, Holder shall hold any
amount so received in trust for the holders of Senior Indebtedness, shall
segregate such assets from other assets held by Holder and shall forthwith turn
over such payment or distribution (without liability for interest thereon) to
the Senior Agent on behalf of the holders of Senior Indebtedness in the form
received (with any necessary endorsement) to be applied to Senior Indebtedness.
(e) Exercise of Remedies. So long as any Senior Indebtedness is outstanding
--------------------
(including any loans, any letters of credit, any commitments to lend or any
lender guarantees), Holder (solely in its capacity as a holder of this Note)
shall not exercise any rights or remedies with respect to an Event of Default
under this Note, including, without limitation, any action (l) to demand or sue
for
4
<PAGE>
collection of amounts payable hereunder, (2) to accelerate the principal of this
Note, or (3) to commence or join with any other creditor (other than the holder
of a majority in principal amount of the Senior Indebtedness) in commencing any
proceeding in connection with or premised on the occurrence of a Bankruptcy
Event prior to the earlier of:
(A) the payment in full in cash or other immediately available
funds of all Senior Indebtedness;
(B) the initiation of a proceeding (other than a proceeding
prohibited by clause (3) of this Section X(e)) in connection with or
premised upon the occurrence of a Bankruptcy Event;
(C) the expiration of 180 days immediately following the receipt
by the Senior Agent of notice of the occurrence of such Event of Default
from the Holder; and
(D) the acceleration of the maturity of the Senior Indebtedness;
provided, however, that if, with respect to (B) and (D) above, such proceeding
or acceleration, respectively, is rescinded, or with respect to (C) above,
during such 180-day period such Event of Default has been cured or waived, the
prohibition against taking the actions described in this Section X(e) shall
automatically be reinstated as of the date of the rescission, cure or waiver, as
applicable. In all events, unless an event described in clause (A), (B) or (D)
above has occurred and not been rescinded, the Holder shall give thirty (30)
days prior written notice to the Senior Agent before taking any action described
in this Section X(e), which notice shall describe with specificity the action
that the Holder in good faith intends to take.
(f) Acceleration of Payment of Note. If this Note is declared due and
-------------------------------
payable prior to the Maturity Date, no direct or indirect payment that is due
solely by reason of such declaration shall be made, nor shall application be
made of any distribution of assets of the Borrower (whether by set off or in any
other manner, including, without limitation, from or by way of collateral) to
the payment, purchase or other acquisition or retirement of this Note, unless,
in either case, (i) all amounts due or to become due on or in respect of the
Senior Indebtedness (including with respect to any outstanding letters of
credit) shall have been previously paid in full in cash or other immediately
available funds or in any other manner satisfactory to all holders of such
Senior Indebtedness, (ii) all commitments to lend under Senior Indebtedness
shall have been terminated and (iii) all guarantees constituting Senior
Indebtedness shall have been terminated.
(g) Proceedings Against Borrower. So long as any Senior Indebtedness
----------------------------
is outstanding (including any loans, any commitments to lend or open lender
guarantees or any lender guarantees, Holder (solely in its capacity as a holder
of this Note) shall not commence any bankruptcy, insolvency, reorganization or
other similar proceeding against Borrower.
5
<PAGE>
(h) Amending Senior Indebtedness. Any holder of Senior Indebtedness
----------------------------
may, at any time and from time to time, without the consent of or notice to
Holder (i) modify or amend the terms of the Senior Indebtedness, (ii) sell,
exchange, release, fail to perfect a lien on or a security interest in or
otherwise in any manner deal with or apply any property pledged or mortgaged to
secure, or otherwise securing, Senior Indebtedness, (iii) release any guarantor
or any other person liable in any manner for the Senior Indebtedness, (iv)
exercise or refrain from exercising any rights against Borrower or any other
person, (v) apply any sums by whomever paid or however realized to Senior
Indebtedness or (vi) take any other action that might be deemed to impair in any
way the rights of the holder of this Note. Any and all of such actions may be
taken by the holders of Senior Indebtedness without incurring responsibility to
Holder and without impairing or releasing the obligations of Holder to the
holders of Senior Indebtedness.
(i) Certain Rights in Bankruptcy. Holder hereby irrevocably authorizes
----------------------------
and empowers each holder of Senior Indebtedness (and its representative or
representatives) to demand, sue for, collect and receive all payments and
distributions under the terms of this Note, to file and prove all claims
(including claims in bankruptcy) relating to this Note, to exercise any right to
vote arising with respect to this Note and any claims hereunder in any
bankruptcy, insolvency or similar proceeding and take any and all other actions
in the name of Holder (solely in its capacity as a holder of this Note), as such
holder of Senior Indebtedness determines to be necessary or appropriate.
(j) Subrogation. No payment or distribution to any holder of Senior
-----------
Indebtedness pursuant to the provisions of this Note shall entitle Holder to
exercise any right of subrogation in respect thereof until (i)(x) all Senior
Indebtedness shall have been paid in full in cash or other immediately available
funds or in any other manner satisfactory to all holders of Senior Indebtedness,
(y) all commitments to lend under Senior Indebtedness shall have been terminated
and (z) all guarantees constituting Senior Indebtedness shall have been
terminated or (ii) all holders of Senior Indebtedness have consented in writing
to the taking of such action.
(k) Relative Rights. The provisions of this Section X are for the benefit
---------------
of the holders of Senior Indebtedness (and their successors and assigns) and
shall be enforceable by them directly against Holder. Holder acknowledges and
agrees that any breach of the provisions of this Section X will cause
irreparable harm for which the payment of monetary damages may be inadequate.
For this reason, Holder agrees that, in addition to any remedies at law or
equity to which a holder of the Senior Indebtedness may be entitled, a holder of
the Senior Indebtedness will be entitled to an injunction or other equitable
relief to prevent breaches of the provisions of this Section X and/or to compel
specific performance of such provisions. The provisions of this Section X shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of Senior Indebtedness is rescinded or must otherwise be returned by
any holder of Senior Indebtedness upon the occurrence of a Bankruptcy Event or
otherwise, all as though such payment had not been made. The provisions of this
Section X are not intended to impair and shall not impair as between Borrower
and Holder, the obligation of Borrower, which is absolute and unconditional, to
pay Holder all amounts owing under this Note.
6
<PAGE>
(l) Reliance on Orders and Decrees. Subject to the provisions of Section
------------------------------
X(d) hereof, upon any payment or distribution of assets of Borrower, whether in
cash, property, securities or otherwise, Holder shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which any
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to Holder for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of Senior
Indebtedness, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Section
X.
7
<PAGE>
EXHIBIT 10.5.SCHA
SCHEDULE 1.1(i)
ADDBACKS TO EBITI)A
-------------------
Without duplication:
(i) MIS Upgrade Expenditures, Year 2000 Expenditures, EITF 97-13
Expenditures and Other MIS Expenditures, in each case to the extent
deducted in determining Consolidated Net Income;
(ii) any bad debt and factoring losses incurred specifically with respect to
the bankruptcy of Montgomery Ward;
(iii) items classified as unusual or nonrecurring gains and losses (including
restructuring costs, severance and relocation costs, any one-time
expenses related to (or resulting from) any merger, recapitalization or
Permitted Acquisition);
(iv) one-time compensation charges, including any arising from any
recapitalization of Holdings' special bonus program or existing stock
options, performance share or restricted stock plans resulting from any
merger or recapitalization transaction or expensed in any period prior
to the consummation of the Merger;
(v) non-recurring cash restructuring charges incurred in connection with the
Recapitalization Transactions and related transactions to the extent
deducted in determining Consolidated Net Income; provided that such
charges are incurred on or before December 18, 1998 and do not exceed in
the aggregate the sum of (a) premiums paid in connection with the Debt
Tender Offer plus (b) $1,000,000;
(vi) non-recurring cash restructuring charges incurred in connection with
Permitted Acquisitions to the extent deducted in determining
Consolidated Net Income; and
(vii) Bain Management Fees (excluding any portion thereof representing
reimbursement of expenses or fees for acquisitions, financings or
divestitures) paid during such period under the Bain Advisory Services
Agreement, and any Harvard Management Fees (excluding any portion
thereof representing reimbursement of expenses paid during such period);
(viii) non-recurring cash charges incurred prior to June 18, 1999 in connection
with the relocation of any of Company's facilities and transition
expenses related thereto, but only to the extent that such non-recurring
charges do not exceed $6,000,000; and
(ix) to the extent deducted in determining Consolidated Net Income, premiums
and transaction costs on Existing Subordinated Notes not tendered in the
Debt Tender Offer.
1.1(i)-1
<PAGE>
SCHEDULE 1.1(ii)
Recapitalization Transactions
Immediately prior to the Closing Date, Holdings will contribute (the
"Capital Contribution") all of the issued and outstanding capital stock of
Sealy, Inc., an Ohio corporation, The Stearns & Foster Bedding Company, a
Delaware corporation, Advanced Sleep Products, a California corporation, Sealy
Components-Pads, Inc., a Delaware corporation, and Sealy Mattress Company of San
Diego, a California corporation, to the capital of the Company. Immediately
after the Capital Contribution, Company will be the only direct subsidiary of
Holdings and will own 100% of the operations of Holdings. On the Closing Date
Merger Corp. will be merged with and into Holdings with Holdings being the
surviving corporation.
<PAGE>
Schedule 2.1
Lender's Commitments, Loans and Pro Rata Shares
Schedule 2.1
Lender's Commitments, Loans and Pro Rata Shares
PRO RATA PRO RATA PRO RATA PRO RATA
SHARE RE SHARE RE SHARE RE SHARE RE
AXELs AXELs AXELs ALL
LENDER AXELs SERIES B SERIES B AXELs SERIES C SERIES C AXELs SERIES D SERIES D LOANS
-----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Credit Partners
L.P. $63,636,361 50.9% $45,818,181 50.9% $58,545,456 50.9% 32.6%
Morgan Guaranty Trust
Company of New York $ 9,848,485 7.9% $ 7,090,909 7.9% $ 9,060,606 7.9% 6.8%
Bankers Trust Company $ 1,893,940 1.5% $ 1,363,636 1.5% $ 1,742,424 1.5% 4.0%
General Electric Capital
Corporation $ 1,893,940 1.5% $ 1,363,636 1.5% $ 1,742,424 1.5% 4.0%
Merita Bank Ltd. $ 1,136,363 0.9% $ 818,182 0.9% $ 1,045,455 0.9% 3.3%
Royal Bank of CAnada $ 1,136,363 0.9% $ 818,182 0.9% $ 1,045,455 0.9% 3.3%
Wells Fargo Bank $ 1,136,363 0.9% $ 818,182 0.9% $ 1,045,455 0.9% 3.3%
BankBoston, N.A. $ 1,893,940 1.5% $ 1,363,636 1.5% $ 1,742,424 1.5% 4.0%
Commerzbank AG $ 1,515,152 1.2% $ 1,090,909 1.2% $ 1,393,939 1.2% 2.2%
Credit Agricole Indosuez $ 1,515,152 1.2% $ 1,090,909 1.2% $ 1,393,939 1.2% 2.2%
Skandinaviska Enskilda Banken,
New York Branch $ 1,136,363 0.9% $ 818,182 0.9% $ 1,045,455 0.9% 3.3%
Merrill Lynch Senior Floating
Rate Fund $ 3,030,303 2.4% $ 2,181,818 2.4% $ 2,787,879 2.4% 1.5%
Toronto Dominion Bank $ 4,545,455 3.6% $ 3,272,727 3.6% $ 4,171,818 3.6% 2.2%
Ares Leveraged Investment
Fund, L.P. $ 3,787,879 3.0% $ 2,727,273 3.0% $ 3,484,848 3.0% 1.8%
Oak Hill Securities Fund, L.P. $ 3,787,879 3.0% $ 2,727,273 3.0% $ 3,484,848 3.0% 1.8%
Transamerica Life Insurance and
Annuity Company $ 3,787,879 3.0% $ 2,727,273 3.0% $ 3,484,848 3.0% 1.8%
Prime Income Trust $ 3,030,303 2.4% $ 2,181,818 2.4% $ 2,787,879 2.4% 1.5%
KZH-Crescent Corporation $ 1,893,940 1.5% $ 1,363,636 1.5% $ 1,742,424 1.5% 4.0%
Lehman Commercial Paper, Inc. $ 2,272,727 1.8% $ 1,636,364 1.8% $ 2,090,909 1.8% 1.1%
ORIX USA Corporation $ 2,272,727 1.8% $ 1,636,364 1.8% $ 2,090,909 1.8% 1.1%
PPM America, Inc. $ 2,272,727 1.8% $ 1,636,364 1.8% $ 2,090,909 1.8% 1.1%
The Northwestern Mutual Life
Insurance Company $ 1,893,940 1.5% $ 1,363,636 1.5% $ 1,742,424 1.5% 4.0%
Octagon Credit Investors Loan
Portfolio $ 1,893,940 1.5% $ 1,363,636 1.5% $ 1,742,424 1.5% 4.0%
KZH Holding Corporation III $ 1,515,151 1.2% $ 1,090,909 1.2% $ 1,393,940 1.2% 0.7%
Bank of America NT & SA $ 1,515,151 1.2% $ 1,090,909 1.2% $ 1,393,940 1.2% 0.7%
Franklin Floating Rate Trust $ 757,576 0.6% $ 545,455 0.6% $ 696,970 0.6% 0.4%
<PAGE>
SCHEDULE 3.1C
Corporate and Capital Structure; Ownership
Company Ownership/1/
------- ------------
Sealy Corporation Bain Funds (49%)/2/
Sealy Investors LLC (17%)
Harvard Private Capital Holdings, Inc. (19%)
Zell/Chilmark Fund, L.P. (14%)
Sealy Mattress Company Sealy Corporation
The Sealy Mattress Company of Puerto Rico Sealy Mattress Company
Ohio-Sealy Mattress Manufacturing Co., Inc. - Randolph Sealy Mattress Company
Ohio-Sealy Mattress Manufacturing Co. -- Forth Worth Sealy Mattress Company
Ohio-Sealy Mattress Manufacturing Co. Sealy Mattress Company
Ohio-Sealy Mattress Manufacturing Co. -- Houston Sealy Mattress Company
Sealy Mattress Company of Michigan, Inc. Sealy Mattress Company
Sealy Mattress Company S.W. Virginia Sealy Mattress Company
Sealy Connecticut, Inc. Sealy Mattress Company
Sealy Mattress Company of Kansas City, Inc. Sealy Mattress Company
Sealy of Maryland and Virginia, Inc. Sealy Mattress Company
Sealy Mattress Company of Illinois Sealy Mattress Company
A. Brandwein & Company Sealy Mattress Company of Illinois
Sealy Mattress Company of Albany, Inc. Sealy Mattress Company
Sealy of Minnesota, Inc. Sealy Mattress Company
Sealy Mattress Company of Memphis Sealy Mattress Company
The Ohio Mattress Company Licensing and Components Group Sealy Mattress Company
Sealy Mattress Manufacturing Company, Inc. Ohio Mattress Company Licensing and
Components Group
Sealy Canada, Ltd. Ohio Mattress Company Licensing and
Components Group
----------
/1/ The stock records of the Subsidiaries are incomplete. During the decade or
more that Holdings has owned the Subsidiaries, however, to the knowledge of
Holdings, no third party has made any claim with respect to its ownership
of stock of any of the Subsidiaries.
/2/ The percentage ownership of Sealy Corporation are rough estimates.
<PAGE>
Gestion Centurion, Inc. Sealy Canada, Ltd.
Sealy Descanso S.A. Ohio Mattress Company Licensing and
Components Group
Sealy, Inc. Sealy Mattress Company
Sealy Mattress Company Mexico S. de R.L. de C.V. Sealy, Inc./3/
The Stearns & Foster Bedding Company Sealy Mattress Company
The Stearns & Foster Upholstery Furniture Company The Stearns & Foster Bedding Company
Advanced Sleep Products Sealy Mattress Company
Sealy Components - Pads, Inc. Sealy Mattress Company
Sealy Mattress Company of San Diego Sealy Mattress Company
----------
/3/ 999 shares held by Sealy Inc.; 1 share by The Ohio Mattress Licensing and
Components Group.
<PAGE>
SCHEDULE 3.1I
Closing Date Mortgaged Properties
THE STEARNS & FOSTER BEDDING COMPANY
------------------------------------
4802 West Van Buren Street
Phoenix, AZ 85043
1705 Rockdale Ind. Blvd.
Conyers, GA 30207
SEALY MATTRESS COMPANY
----------------------
1070 Lake Road
Medina, OH 44258
THE SEALY MATTRESS COMPANY OF PUERTO RICO
-----------------------------------------
El Comandanta Industrial Center
#1 San Marcos
Carolina, Puerto Rico 00982
OHIO-SEALY MATTRESS MANUFACTURING CO., INC.-RANDOLPH
----------------------------------------------------
671 North Street
One Posturepedic Drive
Randolph, MA 02368
OHIO-SEALY MATTRESS MANUFACTURING CO., INC.--FORT WORTH
-------------------------------------------------------
6550 Wuliger Way
North Richland Hills, TX 76180
OHIO-SEALY MATTRESS MANUFACTURING CO., INC.-HOUSTON
---------------------------------------------------
Highway Loop 290
Brenham, TX 77833
SEALY MATTRESS COMPANY OF CONNECTICUT, INC.
-------------------------------------------
100 Canal/Street
Putnam, CT 06260
<PAGE>
SEALY MATTRESS COMPANY OF ALBANY, INC.
--------------------------------------
99 Railroad Avenue
Albany, NY 12205
SEALY OF MINNESOTA, INC.
------------------------
825 Transfer Road
St. Paul, MN 55114
SEALY MATTRESS COMPANY OF MEMPHIS, INC.
---------------------------------------
4120 Air Trans Road
Memphis, TN 38118
THE OHIO MATTRESS COMPANY LICENSING AND COMPONENTS GROUP
--------------------------------------------------------
6275 Lake Shore Court
Colorado Springs, CO 80915
1132 North Culled Street
Rensselaer, IN 47978
1133 North Cullen Street
Rensselaer, IN 47978
Magic Industrial Park
Delano, PA 18220
SEALY MATTRESS MANUFACTURING COMPANY, INC.
------------------------------------------
1130 Seventh Street
Richmond, CA 94801
4361 East Firestone Boulevard
South Gate, CA 90280
12555 East 39th Avenue
Denver, CO 80239
11220 Space Boulevard
Regency Industrial Park
Orlando, FL 32821
<PAGE>
700 South State Street
at 7th Avenue
Lexington, NC 27293
13635 N. Lombard
Rivergate Industrial Dis.
Portland, OR 97203
RD #1, Rt. 322
Clarion, PA 16214
SEALY MATTRESS COMPANY OF KANSAS CITY, INC.
-------------------------------------------
3100 Fairfax Traffic Way
Kansas City, KS 66115
<PAGE>
SCHEDULE 3.1K
Closing Date Environmental Report
1. 4802 West Van Buren Street
Phoenix, AZ 85043
2. 1130 Seventh Street
Richmond, CA 94801
3. 4361 East Firestone Boulevard
South Gate, CA 90280
4. 6275 Lake Shore Court
Colorado Springs, CO 80915
5. 12555 East 39th Avenue
Denver, CO 80239
6. 100 Canal Street
Putnam, CT 06260
7. 11220 Space Boulevard
Regency Industrial Park
Orlando, FL 32821
8. 1705 Rockdale Ind. Boulevard
Conyers, GA 30207
9. 1030 East Fabian Parkway
Batavia, IL
10. 1132 & 1133 North Cullen Street
Rensselaer, IN 47978
11. 3100 Fairfax Traffic Way
Kansas City, KS
12. 16114 Elliott Parkway
70-81 Industrial Park
Williamsport, MD
13. 671 North Street
One Posturepedic Drive
Randolph, MA 02368
<PAGE>
14. 21450 Trolley Industrial Drive
Taylor, MI
15. 825 Transfer Road
St. Paul, MN 55114
16. 99 Railroad Avenue
Albany, NY 12205
17. 700 South State Street
at 7th Avenue
Lexington, NC 27293
18. 1070 Lake Road
Medina, OH 44258
19. 13635 N. Lombard
Rivergate Industrial Dis.
Portland, OR 97203
20. RD#1, Rt. 322
Clarion, PA 16214
21. Magic Industrial Park
Delano, PA 18220
22. 4120 Air Trans Road
Memphis, TN 38118
23. Highway Loop 290
Brenham, TX 77833
24. 6550 Wuliger Way
North Richland Hills, TX 76180
25. 14550 112th Avenue, NW
Edmonton, Alberta, Canada
26. 555 Rue Panneton
St. Narcisse, Quebec, Canada
27. 685 Warden Avenue
Toronto, Ontario, Canada
<PAGE>
28. Lots 17 & 18 Exportec II Industrial Park
Toluca, Mexico
29. El Comandante Industrial Center
#1 San Marcos
Carolina, Puerto Rico 00982
<PAGE>
SCHEDULE 4.1
Subsidiaries
Subsidiary Direct Owner of Subsidiary/4/ Jurisdiction of Incorporation
---------- ----------------------------- -----------------------------
Sealy Mattress Company Sealy Corporation Ohio
The Sealy Mattress Company of Puerto Rico Sealy Mattress Company Ohio
Ohio-Sealy Mattress Manufacturing Co., Inc. Sealy Mattress Company Massachusetts
- Randolph
Ohio-Sealy Mattress Manufacturing Co.--Forth Worth Sealy Mattress Company Texas
Ohio-Sealy Mattress Manufacturing Co. Sealy Mattress Company Georgia
Ohio-Sealy Mattress Manufacturing Co.--Houston Sealy Mattress Company Texas
Sealy Mattress Company of Michigan, Inc. Sealy Mattress Company Michigan
Sealy Mattress Company of S.W. Virginia Sealy Mattress Company Virginia
Sealy Connecticut, Inc. Sealy Mattress Company Connecticut
Sealy Mattress Company of Kansas City, Inc. Sealy Mattress Company Missouri
Sealy of Maryland and Virginia, Inc. Sealy Mattress Company Maryland
Sealy Mattress Company of Illinois Sealy Mattress Company Illinois
A. Brandwein & Company Sealy Mattress Company of Illinois Illinois
Sealy Mattress Company of Albany, Inc. Sealy Mattress Company New York
Sealy of Minnesota, Inc. Sealy Mattress Company Minnesota
Sealy Mattress Company of Memphis Sealy Mattress Company Tennessee
The Ohio Mattress Company Licensing and Sealy Mattress Company Delaware
Components Group
Sealy Mattress Manufacturing Company, Inc. Ohio Mattress Company Licensing and Delaware
Components Group
Slay Canada, Ltd. Ohio Mattress Company Licensing and Alberta
Components Group
Gestion Centurion, Inc. Sealy Canada, Ltd. Quebec
----------
/4/ The stock records of the Subsidiaries are incomplete. During the decade
or more that Holdings has owned the Subsidiaries, however, to the knowledge
of Holdings, no third party has made any claim with respect to its
ownership of stock of any of the Subsidiaries. All ownership interests are
100%, except as indicated.
<PAGE>
Sealy Descanso S.A. Ohio Mattress Company Licensing and Spain
Components Group
Sealy, Inc. Sealy Mattress Company Ohio
Sealy Mattress Company Sealy, Inc./5/ Mexico
Mexico S. de R.L. de C.V.
The Stearns & Foster Bedding Company Sealy Mattress Company Delaware
The Stearns & Foster Upholstery Furniture The Stearns & Foster Bedding Company Ohio
Company
Advanced Sleep Products Sealy Mattress Company Ohio
Sealy Components - Pads, Inc. Sealy Mattress Company Delaware
Sealy Mattress Company of San Diego Sealy Mattress Company California
----------
/5/ 999 Shares held by Sealy Inc.; 1 share by The Ohio Mattress Licensing and
Components Group.
<PAGE>
SCHEDULE 4.5
Real Property
COMPANY LOCATION LEASED/OWNED TENANT/LANDLORD
SEALY, INC.
-----------
International Home Leased Tenant
Furnishings Center
High Point,NC 27261
10th Floor/4th Floor, Halle Bldg. Leased Tenant
1228 Euclid Avenue
Cleveland, OH 44115
12th Floor Storage, Halle Bldg. Leased Tenant
1228 Euclid Avenue
Cleveland, OH 44115
17500 Engle Lake Dr. Leased Tenant
Middleburg Hts., OH 44130
17520 Engle Lake Dr. Leased Tenant
Middleburg Hts., OH 44190
THE STEARNS & FOSTER BEDDING COMPANY
------------------------------------
4802 West Van Buren Street Owned
Phoenix, AZ 85043
1705 Rockdale Ind. Blvd. Owned
Conyers, GA 30207
1030 Fabyan Parkway Leased Tenant (with 100,000
Batavia. IL 60510 square feet subleased
to Legget & Platt)
ADVANCED SLEEP PRODUCTS
-----------------------
1261 Industrial Parkway North Leased Tenant
Brunswick, OH 44212
SEALY MATTRESS COMPANY
----------------------
1070 Lake Road Owned
Medina, OH 44258
18-22 Main Street Extension Leased Tenant
Plymouth, MA
4100 Spring Valley Rd. Leased Tenant
Suite 800
Dallas, TX 75244
<PAGE>
SEALY MATTRESS COMPANY
----------------------
48 South Service Road Leased Tenant
Melville, NY 11747
200 CenterPort Drive Leased Tenant
Greensboro, NC 27409
THE SEALY MATTRESS COMPANY OF PUERTO RICO
-----------------------------------------
El Comandante Industrial Center Owned
# I San Marcos
Carolina, Puerto Rico 00982
OHIO-SEALY MATTRESS MANUFACTURING CO., INC.-RANDOLPH
----------------------------------------------------
One Posturepedic Drive Owned
Randolph, MA 02368
OHIO-SEALY MATTRESS MANUFACTURING CO., INC.--FORT WORTH
-------------------------------------------------------
6550 Wuliger Way Owned
North Richland Hills, TX 76180
6400-J Wuliger Way Leased Tenant
North Richland Hills, TX 76180
OHIO-SEALY MATTRESS MANUFACTURING CO., INC.--HOUSTON
----------------------------------------------------
Highway Loop 290 Owned
Brenham, TX 77833
13111 Westheimer Suite 118 Leased Tenant
Leased Tenant
Houston, TX 77077
SEALY MATTRESS COMPANY OF MICHIGAN, INC.
----------------------------------------
21450 Trolley Industrial Drive Leased Tenant
Taylor, MI 48180
SEALY MATTRESS COMPANY OF CONNECTICUT, INC.
-------------------------------------------
25 Hillside Avenue Owned Leased to private family
Oakville, CT 06779
31 Hillside Avenue Owned Leased to private family
Oakville, CT 06779
100 Canal Street Owned Leased to Nutmeg Realty Co.
Putnam, CT 06260
SEALY MATTRESS COMPANY OF KANSAS CITY, INC.
-------------------------------------------
3100 Fairfax Traffic Way Leased Tenant
Kansas City, KS 66115
<PAGE>
SEALY OF MARYLAND AND VIRGINIA, INC.
------------------------------------
70-81 Industrial Park Leased Tenant
Williamsport, MD 21795
11606 Greencastle Pike Leased Tenant
Hagerstown, MD 21740
16121 Business Parkway Leased Tenant
Hagerstown, MD 21740
Topflight Air Park Leased Tenant
18450 Showalter Rd.
Hagerstown, MD 21740
SEALY MATTRESS COMPANY OF ILLINOIS
----------------------------------
1130 Lake Cook Rd. #170 Leased Tenant
Buffalo Grove, IL 60089
SEALY MATTRESS COMPANY OF ALBANY INC.
-------------------------------------
99 Railroad Avenue Owned
(Railroad Avenue & Brown Road)
Albany, NY 12205
45 Railroad Avenue Leased Tenant
Colonie, NY
SEALY OF MINNESOTA, INC.
------------------------
825 Transfer Road Owned
St. Paul, MN 55114
SEALY MATTRESS COMPANY OF MEMPHIS
---------------------------------
4120 Air Trans Road Owned
Memphis, TN 38118
4401 N. Roman Street Leased Tenant
New Orleans, LA
THE OHIO MATTRESS COMPANY LICENSING AND COMPONENTS GROUP
--------------------------------------------------------
6275 Lake Shore Court Owned
Colorado Springs, CO 80915
Vapor Trail Bldg. Leased Tenant
Colorado Springs, CO 80915
525 West Monroe Leased Assigned to Katten, Muchin
Chicago, IL 60606 & Zavis
111 N. Canal Street Leased Tenant
Chicago, IL 60606
1132 North Cullen Street Owned
Rensselaer, IN 47978
<PAGE>
1133 North Cullen Street Owned
Rensselaer, IN 47978
Magic Industrial Park Owned Owned
Delano, PA 18220
Rt. 54 & 309 Leased Tenant
Hometown, PA
SEALY MATTRESS MANUFACTURING COMPANY, INC.
------------------------------------------
1130 7th Street Owned
Richmond, CA 94801
4361 East Firestone Blvd. Owned
South Gate, CA 90280
12555 East 39th Avenue Owned
Denver, CO 80239
11220 Space Blvd. Owned
Regency Industrial Park
Orlando, FL 32821
1440 Central Florida Parkway Leased Tenant
Orlando, FL 32821
700 S. State St. Owned
at 7th Avenue
Lexington, NC 27293
3 East First Street Leased Tenant
Lexington, NC 27293
Industrial Drive Leased Tenant
Welcome, NC
8th Ave./State Street Leased Tenant
Lexington
13635 N. Lombard Owned
Rivergate Industrial Dis.
Portland, OR 97203
(U.S. Route 322 & Owned Owned
Washington Avenue)
R.D. #I Rte. 322
Clarion, PA 16214
R.D. #1, Rt. 322 Leased Tenant
Clarion, PA 16214
San Francisco Mart Leased Tenant
San Francisco, CA
<PAGE>
17291 Irvine Road Leased Tenant
Tustin, CA 92680
1930 E. Mariton Pike Leased Tenant
Cherry Hill, NJ
SEALY CANADA, LTD.
------------------
685 Warden Avenue Leased Tenant
Scarborough, Ontario M I L 3Z5
14550 112th Avenue Owned
Edmonton, Alberta TSM 2VI
431 Thames Avenue Leased Tenant
Winnipeg, Manitoba
14550-112 Ave. Leased Tenant
Edmonton, Alberta TSM 2V 1
SEALY MATTRESS COMPANY (MEXICO)
-------------------------------
Lot 18 Owned Owned
Industrial Park Exportec 11
Toulcam Mexico
<PAGE>
SCHEDULE 4.12
Certain Fees
1. Approximately $5,600,000 fee to Merrill Lynch for representation in the sale
of Holdings.
2. Approximately $250,000 fee to NationsBanc Montgomery Securities, Inc. for
warrant valuation.
3. Approximately $251,550 fee to ABN Ambro for warrant valuation.
4. Approximately $3,663,830 in payments made to certain employees as a result of
the change in control caused by the Recapitalization Transactions.
<PAGE>
SCHEDULE 4.13
Environmental Matters
South Brunswick. NJ. A Holdings subsidiary is the former owner of a
-------------------
commercial/industrial facility in Monmouth Junction (South Brunswick Township),
New Jersey ("Property"). Prior to 1953, the Property was used as a horse farm.
In 1953, the original portion of the current main building was constructed and
thereafter operated until 1979 by Stop-Fire, Inc., a fire extinguisher
manufacturer. The Property was purchased in 1979 by The Stearns & Foster Bedding
Company (which was acquired by Holdings in 1983) and the Property was used as a
mattress assembly facility until 1991. After being vacant for four (4) years,
Holdings reopened the Property as a mattress pad manufacturing facility in 1995.
In 1997, Holdings sold the business and Property to Leggett & Platt which has
continued to use the Property for pad manufacturing.
Holdings believes that operation/disposal practices by Stop-Fire at the Property
resulted in the release of volatile organic compounds to the soil and
groundwater. Solvents used to clean factory machinery and degrease fire
extinguisher casings prior to painting were reportedly disposed on-site in a
large area south of the secondary building and in the area outside the exit door
at the former paint room. Paint sludge was also reportedly disposed through a
wooded area at the Property near the large spent solvent disposal area.
Holdings's environmental consultant has indicated that spent solvents were
disposed at a rate of three to four 55 gallon drums per month over a 25 year
period.
In 1989, as the result of a leveraged buyout, a "triggering event" under New
Jersey environmental law (Environmental Cleanup Responsibility Act; "ECRA", now
known as the Industrial Site Recovery Act; "ISRA") the New Jersey Department of
Environmental Protection ("NJDEP") required Holdings to conduct certain soil and
groundwater testing activities that resulted in the discovery of volatile
organic compounds in the impacted soil disposal areas and the groundwater.
Pursuant to Administrative Consent Order ("ACO") signed by Holdings and its
subsidiary, environmental investigation and focused remediation activities have
continued at the facility through 1996.
In 1995, NJDEP approved Holdings's soil remediation plan. As of July, 1997,
Holdings completed required soil remediation at the Property. In August, 1997,
NJDEP approved Holdings's interim groundwater remediation plan involving a pilot
test program for groundwater containment and recycling of a portion of the
contaminant plume with natural attenuation of the remaining plume. Installation
of the pilot system is scheduled to begin in September, 1997 with full
implementation planned for November or December, 1997.
In January, 1997, Holdings settled a New Jersey U.S. District Court cost
recovery litigation filed in March, 1994 against former owners of the Property
and their lenders. Holdings is currently prosecuting a cost recovery action in
New Jersey state court against certain insurance companies of The Steams &
Foster Bedding Company. Holdings is also defending a declaratory judgment action
filed in Ohio state court by the same insurance companies which seeks a
determination of non-liability under the policies. It is conceivable that NJ DEP
may seek to intervene in the insurance cost recovery action and/or pursue a
portion of the cost recovery award Holdings obtained in early 1997.
Oakville, CT. Holdings is the owner of commercial/industrial property in
------------
Oakville, Connecticut at which two vacant buildings are located ("Property").
Until 1993, Holdings used one of the buildings to assemble mattresses. The other
building was used by various manufacturing companies as tenants ("Tenants")
until 1991. None ofthe Tenants were affiliated with Holdings. There is soil and
groundwater contamination at the Property under the Tenants' building which
Holdings believes is attributable to the Tenants' metal plating operations which
involved the use of various metals and organic chemical solvents. There is also
possible PCB and PAH soil contamination at the transformer areas and parking lot
areas of the Property resulting from historical use practices.
As owner, Holdings has developed a remediation plan for both soil and
groundwater that has been reviewed and approved by the Connecticut Department of
Environmental Protection. The plan anticipates the demolition of the Tenants'
building with the exception of the floor slab; the further delineation of
impacted areas under the floor slab; and the removal of contaminated soils and
the dewatering of areas with impacted groundwater. Demolition is scheduled for
October, 1997. Additional delineation activities are planned for early Spring,
1998.
<PAGE>
Holdings has filed a cost recovery action in the Connecticut U.S. District Court
seeking to require the Tenants to complete the remediation and/or reimburse
Holdings for all site investigation and remedial costs.
Oakville, CT. In 1993, a Holdings subsidiary was identified as a Potential
------------
Responsible Party ("PRP") at a municipal landfill in Naugatuck, Connecticut at
which solid, non-hazardous waste from the Oakville plant was previously
deposited. The landfill had been identified as a Superfund Site by U.S. EPA at
the time of the notice. Holdings has received no further correspondence and is
aware of no further activity on this matter since 1993.
Lockland, OH. In 1991, Holdings received notice from U.S. EPA that a landfill in
------------
West Chester, Ohio ("Skinner Landfill") - previously used by a textile and
upholstered furniture manufacturing company purchased by Holdings in 1983 - had
been identified as a Superfund Site. Holdings responded to U.S. EPA's CERCLA
inquiry in 1991 and advised the former seller of U.S. EPA's interest and
involvement in the Landfill. Since then, Holdings has heard nothing about this
matter from either the U.S. EPA or the seller. On September 12, 1997, Holdings,
Inc. was named as a defendant to a cost recovery action by certain Potential
Responsible Parties ("PRP's") that had, by order of the U.S. EPA, commenced
clean-up of the Skinner Landfill. Holdings intends to vigorously defend the
action.
St. Paul, MN. In 1994, a Holdings subsidiary was identified as a Potentially
------------
Responsible Party ("PRP") at a municipal landfill in Minneapolis, MN at which
solid, non-hazardous waste from the St. Paul plant was previously deposited. In
1994, the landfill was identified as subject to the Minnesota Landfill Clean-up
Act under which the State takes responsibility for the cleanup. As part of this
State program, Holdings recently responded to an information request by the
Minnesota Department of Environmental Protection as to prior use of the landfill
by Holdings's subsidiary.
St. Paul, MN. A 1997 environmental report indicated that the Pine Bend Sanitary
------------
Landfill in Inver Grove Heights used by the plant in 1993 is on the Natural
Priorities List ("NPL"). The plant has confirmed that it has not used this
landfill since 1994 and has to present used scrap metal dealers as an
alternative disposal method.
Rensselaer, IN. A 1997 environmental report revealed that the Rensselaer
--------------
facility leased by Holdings (from October, 1995 to October, 1997 when the site
was purchased by Holdings) was previously used as an amusement train
manufacturing plant from 1947 through 1957. Such activities routinely involve
hazardous materials such as paints, solvents and metal waste which may serve as
the basis for possible subsurface contamination.
Rensselaer, lN. A 1995 environmental report revealed that the Rensselaer
--------------
facility leased by Holdings was previously used as a porcelain fixture and wood
cabinet manufacturing plant from 1954 to 1994. Such activities routinely involve
hazardous materials such as paints. solvents, acetone, toluene (and perhaps
other flammable solids) and dichloromethane, i.e., methylene chloride which may
serve as a basis for possible subsurface contamination.
Rensselaer, IN. A 1997 environmental report suggested that certain chemical
--------------
constituents of the isocyanate and resin compounds used at the newly-purchased
plant location for the manufacture of foam encased mattress units may be present
in quantities at or above the specified reporting threshold levels in SARA Title
III (Sections 312 and 313). Purchase and production information was reviewed and
the 312/313 reporting forms for the years 1995 and 1996 as required by SARA
Title III were submitted to the appropriate agencies.
Colorado Springs. CO. A 1997 environmental report reflected the fact that the
--------------------
Holdings property abuts railroad property used as a railcar dismantling area and
that approximately one (1) acre of the Holdings site was previously owned by the
railroad. The report noted that railcar facilities generally deal with a wide
assortment of hazardous materials and suggested the potential of railcar-related
contamination issues. The 1997 report also noted that prior to 1987, Holdings
stored incoming raw materials and waste outdoors on paved areas now used for
parking, shipping and receiving. Although no spills or releases were identified,
the report suggested the potential of subsurface contamination. Finally, the
1997 report noted the existence of oil stains on soil resulting from the past
unprotected discharge of oil from the Holdings plant air compressor. Soil
aeration on-site is being employed to address this air compressor discharge
matter.
Delano, PA. A 1993 environmental report noted that three (3) waste disposal
----------
facilities used by the Holdings plant for waste oil disposal listed on the
Comprehensive Environmental Response, Compensation and Liability Information
System (CERCLIS) database. Of these, one facility (and the then transporter
utilized by the Holdings plant) have been
<PAGE>
designated as requiring no further action. At the second facility, an
environmental investigation begun in 1986, continued in 1990, and remained
ongoing in 1993. The third disposal facility underwent initial site
investigation in February, 1992. The Holdings plant no longer utilizes any of
these CERCLIS landfills and no notice of a possible recovery action based upon
past use has been received. The 1993 report also noted minor areas of oil-
stained soil which have since been addressed.
Richmond, CA. A 1997 environmental report indicated that prior to Holdings's
------------
purchase of the property in 1973, a variety of operations were conducted at the
plant including the manufacture of plumbing fixtures and. Iater, steel bath
tubs. No spills or releases were identified. A prior 1993 report also noted the
abutting property as being owned and operated by a registered hazardous waste
transfer/hazardous material handling company. Although neither the 1993 or 1997
database search revealed any documented spills or releases, the Holdings plant
manager recalls an acid release in the area in 1993 which resulted in a cloud
cast over the Holdings plant and the neighboring area. The plant manager also
recalls: (a) a mercaptan drum spill in either 1989 or 1990 which caused a strong
odor to be present for some time; and (b) a diesel fuel spill of approximately 5
gallons a few years ago from a storage tanker in the driveway of the plant. The
diesel fuel spill was immediately contained and the area cleaned by the adjacent
hazardous material handling company. The 1997 environmental report also
suggested that certain chemical constituents of the isocyanate and resin
components used at the facility for the manufacture of foam encased mattress
units may be present in quantities at or above the specified reporting threshold
levels in SARA Title III, Section 313. Purchase and production information was
reviewed and the 313 reporting forms for the years 1994, 1995 and 1996 as
required by SARA Title III were submitted to the appropriate agency.
Southgate, CA . A 1997 environmental report indicated that prior to Holdings's
-------------
purchase of the property in 1973, the plant was owned by the Holley division of
Lear Sigler Co., which manufactured air conditioner units. A prior 1993 report
also noted that a former tenant of Holdings at the plant, Hall Metals Company,
used the leased area as an engine and scrap metal storage site. When the
business failed, Holdings evicted the tenant and cleared the leased area of the
stored engines, scrap metal and various other materials, including some
unidentified chemicals. The 1993 and 1997 reports suggested that these
historical activities could have resulted in possible subsurface contamination.
Convers, GA. The rear portion of the Holdings plant was leased to a urethane
-----------
foam manufacturer from 1980 to 1997. A 1997 environmental report noted that the
tenants' facility was listed on the CERCLIS database and the Toxic Release
Inventory System ("TRIS") database, and that the U.S. EPA had designated the
site as requiring no further action after three (3) site assessments in 1980,
1985 and 1989. The TRIS report noted the release of dichloromethane, toluene-2,
6-diisocyanate and toluene-2, 4-diisucyanate. Recent testing by the tenant as
part of its cessation of business at the property and the termination of the
lease revealed no adverse environmental conditions.
Orlando, FL. A urethane foam manufacturer owns and operates the property to the
-----------
rear of the Holdings plant. A spill in 1992 at the foam manufacturer's property
resulted in the commencement of environmental investigation under a consent
order with the Florida Department of Environmental Protection which
investigation, over the past four (4) years, has confirmed the migration of
groundwater contamination in the form of 1,1 dichloroethylene, vinyl chloride,
acetone, 2-butanone, formaldehyde, toluene and 1,2, dichlorethane under the
Holdings property. In 1997, Holdings requested the foam manufacturer to advise
Holdings of its future investigation and remediation plan before Holdings allows
continued access to Holdings's property.
Clarion, PA. A 1997 environmental report revealed that the property was owned
-----------
and operated by a trailer and mobile home manufacturer from 1968 to 1983.
Although such an operation was noted to have likely made use of hazardous
materials, the 1997 report indicated no spills or other contamination problems.
Carolina, Puerto Rico. A 1997 environmental report revealed that of the three
---------------------
(3) buildings presently occupied by Holdings at this location, one building was
used previously as a printing shop and another was used as a machine shop and as
an office and warehouse for an air conditioner service company. The third
building had no significant prior use history. The 1997 report noted that while
these operations commonly handle hazardous materials, no report of environmental
problems were revealed by an environmental database search.
<PAGE>
Ft. Worth, TX. A diesel fuel spill occurred on June 8, 1996 as the result of a
-------------
vehicle accident involving a Holdings delivery truck in Longview, Texas. The
authorities were notified and the spill area cleaned. The resultant report was
submitted to Texas authorities. Holdings is awaiting a no further action letter.
Batavia, IL. A diesel fuel spill occurred on May 21, 1996 as the result of a
-----------
vehicle accident involving a Holdings delivery truck in Sturtevant, Wisconsin.
The authorities were notified and the spill area cleaned. The resultant report
was submitted to Wisconsin authorities. A no further action letter was issued on
August 19, 1996.
Randolph, MA. A diesel fuel spill occurred on June 30, 1994 as the result of a
------------
fuel tank rupture at Holdings's Randolph plant. The authorities were notified
and the spill area was cleaned. A 1997 database review confirmed the matter was
closed by Massachusetts authorities.
Randolph, MA. In 1996, the asbestos containing material in the Holdings plant
------------
boiler room was removed as part of the boiler decommission and overflow tank
removal. Beginning June 1996 and continuing to completion in 1997, the outside
above ground 20,000 storage tank for #2 heating oil to power the boiler was
decommissioned; the 10,000 outside above ground diesel fuel tank and fuel pump
were removed: and the associated lines closed in place. Random and isolated oil
stained areas were addressed by soil removal as part of these environmental
activities.
Kansas City. KS. A 1997 environmental report indicated the possible migration of
---------------
subsurface contamination from an automobile manufacturing facility one-quarter
mile north of the plant. The manufacturing site is listed on multiple
environmental databases and both soil and groundwater contamination has been
confirmed to exist at the manufacturing site at concentrations above regulatory
action levels.
Putnam, CT. Environmental reports from 1993 and 1994 revealed that the Holdings
----------
property in Putnam, Connecticut was used in the 1920's by a manufacturer of
fabric inserts for rubber tires and from the late 1940's to the 1970's (until
purchased by Holdings) by a safety material manufacturer, i.e., safety goggle,
glove and helmet assembly. The 1994 report noted that the use of chemicals and
the generation of wastes by the first manufacturer was unknown. The same report
also stated that while no industrial wastes were generated by the second
manufacturer, trichloroethylene was used as a degreasing solvent on site. A 1992
environmental report revealed that land adjacent to the Putnam property was used
as a steel manufacturing facility and that waste from metal working processes
and/or process wastewater of steel pickling may have discharged to the
groundwater and may potentially impact the Holdings property. A 1997
environmental report revealed no additional information regarding the site.
Phoenix, AZ. The Arizona Department of Environmental Quality (ADEQ) is
-----------
conducting a groundwater contamination study in a roughly 45 square mile area
that includes the Holdings plant. The effort is known as the West Van Buren
Study. Several contaminated wells have been identified including one well
located approximately one-quarter mile south of the Holdings plant. Using 1994
data, the groundwater contamination plume has been identified by ADEQ on an
isoconcentration map which shows a PCE plume at the boundary line of the plant
and moving in a westerly direction under the plant site. Numerous sources of
groundwater contamination have been identified although neither Holdings nor the
plant has been listed as a contributor to the contamination. Other principal
contaminants are 1,1, DCE; TCA; TCE and their breakdown products. These
compounds are not consistent with materials used at the plant.
Woodstuff Manufacturing Oak/Pine Plants: Phoenix AZ. In 1997, Holdings sold the
---------------------------------------------------
assets of its furniture manufacturing subsidiary, Woodstuff Manufacturing, Inc.,
to Sammy, Inc. Holdings agreed to indemnify Sammy from:
All Losses (including reasonable legal and accounting fees, resulting from or
arising out of (1 ) limitations, reductions or other adverse changes in the
permissible level of emissions or other terms and conditions of the Original
Pine Plant Permit (as such term is defined in Section 7.3(k) above) as in effect
as of the Closing if such changes (a) result from violations of Air Quality
Regulations by the Company of the Seller prior to the Closing and (b) are
imposed in connection with the Company's original application for a Title 5
Permit for the Pine Plant or the processing thereof or any related review by the
Maricopa County Environmental Services Department of Air Pollution Control (the
"Company's Original Title 5 Application"), or (2) violations of Air Quality
Regulations by the Company or the Seller prior to the Closing, or government or
private actions or suits alleging such violations, which violations are alleged
or asserted in connection with the Company's Original Title 5 Application or any
related review by the Maricopa County Environmental Services Department of Air
Pollution Control; provided, however, that this Section 8.1 (iv) shall not cover
<PAGE>
any Losses resulting from or arising out of any changes in the terms,
application or interpretation of any Air Quality Regulations that become
effective after the Closing.
Environmental investigations and resultant reports conducted in 1997 revealed
the existence of the West Van Buren Study and the location of one contaminated
well approximately one-half mile north of the Oak plant and one mile north of
the Pine plant. Subsurface investigations at both the Pine and Oak plants did
not reveal petroleum hydrocarbons or volatile organic compounds at
concentrations above regulatory action levels.
<PAGE>
As of the 1997 divestment, the following Hazardous Substances have been used by
or located at the Company's Oak plant: ethyl benzene; toluene; xylene; 1,1,1 -
trichloroethane (1, 1,1 TCA); freon 11 (TCFM). freon 113 (TCFE); benzene,
dibromochloromethane; and methyl tert butyl ether.
As of the 1997 divestment, the following Hazardous Substances have not, to
Holdings's knowledge, been used by or located at the Company's Oak plant:
tetrachloroethene (PCE); trichloroethene (TCE); 1,1-dichloroethane (1,1 DCA);
1,2-dichloroethane (1,2 DCA); ,1dichloroethene (l,lI DCE); 1,2-dichloroethene
(1,2 DCE); bromodichloromethane (BDCM); carbon tetrachloride; chloroform; 1,1,2
trichloroethane (1,1,2 TCA); and vinyl chloride.
The current management of Woodstuff Manufacturing intends to file the Title V
Permit Application in early October, 1997. The State of Arizona is under no time
obligation to act upon the Application, however, the current management has
indicated that it intends to seek an expedited conclusion.
Lexington, NC. In 1997, Holdings conducted soil and groundwater investigation
-------------
for petroleum hydrocarbon contamination at three (3) former UST removal areas at
the Lexington plant. Groundwater analytical data indicated contamination. Soil
analytical data revealed only one of six samples to contain total petroleum
hydrocarbons at 1500 ppm, 300 ppm in excess of the 1200 ppm State standard.
Holdings's environmental consultant concluded that this isolated reading is not
representative of a contamination problem and Holdings has requested a no
further action determination from North Carolina.
Lexington, NC. A 1997 environmental report indicated the possible migration of
-------------
subsurface contamination from three (3) upgradient sites listed as active LUST
(Leaking Underground Storage Tank) sites with the North Carolina authorities.
Southgate, CA. In 1994, the three (3) underground storage tanks located under
-------------
the area leased to a tenant of Holdings were removed. Soil contamination caused
by gasoline, diesel fuel and waste oil releases at the tank pit area was
addressed by the removal of the soil. Groundwater contamination involving the
same contaminants is being addressed first by the passive removal of free
products pending approval of a natural attenuation program by Los Angeles
County. Renssealer. IN: A 1997 environmental report notes the possible existence
of a UST of approximately 1,000 gallons abandoned by prior owner. Possible
underground storage tank abandoned by the prior owner.
Toronto, Canada: A 1997 environmental report notes the possible existence of an
---------------
abandoned UST, size not specified, previously used to power the facility boiler.
Quebec, Canada: A 1997 environmental report confirms that the facility boiler is
--------------
currently powered with heating fuel contained in existing 1,000 gallon UST.
Edmonton, Canada: A 1997 environmental report notes the possible migration of
----------------
subsurface contamination from two USTs (one for diesel fuel; the other for
either gasoline or lubricating oil) removed by the City of Edmonton from its
Public Works Department Facility in 1988. The report recommended that the matter
be further investigated to determine what the City of Edmonton has done since a
1990 environmental report to the City recommended further investigation at the
former UST location.
Toronto Canada: A 1997 environmental report indicated the existence of thermal
--------------
system insolation at the facility which, because of its age, may be asbestos-
containing. The report recommends that an asbestos inspection be conducted.
Ouebec, Canada: A 1997 environmental report indicated the existence of spray-
--------------
applied fire proofing at the Facility which, because of its age, may be
asbestors-containing. The report recommended that an asbestos inspection be
conducted.
Matters set forth in the report titled "Environmental Review of Sealy
Corporation," prepared by ENVIRON Corporation, dated December 1997, and the
Memorandum to File from Mark Grummer, Kirkland & Ellis, Regarding "Scaly
Environmental Liabilities: Offsite and Former Facility," copies of which have
been provided to Agent, are incorporated herein by reference and are deemed set
forth on this Schedule 5.13.
<PAGE>
Schedule 5.12
POST-CLOSING DELIVERIES
-----------------------
A. Company shall deliver, and shall cause its Subsidiaries to deliver, each of
the following items to Administrative Agent no later than 30 days after the
Closing Date, in each case in form and substance reasonably satisfactory to
Administrative Agent:
1. A Mortgage, in proper form for recording, encumbering the following Real
Property Assets:
. El Comandante Industrial Center, #1 San Marcos, Carolina, Puerto Rico
. Additional Properties at 11220 Space Blvd., Regency Industrial Park,
Orlando, Florida
. Highway Loop 290, Brenham, Texas (satisfactory survey not yet received)
. 100 Canal Street, Putnam, Connecticut (title being transferred to
another Subsidiary Guarantor)
2. A Closing Date Mortgage Policy for each of the Closing Date Mortgaged
Properties described in paragraph A.1 above.
3. The results of a recent search (and copies of all such filings disclosed
by such search), by a Person reasonably satisfactory to Syndication Agent
and Administrative Agent, of all effective UCC financing statements and
fixture filings and all judgment and tax lien filings which may have been
made with respect to any personal or mixed property of the Loan Parties
listed below in the jurisdictions set forth on Annex A hereto.
4. Any UCC termination statements, duly executed by all applicable Persons
for filing in all applicable jurisdictions as may be necessary to
terminate any effective UCC financing statements or fixture filings
disclosed in any search described in paragraph A.3 above (other than any
such financing statements or fixture filings in respect of Liens permitted
to remain outstanding pursuant to the terms of this Agreement).
5. Executed fixture filings with respect to all mixed property Collateral of
The Sealy Mattress Company of Puerto Rico, for filing in Puerto Rico.
6. Executed fixture filings with respect to all mixed property Collateral of
Sealy Mattress Manufacturing Company, Inc. at the Orlando, Florida
additional properties described in paragraph A.1 above, for filing in
Orange County, Florida.
B. Company shall use, and shall cause its Subsidiaries to use, commercially
reasonable efforts to deliver each of the following items to Administrative
Agent no later than 30 days after the Closing Date, in each case in form and
substance reasonably satisfactory to Administrative Agent:
1. At least one original of a memorandum of lease for the property at 3100
Fairfax Traffic Way, Kansas City, Kansas, in a form acceptable for
recording in the applicable jurisdiction.
2. A Mortgage, in proper form for recording, encumbering the leasehold
Closing Date Mortgaged Property described in paragraph B.1 above.
3. A Closing Date Mortgage Policy containing a survey exception in the form
set forth in the Global Title Letter for the Closing Date Mortgaged
Property described in paragraph B.2 above.
4. A Collateral Access Agreement with respect to the properties at Industrial
Drive, Welcome, North Carolina.
<PAGE>
Notwithstanding the foregoing, if Company fails to deliver any of the
foregoing items to Administrative Agent within such 30 day period,
Administrative Agent may (but shall not be obligated to) (i) consent to an
additional period of time for such delivery, in the case of failure to
deliver an item described in any of paragraphs A.1 through A.6, or (ii)
consent to an additional period of time for such delivery or waive the
delivery requirement as set forth in this Schedule, in the case of failure
to deliver an item described in any of paragraphs B.1 through B.4.
C. In the event that Company and its Subsidiaries shall fail to sell the 31
Hillside Avenue, Oakville, Connecticut property to a third party by November
30, 1998, Company shall no later than December 1, 1998 deliver, or shall
cause its applicable Subsidiary to deliver, each of the items set forth in
subsection 6.9 of the Credit Agreement with respect to such properties as if
they were an Additional Mortgaged Properties as defined in such subsection.
D. Company shall, and shall cause its Subsidiaries to, use commercially
reasonable efforts to commence and consummate such corporate and other
proceedings as Company and its counsel shall determine to be advisable to
ratify the issuances of outstanding capital stock of Company and its
Subsidiaries as set forth in the applicable Schedules to the Holdings Pledge
Agreement, the Company Pledge Agreement and the Subsidiary Pledge Agreement.
<PAGE>
Annex A
ENTITIES & JURISDICTIONS
NOT SEARCHED.
Sealy of Maryland and Virginia, Inc.
------------------------------------
State of Delaware
State of Virginia
Independent City of Richmond
Ohio-Sealy Mattress Manufacturing Co., Inc.
-------------------------------------------
State of Connecticut
The Stearns & Foster Bedding Company
------------------------------------
DeKalb County, Georgia/1/
Hall County, Georgia
Richmond County, Georgia
Dougherty County, Georgia
Chatham County, Georgia
Fulton County, Georgia
State of Florida
State of Alabama
State of Tennessee
Sealy Mattress Manufacturing Company, Inc.
------------------------------------------
Mecklenburg County, North Carolina
Forsyth County, North Carolina
New Hanover County, North Carolina
State of South Carolina
State of Virginia
Independent City of Chesapeake
State of Florida
State of Hawaii
State of Washington
State of Utah
Sealy Mattress Company of Kansas City, Inc.
-------------------------------------------
State of Missouri
Independent City of St. Louis
Ohio-Sealy Mattress Manufacturlng Co.--Fort Worth
-------------------------------------------------
State of Louisiana
Sealy Mattress Companv of Memphis
---------------------------------
State of Mississippi
Madison County, Mississippi
State of Alabama
State of Arkansas
Pulaski County, Arkansas
Jefferson County, Arkansas
State of Florida
State of Kentucky
----------
/1/ Clerk's Cooperative was searched. No records found.
<PAGE>
SCHEDULE 7.1(v)
Existing Foreign Subsidiary Intercompany Indebtedness
None
<PAGE>
SCHEDULE 7.1(xv)
Certain Existing Indebtedness
1. Note by The Sealy Mattress Company Licensing and Components Group payble to
Jose Ades Tawil, a former licenseee, with an outstanding pricipal balance of
$1,200,000.
2. Note from The Sealy Mattress Company of Puerto Rico to Sealy Corporation with
an outstanding principal balance of $2,500,000.
3. Letters of Credit issued issued by Banque Paribas for Sealy Corporation:
<PAGE>
Beneficiary LC Number Amount Effective Date Maturity Tvue
Lumbermen's 21365/93 $426,994.00 517/93 5/6/98 Standby Mutual
Hartford Fire 21369/93 54,739,577.00 6/1/93 6/2/98 Standby Insurance
Hartford Fire 21375/94 $3,360,423.00 8/18/94 8/19/98 Standby Insurance
Transcontinental 21404/96 $382,000 00 9/20/96 9/19/98 Standby Tech.
Continental 21405/96 $2,831.000.00 9/20/96 9/19/98 Standby Casualty
<PAGE>
SCHEDULE 7.3(vii)
Certain Existing Investments
<PAGE>
OWNER INVESTMENT
Gestion Centurion, Inc. One-third ownership of outstanding
stock of Alpha Springs, Ltd.
The Ohio Mattress Company 14 shares of Southwest Ohio Water
Class "A" common stock
Sealy, Inc. Ownership of personal residences in
connection with corporate relocation
program
<PAGE>
SCHEDULE 7.3(xiii)
Existing Foreign Subsidiary Capital Contributions
<PAGE>
CONTRIBUTOR AMOUNT FOREIGN SUBSIDIARY
The Ohio Mattress Company
$31,000,000
Sealy Canada, Ltd.
Licensing and Components Group
<PAGE>
SCHEDULE 7.3(xviii)
Certain Proposed Investments
1. The Ohio Mattress Company Licensing and Components Group and Kurlon Limited
executed a letter of intent dated October 20, 1997 for a joint venture in
India to produce and market inner-spring mattresses under the Sealy brand
name.
<PAGE>
SCHEDULE 7.4
Certain Existing Contingent Obligations
None
<PAGE>
SCHEDULE 7.9
Sale-Leaseback Transactions
Proposed relocation of certain of Sealy Mattress Company's assets may
involve the purchase of an existing facility, with the subsequent sale and
leaseback of the same facility.