EXHIBIT 10.48
STOCKHOLDERS AGREEMENT
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This STOCKHOLDERS AGREEMENT is dated as of December 18, 1997, by and among Sealy Corporation, a Delaware corporation (the "Company"); Bain Capital Fund V,
------- L.P. ("Bain Fund V"); Bain Capital Fund V-B, L.P. ("Bain Fund V-B"); BCIP
----------- ------------- Associates ("BCIP"); BCIP Trust Associates, L.P. ("BCIP Trust"); Harvard Private
---- ---------- Capital Holdings, Inc. ("Harvard");Sealy Investors 1, LLC ("SILLC 1"); Sealy
------- ------- Investors 2, LLC ("SILLC 2"); Sealy Investors 3, LLC ("SILLC 3"); Zell/Chilmark
------- ------- Fund, L.P. ("Zell"); and Randolph Street Partners II ("Randolph").
---- --------
On October 30, 1997, the Company, Sandman Merger Corporation, a transitory Delaware merger corporation ("Sandman"), and Zell entered into an Agreement and
------- Plan of Merger (the "Merger Agreement") pursuant to which, simultaneous with the
---------------- execution of this Agreement, Sandman merged with and into the Company (such merger, the "Merger") with the Company as the surviving corporation.
------
Immediately prior to the execution of this Agreement, Bain Fund V, Bain Fund V-B, BCIP, BCIP Trust, Harvard, SILLC 1, SILLC 2, SILLC 3 and Randolph purchased a number of shares of Sandman's common stock ("Sandman Shares")
-------------- pursuant to a Subscription Agreement, dated as of the date hereof, by and among such Persons (as defined below) and Sandman.
In connection with the Merger (i) certain shares of the Company's preferred stock owned by Zell have been converted into a Junior Subordinated Promissory Note and a number of shares of the Company's Common Stock and (ii) the Sandman Shares have been converted into a number of shares of the Company's Common Stock.
The Company and the Stockholders (as defined below) desire to enter into this Agreement for the purposes, among others, of (i) establishing the composition of the Board (as defined below), (ii) assuring continuity in the management and ownership of the Company and (iii) limiting the manner and terms by which the Stockholder Shares (as defined below) may be transferred.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. As used herein, the following terms shall have the
----------- following meanings:
"Affiliate" means, when used with reference to a specified Person, any
--------- Person that directly or indirectly controls or is controlled by or is under common control with the specified Person. As used in this definition, "control" (including, with its correlative meanings, "controlled
by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise). With respect to any Person who is an individual, "Affiliates" shall also include, without limitation, any member of such individual's Family Group. Notwithstanding the foregoing, for purposes of this Agreement, any Person who is an administrative member of a limited liability company and who owns less than 10% of such limited liability company's membership interests shall not be deemed to be an Affiliate of such limited liability company.
"Bain Fund" means any of Bain Fund V, Bain Fund V-B, BCIP, BCIP Trust, or
--------- Randolph.
"Bain Investor" means any Bain Fund or any of their respective Permitted
------------- Transferees.
"Bain Shares" means all Stockholder Shares issued or issuable to any Bain
----------- Investor.
"Board" means the Company's board of directors.
-----
"Class A Common" means the Company's Class A Common Stock, par value $.01
-------------- per share.
"Class B Common" means the Company's Class B Common Stock, par value $.01
-------------- per share.
"Class L Common" means the Company's Class L Common Stock, par value $.01
-------------- per share.
"Class M Common" means the Company's Class M Common Stock, par value $.01
-------------- per share.
"Common Stock" means collectively Class A Common, Class B Common, Class L
------------ Common, Class M Common and any other common stock authorized by the Company.
"Family Group" means, with respect to any Person who is an individual, (i)
------------ such Person's spouse, former spouse and descendants (whether natural or adopted), parents and their descendants and any spouse of the foregoing persons (collectively, "relatives") or (ii) the trustee, fiduciary or personal representative of such Person and any trust solely for the benefit of such Person and/or such Person's relatives.
"Harvard Investor" means any of Harvard or any of its Permitted
---------------- Transferees.
"Harvard Shares" means all Stockholder Shares issued or issuable to any
-------------- Harvard Investor.
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"Investor" means any Bain Investor, any Harvard Investor or any SILLC
-------- Investor.
"Investors" means collectively the Bain Investors, the Harvard Investors
--------- and the SILLC Investors.
"Investor Shares" means all Stockholder Shares issued or issuable to any
--------------- Investor.
"Permitted Transferee" has the meaning set forth in Section 4(e)(ii)
-------------------- hereof.
"Person" means an individual, a partnership, a corporation, a limited
------ liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a governmental entity or any department, agency or political subdivision thereof or any other entity or organization.
"Public Offering" means an underwritten public offering and sale of the
--------------- Common Stock pursuant to an effective registration statement under the Securities Act; provided that a Public Offering shall not include an offering made in connection with a business acquisition or combination or an employee benefit plan.
"Public Sale" means any sale of Stockholder Shares to the public pursuant
----------- to an offering registered under the Securities Act or to the public pursuant to the provisions of Rule 144 (or any similar rule or rules then in effect) under the Securities Act.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"SILLC Investor" means any of SILLC 1, SILLC 2, SILLC 3 or any of their
-------------- respective Permitted Transferees.
"SILLC Shares" means all Stockholder Shares issued or issuable to any SILLC
------------ Investor.
"Stockholder" means any of the Stockholders.
-----------
"Stockholder Shares" means (i) all shares of Common Stock held, directly or
------------------ indirectly, by the Stockholders, and (ii) all equity securities issued or issuable directly or indirectly with respect to any Common Stock referred to in clause (i) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular shares constituting Stockholder Shares, such shares will cease to be Stockholder Shares when they have been Transferred in a Public Sale.
"Stockholders" means collectively the Investors and the Zell Holders.
------------
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"Subsidiary" means, with respect to any Person, any corporation,
---------- partnership, limited liability company, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons shall be allocated a majority of partnership, limited liability company, association or other business entity gains or losses or shall be or control the managing director, managing member, manager or a general partner of such partnership, limited liability company, association or other business entity.
"Transfer" means any voluntary or involuntary, direct or indirect sale,
-------- transfer, conveyance, assignment, pledge, hypothecation, gift, delivery or other disposition. Notwithstanding the foregoing, the conversion by any Stockholder of any shares of any class of Common Stock into any other class of Common Stock shall not be deemed a "Transfer" for purposes of this Agreement, provided that such Stockholder continues to own such converted shares immediately after such conversion.
"Unaffiliated Third Party" means any Person who, immediately prior to the
------------------------ contemplated transaction, (i) is not a Person who directly or indirectly owns in excess of 5% of the outstanding shares of Common Stock on a fully-diluted basis (a "5% Owner"), (ii) is not controlling, controlled by or under common control
-------- with any such 5% Owner and (iii) is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other Persons.
"Zell Holder" means any of Zell or any of its Permitted Transferees.
-----------
"Zell Shares" means all Stockholder Shares issued or issuable to any Zell
----------- Holder.
2. Board of Directors.
------------------
(a) To the extent permitted by law, each Stockholder shall vote all voting securi ties of the Company over which such Stockholder has voting control, and shall take all other necessary or desirable actions within such Stockholder's control (whether in such Stockholder's capacity as a stockholder, director, member of a board committee or officer of the Company or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all necessary and desirable actions within its control (including, without limitation, calling special board and shareholder meetings), so that:
(i) the authorized number of directors of the Board shall be seven;
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(ii) holders of record of a majority of the Bain Shares entitled to
vote for directors of the Board will designate three (3) of the seven total
directors of the Board (each a "Bain Director") (the three Bain Directors
-------------
shall initially be Joshua Bekenstein, Paul Edgerley and Michael Krupka);
(iii) prior to the consummation of an initial Public Offering, so
long as Harvard and its Affiliates (and not any of their respective
assigns) own at least 5% of the outstanding shares of Common Stock, Harvard
and its Affiliates who own Stockholder Shares (and not any of their
respective assigns) will designate one of the seven total directors of the
Board (the "Harvard Director") (the Harvard Director shall initially be
----------------
John M. Sallay);
(iv) any director designated pursuant to clause (ii) or (iii) above
shall be removed from the Board or any committee thereof (with or without
cause) at the written request of the Stockholder or Stockholders which have
the right to designate such director hereunder, but only upon such written
request and under no other circumstances (in each case, determined on the
basis specified in clause (ii) or (iii) above, as the case may be);
(v) in the event that any director designated hereunder for any reason
ceases to serve as a member of the Board or any committee thereof during
such director's term of office, the resulting vacancy on the Board or
committee shall be filled by a director designated by the Stockholders
referred to in clause (ii) or (iii) above, as the case may be;
(vi) at the Board's election, the composition of the board of
directors (or any similar governing body) of any of the Company's
Subsidiaries shall be the same as the Board; and
(vii) no executive committee of the Board shall have the authority to
(1) declare dividends of the Company, (2) authorize the issuance of capital
stock of the Company (other than to directors, officers or employees of the
Company and its Subsidiaries pursuant to benefit plans), (3) authorize the
execution by the Company of any merger, consolidation or recapitalization
agreement or any agreement to sell all or substantially all of the assets
of the Company, (4) authorize the refinancing of any of the material
indebtedness for borrowed money of the Company and its Subsidiaries, (5)
authorize any material acquisition of another Person or substantially all
of the assets of another Person, (6) authorize the creation of any material
Subsidiary of the Company which is not directly or indirectly wholly-owned
by the Company, or (7) authorize capital expenditures individually or in
the aggregate during any applicable period $10 million in excess of the
capital expenditures provided for in the applicable budget or budgets of
the Company and its Subsidiaries approved by the Board. For purposes of
this clause (vii), the terms "material" and "materially" shall refer to an
amount or a valuation in excess of $50 million.
(b) The Company shall reimburse the directors of the Board for all reasonable out-of-pocket expenses borne by such directors in connection with the performance of their duties as directors of the Company. In addition, the Company shall pay such additional compensation to
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the directors of the Company who are not employees of the Company or any of its Subsidiaries or any Stockholder or any Affiliate of any Stockholder as the Board so determines.
(c) If any party fails to designate in writing a representative to fill a director position pursuant to the terms of this Section 2, the election of a Person to such director position shall be accomplished in accordance with the Company's Certificate of Incorporation and by-laws and applicable law. In the event that, at any time, any provision of the Company's Certificate of Incorporation or by-laws is inconsistent with the requirements of any provision of this Section 2, the Stockholders shall take such action as may be necessary to amend any such provision in the Company's Certificate of Incorporation or by- laws, as the case may be, to conform with such requirements.
3. Conflicting Agreements. Each Stockholder represents that such
---------------------- Stockholder has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement, and no holder of Stockholder Shares shall grant any proxy or become party to any voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement.
4. Restrictions on Transfer of Stockholder Shares.
----------------------------------------------
(a) General Restrictions.
--------------------
(i) Prior to the earlier of (x) the tenth anniversary of the date
hereof and (y) the first day after the period commencing on the date hereof
and ending on the day the Company's financial statements are filed with the
SEC for the first full fiscal quarter after the Company issues any
securities to the public pursuant to a filing with the SEC, subject to
Section 7 hereof, a Zell Holder may Transfer Stockholder Shares only (A) if
such Zell Holder is exercising a tag-along right granted to such Zell
Holder pursuant to Section 4(d), then to any Person, provided, that such
--------
Person shall have complied with the requirements of Section 4(e)(ii), or
(B) pursuant to the terms of Section 5.
(ii) On or after the earlier of (x) the tenth anniversary of the date
hereof and (y) the first day after the period commencing on the date hereof
and ending on the day the Company's financial statements are filed with the
SEC for the first full fiscal quarter after the Company issues any
securities to the public pursuant to a filing with the SEC, subject to
Section 7 hereof, a Zell Holder may Transfer Stockholder Shares only (A) in
Public Sales, (B) if such Zell Holder has complied with the terms and
requirements of Section 4(c) or if such Zell Holder is exercising a tag-
along right granted to such Zell Holder pursuant to Section 4(d), then to
any Person, provided, that such Person shall have complied with the
--------
requirements of Section 4(e)(ii), or (C) pursuant to the terms of Section
5.
(iii) Subject to Section 7 hereof, an Investor may Transfer
Stockholder Shares only (A) in Public Sales, (B) if such Investor has
complied with the terms and requirements of Sections 4(b), 4(c) and 4(d),
to the extent applicable, or if such Investor is exercising a tag-along
right granted to such Investor pursuant to Section 4(d), then to any
Person,
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provided, that such Person shall have complied with the requirements of
--------
Section 4(e)(ii), or (C) pursuant to the terms of Section 5.
(b) Right of First Offer granted to Harvard. Subject to Section
--------------------------------------- 4(e)(i) (all terms defined in this Section 4(b) shall be for purposes of this Section 4(b) only):
(i) If at any time any Bain Investor (a "Selling Holder") proposes to
--------------
Transfer any Stockholder Shares (other than pursuant to a Public Sale, or
pursuant to the terms of Section 5), then such Selling Holder will, not
fewer than fifteen (15) business days prior to making such Transfer, give
notice (the "Proposed Transfer Notice") to Harvard and its Affiliates who
------------------------
then own Stockholder Shares (and not any of their respective assigns) and
to the Company specifying the Stockholder Shares proposed to be Transferred
(the "Offered Shares").
--------------
(ii) At any time within ten (10) business days after delivery of the
Proposed Transfer Notice (the "Exercise Period") Harvard and its Affiliates
---------------
who then own Stockholder Shares (and not any of their respective assigns)
(the "Offering Holder") may notify the Selling Holder and the Company in
---------------
writing of their offer (the "Offer") to purchase all of the Offered Shares
-----
and the price (the "Offered Price") and the other terms and conditions upon
-------------
which such Offering Holder proposes to purchase such Offered Shares (such
offer must be solely for cash) (the "Offer Notice"). The Offer Notice will
------------
constitute an irrevocable offer by the Offering Holder to acquire the
Offered Shares from the Selling Holder at the Offered Price and on the
terms specified in the Offer Notice.
(iii) At any time during the 60 day period commencing upon the
expiration of the Exercise Period, the Selling Holder may
(A) if an Offer Notice has been delivered to the Selling Holder
during the applicable Exercise Period, then (x) deliver notice to the
Offering Holder accepting the applicable Offer (the "Acceptance
----------
Notice") or (y) provided the Selling Holder has also complied with any
applicable provisions of Section 4(d) and no transferee is an
Affiliate of the Selling Holder, Transfer all (unless reduced pursuant
to the exercise of rights granted to other Stockholders in Section
4(d)) of the Offered Shares, at a price which is greater than the
price specified in the Offer Notice and on other terms and conditions
which are not in the aggregate more favorable to the transferee
thereof than those specified in the Offer Notice, to any Person(s), or
(B) if an Offer Notice has not been delivered to the Selling
Holder during the applicable Exercise Period, then, provided the
Selling Holder has also complied with any applicable provisions of
Section 4(d) and no transferee is an Affiliate of the Selling Holder,
Transfer all (unless reduced pursuant to the exercise of rights
granted to other Stockholders in Section 4(d)) of the Offered Shares
to any Person(s).
(iv) Upon the proper delivery of an Acceptance Notice, the Offering
Holder and the Selling Holder shall be firmly bound to consummate the
purchase and sale of the Offered
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Shares in accordance with the terms hereof and the applicable Proposed
Transfer Notice, Offer Notice and Acceptance Notice. Subject to the
provisions hereof, within sixty (60) days after the Offering Holder's
receipt of the applicable Acceptance Notice, the Offering Holder shall
purchase and the Selling Holder shall sell all of the Offered Shares at a
mutually agreeable time and place (the "Offered Shares Closing").
----------------------
(v) At the Offered Shares Closing, the Selling Holder shall deliver to
the Offering Holder certificates representing the Offered Shares to be
purchased by the Offering Holder, duly endorsed with signature guaranteed,
and the Offering Holder shall deliver to the Selling Holder the Offered
Price by wire transfer of immediately available funds to an account
designated by such Selling Holder.
(vi) Any Offered Shares not transferred within the applicable time
periods specified above will again be subject to the provisions of this
Section 4(b) upon any subsequent proposed Transfer.
(vii) The provisions of this Section 4(b) shall terminate upon the
earlier of (x) the consummation of an initial Public Offering or (y) the
date upon which Harvard and its Affiliates (and not any of their respective
assigns) cease to own at least 5% of the outstanding shares of Common
Stock.
(c) Right of First Offer granted to the Company and the Bain
-------------------------------------------------------- Investors. Subject to Section 4(e)(i) (all terms defined in this Section 4(c) shall be for purposes of this Section 4(c) only):
(i) If at any time any Harvard Investor, any SILLC Investor or any
Zell Holder (a "Selling Holder") proposes to Transfer any Stockholder
--------------
Shares (other than pursuant to a Public Sale, or pursuant to the terms of
Section 5), then such Selling Holder will, not fewer than twenty (20)
business days prior to making such Transfer, give notice (the "Proposed
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