Exhibit 10
EXECUTION COPY
FORBEARANCE
AGREEMENT
This Forbearance Agreement (this
“Agreement”) is made this 12th day of August, 2005, by
and among O’Sullivan Industries, Inc.
(“O’Sullivan”), a Delaware corporation,
O’Sullivan Industries Holdings, Inc.
(“Holdings”), a Delaware corporation, O’Sullivan
Industries — Virginia, Inc. (“OIV”), a Virginia
corporation, O’Sullivan Furniture Factory Outlet, Inc., a
Missouri Corporation (“OFFO” and, collectively with
O’Sullivan, Holdings, and OIV, the “Company”),
The Bank of New York, in its capacity as indenture trustee (the
“Trustee”), GoldenTree Asset Management L.P., as
investment advisor for the Senior Secured Noteholders listed on
Exhibit “A” (“GoldenTree”), and Mast Credit
Opportunities I, (Master) Ltd. (“Mast”).
BACKGROUND
A.
The Company and the Trustee are parties to that certain indenture
(the “Indenture”), dated September 29, 2003, pursuant
to which O’Sullivan issued $100 million in 10.63% senior
secured notes due 2008 (the “Senior Secured
Notes”).
B.
GoldenTree currently holds $70,190,000 in principal amount, and
Mast holds $13,160,000 in principal amount, of the Senior Secured
Notes.
C.
Interest payments on the Senior Secured Notes of approximately $5.3
million are due biannually on January 15th and July 15th, with a
thirty-day grace period.
D.
To date, the Company has not made the interest payment originally
due on July 15, 2005, and will not do so within the grace period,
thereby causing an event of default to occur under the
Indenture.
E.
The Company has requested that the Trustee, GoldenTree, and Mast
forbear from the exercise of their rights and remedies under the
Indenture and otherwise with respect to the Senior Secured Notes
relating to such non-payment during the period commencing on August
15, 2005 and ending on September 15, 2005 (the “Forbearance
Period”), and those parties have agreed to such forbearance
upon the terms contained in this Agreement.
NOW,
THEREFORE, with the foregoing Background incorporated by reference,
and in consideration of the mutual covenants set forth herein and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1.
Forbearance . During the Forbearance Period, and except as
provided in section 6 below, the Trustee, GoldenTree and Mast will
not exercise any enforcement rights or remedies under the
Indenture, the Senior Secured Notes, or otherwise with respect to
the Senior Secured Notes, including any rights or remedies (a) to
take any action under section 6 of the Indenture (including
acceleration of the Senior Secured Notes), (b) to bring suit to
enforce payment under the Senior Secured Notes, or (c) to seek to
foreclose or otherwise realize on the collateral securing the
Company’s obligations under the Senior Secured Notes. With no
binding obligation, the parties hereto agree to work together in
good faith to consider further extensions of the Forbearance
Period.
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2.
Rescission of Acceleration . In the event that, during the
Forbearance Period, the Senior Secured Notes are somehow
accelerated, GoldenTree and Mast shall, pursuant to section 6.02 of
the Indenture (and except as set forth in section 6 below), give
written notice to the Trustee to rescind such acceleration within
three business days of having received notice from the Company of
such acceleration, and the Trustee shall comply with such
instructions.
3.
Conditions Precedent to Effectiveness of Agreement . This
Agreement shall not become effective until the following events
occur:
(a) GoldenTree and Mast
shall have received a copy of the Company’s FY 2006 budget
approved by the Board of Directors, together with any reforecast,
update, or statement of variances with respect thereto.
(b) GoldenTree and Mast
shall have received all significant and material information
compiled since March 30, 2005, and related to the Company’s
current borrowing base calculation under its revolving credit
agreement and working capital assets, along with a detailed
schedule of projected cash receipts and cash disbursements by the
Company during the Forbearance Period (the “Cash Flow
Schedule”), and all other relevant financial due diligence
information reasonably requested by GoldenTree and Mast.
(c) The Company’s
flash results for July, 2005, shall have been delivered to
GoldenTree and Mast, and the Company’s management shall have
discussed with GoldenTree and Mast its views of the Company’s
performance over the next three months.
(d) Funding by the
Company of the Advance Payment (as defined below).
4.
Acknowledgement of Liens and Obligations . The Company
hereby acknowledges and confirms for the benefit of the Trustee,
GoldenTree and Mast that (i) the liens granted to the Trustee under
the Indenture and related documents for t
