<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: February 28, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission file number 1-8738
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SEALY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3284147
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
520 Pike Street, Seattle, Washington 98101
(Address of principal executive (Zip Code)
offices)*
Registrant's telephone number, including area code (206) 625-1233
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
The number of shares of the registrant's common stock outstanding as of
April 1, 1999 was 31,484,950.2711.
- --------
* All Corporate and administrative services are provided by Sealy, Inc., One
Office Parkway, Trinity, North Carolina, 27230.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1--Financial Statements
SEALY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
February 28, March 1,
1999 1998
------------- -------------
<S> <C> <C>
Net sales.......................................... $222,326 $209,259
-------- --------
Costs and expenses:
Cost of goods sold............................... 122,575 121,484
Selling, general and administrative.............. 79,186 69,303
Compensation associated with Recapitalization.... -- 18,294
Amortization of intangibles...................... 2,962 3,162
Interest expense, net............................ 16,521 15,528
-------- --------
221,244 227,771
-------- --------
Income (loss) before income tax and extraordinary
item.............................................. 1,082 (18,512)
Income tax expense (benefit)....................... 669 (747)
-------- --------
Income (loss) before extraordinary item........ 413 (17,765)
Extraordinary item--loss from early extinguishment
of debt (net of income tax benefit of $0 and
$9,636, respectively)............................. -- 14,455
-------- --------
Net income (loss).............................. $ 413 $(32,220)
======== ========
Earnings/(loss) per common share--basic:
Income (loss) before extraordinary item.......... $ 0.01 $ (0.59)
Extraordinary item............................... -- (0.47)
-------- --------
Net income (loss)................................ $ 0.01 $ (1.06)
======== ========
Earnings/(loss) per common share--diluted:
Income (loss) before extraordinary item.......... $ 0.01 $ (0.59)
Extraordinary item............................... -- (0.47)
-------- --------
Net income (loss)................................ $ 0.01 $ (1.06)
======== ========
Weighted average number of common shares
outstanding:
Basic.......................................... 31,438 30,345
Diluted........................................ 31,683 30,345
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
SEALY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
February 28, November 29,
1999 1998
(unaudited) *
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 9,711 $ 11,234
Accounts receivable, net............................ 112,849 106,761
Inventories......................................... 47,326 43,727
Prepaid expenses and deferred taxes................. 24,175 26,445
-------- --------
194,061 188,167
Property, plant and equipment, at cost................ 194,048 189,311
Less: accumulated depreciation........................ (57,795) (53,502)
-------- --------
136,253 135,809
Other assets:
Goodwill and other intangibles, net................. 387,693 390,192
Debt issuance costs, net, and other assets.......... 35,472 36,912
-------- --------
423,165 427,104
-------- --------
$753,479 $751,080
======== ========
</TABLE>
- --------
* Condensed from audited financial statements.
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
SEALY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
February 28, November 29,
1999 1998
(unaudited) *
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term obligations............ $ 10,939 $ 8,576
Accounts payable.................................... 51,042 46,094
Accrued interest.................................... 10,171 13,432
Accrued incentives and advertising.................. 35,483 32,451
Accrued compensation................................ 7,515 15,883
Other accrued expenses.............................. 26,733 26,390
--------- ---------
141,883 142,826
Long-term obligations................................. 686,118 682,271
Other noncurrent liabilities.......................... 34,801 36,069
Deferred income taxes................................. 28,325 28,740
Stockholders' equity (deficit):
Common stock........................................ 315 314
Additional paid-in capital.......................... 134,538 134,530
Retained deficit.................................... (261,420) (261,833)
Foreign currency translation adjustment............. (10,996) (11,837)
Common stock held in treasury, at cost.............. (85) --
--------- ---------
(137,648) (138,826)
--------- ---------
$ 753,479 $ 751,080
========= =========
</TABLE>
- --------
* Condensed from audited financial statements.
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SEALY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
February 28, March 1,
1999 1998
------------- -------------
<S> <C> <C>
Net cash used in operating activities.............. $ (1,313) $ (7,985)
Investing activities:
Purchase of property and equipment, net.......... (3,240) (5,300)
-------- ---------
Net cash used in investing activities.......... (3,240) (5,300)
-------- ---------
Financing activities:
Treasury stock repurchase, including direct
expenses........................................ (85) (413,078)
Proceeds from long-term obligations, net......... 3,107 351,648
Equity issuance.................................. 8 121,317
Costs associated with tender offer of prior
debt............................................ -- (15,361)
Debt issuance costs.............................. -- (31,128)
-------- ---------
Net cash provided by financing activities...... 3,030 13,398
-------- ---------
Change in cash and cash equivalents................ (1,523) 113
Cash and cash equivalents:
Beginning of period.............................. 11,234 6,057
-------- ---------
End of period.................................... $ 9,711 $ 6,170
======== =========
Selected noncash items:
Issuance of Junior Subordinated Notes............ $ -- $ 25,000
Depreciation expense............................. 3,355 2,711
Non-cash interest expense associated with:
Junior Subordinated Notes...................... 856 622
Debt issuance costs............................ 1,044 848
Discount on Senior Subordinated Notes.......... 2,265 1,706
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended February 28, 1999
Note A--Basis of Presentation
This report covers Sealy Corporation and its subsidiaries (collectively, the
"Company").
The accompanying unaudited condensed consolidated financial statements
should be read together with the Company's Annual Report on Form 10-K for the
year ended November 29, 1998.
The accompanying unaudited condensed consolidated financial statements
contain all adjustments which, in the opinion of management, are necessary to
present fairly the financial position of the Company at February 28, 1999, and
its results of operations and cash flows for the periods presented herein. All
adjustments in the periods presented herein are normal and recurring in nature.
Certain reclassifications of previously reported financial information were
made to conform to the 1999 presentation.
Note B--Inventories
The major components of inventories were as follows:
<TABLE>
<CAPTION>
February 28, November 29,
1999 1998
------------ ------------
(In thousands)
<S> <C> <C>
Raw materials................................... $27,610 $25,511
Work in process................................. 15,305 14,140
Finished goods.................................. 4,411 4,076
------- -------
$47,326 $43,727
======= =======
</TABLE>
Note C--Recapitalization
On October 30, 1997, Sealy Corporation entered into an agreement and plan of
merger (the "Merger Agreement") with Sandman Merger Corporation, a transitory
Delaware merger corporation ("Sandman"), and Zell/Chillmark, Fund, L.P., a
Delaware limited partnership ("Zell"). Zell owned approximately 87% of the
issued and outstanding common stock of the Company. Pursuant to the Merger
Agreement, upon the satisfaction of certain conditions, Sandman was merged with
and into the Company with the Company being the surviving corporation effective
on December 18, 1997 (the "Closing Date") and the Company was recapitalized
(the "Recapitalization") whereby certain equity investors, including members of
management, acquired an approximate 90.0% economic equity stake (85.3% voting
equity stake) in the Company. A portion of the issued and outstanding shares of
common stock of the Company was converted into the right to receive aggregate
cash equal to $419.3 million less (i) certain seller fees and expenses and (ii)
certain costs in connection with the extinguishment of certain outstanding
options and warrants of the Company and the remaining portion was converted
into voting preferred stock and then reconverted into $25.0 million in
aggregate principal amount of a junior subordinated note of the Company
("Junior Note") and a retained voting common stock interest in the Company of
approximately 14.7%. (See also Note H -- Subsequent Event).
Concurrent with the Recapitalization, the Company refinanced its then
existing indebtedness by Sealy Mattress Company, a wholly owned subsidiary of
the Company, issuing $125 million principal amount of 9 7/8% Senior
Subordinated Notes, due 2007 and $128 million principal amount (net proceeds of
$75.4 million) of 10 7/8% Senior Subordinated Discount Notes due 2007 and by
entering into and borrowing $460 million under the Senior Credit Agreements.
Net proceeds from these borrowings were $660.4 million.
5
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
The Recapitalization transaction resulted in an aggregate direct net charge
to APIC and retained deficit totaling $438.1 million primarily comprised of the
costs associated with the purchase of the then outstanding Class A and Class B
Common Stock, the repurchase of Merger Warrants and the repurchase of Series A
and Series B Restructure Warrants. The Recapitalization transaction also
resulted in a pretax charge of $18.9 million ($18.3 million recognized in the
first quarter of 1998), of which $16.4 million was non-cash and resulted in a
credit directly to APIC, comprised of accelerated vesting of stock options and
restricted stock and other incentive based compensation payments to employees.
The Company recorded a $14.5 million extraordinary charge, net of income tax
benefit of $9.6 million, representing the write-off of the remaining
unamortized debt issue costs related to long-term obligations repaid in
connection with the Recapitalization as well as consent fees and premiums paid
related to the Tender Offer of the Parent Notes in connection with the
Recapitalization.
Note D--Net Income Per Common Share
The following table sets forth the computation of basic and diluted earnings
per share (in thousands) for the quarter ended:
<TABLE>
<CAPTION>
February 28, March 1,
1999 1998
------------ --------
<S> <C> <C>
Numerator:
Income (loss) before extraordinary item............... $ 413 $(17,765)
Extraordinary item, net of tax........................ -- 14,455
------ --------
Net income (loss)..................................... $ 413 $(32,220)
====== ========
Denominator:
Denominator for basic earnings per share--weighted
average shares....................................... 31,438 30,345
Effect of dilutive securities:
Stock options......................................... 245 --
------ --------
Denominator for diluted earnings per share--adjusted
weighted-average shares and assumed conversions...... 31,683 30,345
====== ========
</TABLE>
Due to a loss from operations for the quarter ended March 1, 1998, the
dilutive securities would have been antidilutive. Accordingly, they were
excluded from the calculation of diluted earnings per share.
Note E--Comprehensive Income
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Financial Accounting Standard ("FAS") No. 130, "Reporting Comprehensive
Income", effective for the fiscal years beginning after December 15, 1997, the
Company's fiscal year 1999. FAS 130 requires that the Company report
comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income represents the change in
stockholders' equity during the period from nonowner sources. Currently, other
comprehensive income consists only of foreign currency translation adjustments.
The adoption of FAS 130 will have no impact on the Company's net income or
stockholders' equity.
The Company adopted FAS 130 on November 30, 1998. Total comprehensive income
(loss) for the quarters ended February 28, 1999 and March 1, 1998 was $1.3
million and $(32.5) million, respectively.
6
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
Activity in Stockholders' Equity is as follows (dollar amounts in
thousands):
<TABLE>
<CAPTION>
Accumulated
Current Additional Other
Comprehensive Common Paid-in Retained Treasury Comprehensive
Income Stock Capital Earnings Stock Income Total
------------- ------ ---------- ---------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at November 29,
1998.................. $ 314 $ 134,530 $ (261,833) $ (11,837) $ (138,826)
Exercise of Options.... 1 8 9
Purchase of Treasury
Stock................. $ (85) (85)
Comprehensive Income:
Net income for the
three months ended
February 28, 1999.... $ 413 413 413
Foreign currency
translation
adjustment........... 841 841 841
------- ----- --------- ---------- ----- --------- ----------
Balance at February 28,
1999.................. $ 1,254 $ 315 $ 134,538 $ (261,420) $ (85) $ (10,996) $ (137,648)
======= ===== ========= ========== ===== ========= ==========
</TABLE>
Note F--Contingencies
In accordance with procedures established under the Environmental Cleanup
Responsibility Act (now known as the Industrial Site Recovery Act), Sealy and
one of its subsidiaries are parties to an Administrative Consent Order ("ACO")
issued by the New Jersey Department of Environmental Protection ("DEP").
Pursuant to the ACO, the Company and such subsidiary agreed to conduct soil and
groundwater investigation and remediation at the plant previously owned by the
subsidiary in South Brunswick, New Jersey. The Company does not believe that
its manufacturing processes were a source of the contaminants found to exist
above regulatorily acceptable levels in the groundwater. The Company and its
subsidiary have retained primary responsibility for the investigation and any
necessary clean up plan approved by the DEP under the terms of the ACO.
In 1997, the Company, with DEP approval, completed essentially all soil
remediation and conducted a pilot test for a company-proposed revision to the
groundwater remediation program. The Company's revised groundwater remediation
plan was submitted in May, 1998 to the DEP for approval.
While the Company cannot predict the ultimate timing or cost to remediate
this facility based on facts currently known, management believes the
previously established accrual for site investigation and remediation costs is
adequate to cover the Company's reasonably estimable liability and does not
believe the resolution of this matter will have a material adverse effect on
the Company's financial position or future operations.
In March, 1994, the Company filed a claim in the U.S. District Court for the
District of New Jersey against former owners of the site and their lenders
under the Comprehensive Environmental Response, Compensation and Liability Act
seeking contribution for site investigation and remedial costs. In March, 1997,
the Company received $1.7 million from a former owner of the site and one of
the lenders to the former owner in the final settlement of this litigation
which was recorded as an increase to other noncurrent liabilities.
In January 1997, the Company filed a claim in the U.S. District Court of New
Jersey against former insurance companies for the Company under the
Comprehensive Environmental Response, Compensation and Liability Act seeking
contribution for site investigation and remedial costs. A parallel case seeking
a judgment of non-liability was filed by some (but not all) of these insurance
companies in the U.S. District Court for the Northern District of Ohio. Both
the New Jersey and Ohio District Courts have ruled that New Jersey law
7
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
applies. In November, 1998, the Company settled these cases when the insurers
paid the Company approximately $3.8 million which was recorded as an increase
to other noncurrent liabilities.
The Company also has begun to remediate soil and groundwater contamination
at an inactive facility located in Oakville, Connecticut. The Company submitted
a soil and groundwater remediation plan to the Connecticut Department of
Environmental Protection in December 1998. The Company believes the
contamination is attributable to the manufacturing operations of previous
unaffiliated occupants of the facility. In 1994, the Company filed a cost
recovery action in U.S. District Court of Connecticut to require these entities
to complete the remediation and reimburse the Company for its cleanup costs.
Trial of this matter has been bifurcated with the issue of damages only now
scheduled for trial in May, 1999. Based on the facts currently known,
management does not believe that resolution of this matter will have a material
adverse effect on the Company's financial position or future operations.
On May 22, 1997, the Company filed in the United States District Court for
the Northern District of Illinois a motion to terminate certain antitrust final
judgments (the "Judgments") entered on December 30, 1964 and December 26, 1967.
These Judgments, among other things, prohibited the Company from suggesting
resale prices to its dealers. During the pendency of the Company's motion to
terminate the Judgments the Department of Justice (the "Department") on
September 8, 1997, issued to the Company a Civil Investigative Demand ("CID")
seeking documents relating to, among other things, communications between the
Company and dealers concerning the retail prices of mattresses. In response to
the CID, the Company produced certain documents and the deposition of a Company
executive was taken. Immediately following such document production and
deposition, the Department consented to the termination of the Judgments and an
order terminating the Judgments was entered by the Court on September 19, 1997.
The Company has produced additional documents in response to the CID, and is
cooperating with the Department in its investigation.
Note G--Guarantor/Non-Guarantor Financial Information
The Parent and each of the Guarantor Subsidiaries has fully and
unconditionally guaranteed, on a joint and several basis, the obligation to pay
principal and interest with respect to the Senior Subordinated and Senior
Subordinated Discount Notes of Sealy Mattress Company (the "Issuer").
Substantially all of the Issuer's operating income and cash flow is generated
by its subsidiaries. As a result, funds necessary to meet the Issuer's debt
service obligations are provided in part by distributions or advances from its
subsidiaries. Under certain circumstances, contractual and legal restrictions,
as well as the financial condition and operating requirements of the Issuer's
subsidiaries, could limit the Issuer's ability to obtain cash from its
subsidiaries for the purpose of meeting its debt service obligations, including
the payment of principal and interest on the Notes. Although holders of the
Notes will be direct creditors of the Issuer's principal direct subsidiaries by
virtue of the guarantees, the Issuer has subsidiaries ("Non-Guarantor
Subsidiaries") that are not included among the Guarantor Subsidiaries, and such
subsidiaries will not be obligated with respect to the Notes. As a result, the
claims of creditors of the Non-Guarantor Subsidiaries will effectively have
priority with respect to the assets and earnings of such companies over the
claims of creditors of the Issuer, including the holders of the Notes.
The following supplemental consolidating condensed financial statements
present:
1. Consolidating condensed balance sheets as of February 28, 1999 and
November 29, 1998 and consolidating condensed statements of
operations and cash flows for the three months ended February 28,
1999 and March 1, 1998.
8
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
2. Sealy Corporation (the "Parent" and a "guarantor"), Sealy Mattress
Company (the "Issuer"), combined Guarantor Subsidiaries and combined
Non-Guarantor Subsidiaries with their investments in subsidiaries
accounted for using the equity method.
3. Elimination entries necessary to consolidate the Parent and all of its
subsidiaries.
Management does not believe that separate financial statements of the
Guarantor Subsidiaries are material to investors in the Notes.
9
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
SEALY CORPORATION
SUPPLEMENTAL CONSOLIDATING CONDENSED BALANCE SHEET
FEBRUARY 28, 1999
(in thousands)
<TABLE>
<CAPTION>
Combined
Sealy Combined Non-
Sealy Mattress Guarantor Guarantor
Corporation Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ -- $ 11 $ 6,202 $ 3,498 $ -- $ 9,711
Accounts receivable,
net................... -- 3,289 99,073 10,487 -- 112,849
Inventories............ -- 1,188 41,412 4,726 -- 47,326
Prepaids and deferred
taxes................. 733 323 20,829 2,290 -- 24,175
---------- --------- -------- -------- --------- ---------
733 4,811 167,516 21,001 -- 194,061
Property, plant and
equipment, at cost..... -- 4,980 177,308 11,760 -- 194,048
Less: accumulated
depreciation........... -- (1,801) (53,301) (2,693) -- (57,795)
---------- --------- -------- -------- --------- ---------
-- 3,179 124,007 9,067 -- 136,253
Other assets:
Goodwill and other
intangibles, net...... -- 13,951 347,663 26,079 -- 387,693
Net investment in and
advances to (from)
subsidiaries and
affiliates............ (106,733) 500,741 (352,199) (26,195) (15,614) --
Debt issuance costs,
net and other
assets................ -- 27,846 7,600 26 -- 35,472
---------- --------- -------- -------- --------- ---------
(106,733) 542,538 3,064 (90) (15,614) 423,165
---------- --------- -------- -------- --------- ---------
Total assets......... $ (106,000) $ 550,528 $294,587 $ 29,978 $ (15,614) $ 753,479
========== ========= ======== ======== ========= =========
Liabilities and
Stockholders' Equity
(Deficit)
Current liabilities:
Current portion--long-
term obligation....... $ -- $ 10,667 $ 272 $ -- $ -- $ 10,939
Accounts payable....... -- 164 44,885 5,993 -- 51,042
Accrued interest....... -- 506 9,486 179 -- 10,171
Accrued incentives and
advertising........... -- 1,586 32,108 1,789 -- 35,483
Accrued compensation... -- 227 6,635 653 -- 7,515
Other accrued
expenses.............. 2,011 421 23,549 752 -- 26,733
---------- --------- -------- -------- --------- ---------
2,011 13,571 116,935 9,366 -- 141,883
Long-term debt.......... 28,878 643,895 13,345 -- -- 686,118
Other noncurrent
liabilities............ 3,585 -- 31,196 20 -- 34,801
Deferred income taxes... (2,826) 525 27,725 2,901 -- 28,325
Stockholders' equity
(deficit).............. (137,648) (107,463) 105,386 17,691 (15,614) (137,648)
---------- --------- -------- -------- --------- ---------
Total liabilities and
stockholders' equity
(deficit)........... $ (106,000) $ 550,528 $294,587 $ 29,978 $ (15,614) $ 753,479
========== ========= ======== ======== ========= =========
</TABLE>
10
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
SEALY CORPORATION
SUPPLEMENTAL CONSOLIDATING CONDENSED BALANCE SHEET
NOVEMBER 29, 1998
(in thousands)
<TABLE>
<CAPTION>
Combined
Sealy Combined Non-
Sealy Mattress Guarantor Guarantor
Corporation Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ -- $ 22 $ 9,162 $ 2,050 $ -- $ 11,234
Accounts receivable,
net................... -- 3,404 92,644 10,713 -- 106,761
Inventories............ -- 1,216 38,123 4,388 -- 43,727
Prepaid expenses and
deferred taxes........ 714 341 22,190 3,200 -- 26,445
---------- --------- --------- -------- ------- ---------
714 4,983 162,119 20,351 -- 188,167
Property, plant and
equipment, at cost..... -- 4,796 172,375 12,140 -- 189,311
Less: accumulated
depreciation........... -- (1,730) (49,189) (2,583) -- (53,502)
---------- --------- --------- -------- ------- ---------
-- 3,066 123,186 9,557 -- 135,809
Other assets:
Goodwill and other
intangibles, net...... -- 14,050 350,291 25,851 -- 390,192
Net investment in and
advances to (from)
subsidiaries and
affiliates............ (108,153) 493,268 (364,090) (26,614) 5,589 --
Debt issuance costs,
net and other
assets................ -- 28,929 7,959 24 -- 36,912
---------- --------- --------- -------- ------- ---------
(108,153) 536,247 (5,840) (739) 5,589 427,104
---------- --------- --------- -------- ------- ---------
Total assets......... $ (107,439) $ 544,296 $ 279,465 $ 29,169 $ 5,589 $ 751,080
========== ========= ========= ======== ======= =========
Liabilities and
Stockholders' Equity
(Deficit)
Current liabilities:
Current portion--long-
term obligations...... $ -- $ 8,375 $ 201 $ -- $ -- $ 8,576
Accounts payable....... -- 93 41,067 4,934 -- 46,094
Accrued interest....... -- -- 13,432 -- -- 13,432
Accrued incentives and
advertising........... -- 1,626 28,685 2,140 -- 32,451
Accrued compensation... -- 357 14,576 950 -- 15,883
Other accrued
expenses.............. 1,985 391 23,166 848 -- 26,390
---------- --------- --------- -------- ------- ---------
1,985 10,842 121,127 8,872 -- 142,826
Long-term obligations... 28,023 641,796 12,452 -- -- 682,271
Other noncurrent
liabilities............ 3,585 -- 32,484 -- -- 36,069
Deferred income taxes... (2,206) 755 26,467 3,724 -- 28,740
Stockholders' equity
(deficit).............. (138,826) (109,097) 86,935 16,573 5,589 (138,826)
---------- --------- --------- -------- ------- ---------
Total liabilities and
stockholders' equity
(deficit)........... $ (107,439) $ 544,296 $ 279,465 $ 29,169 $ 5,589 $ 751,080
========== ========= ========= ======== ======= =========
</TABLE>
11
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
SEALY CORPORATION
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 1999
(in thousands)
<TABLE>
<CAPTION>
Sealy Combined Combined
Sealy Mattress Guarantor Non-Guarantor
Corporation Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- -------- ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $ -- $ 8,735 $201,460 $15,540 $(3,409) $222,326
Costs and expenses:
Cost of goods sold..... -- 5,604 110,387 10,006 (3,422) 122,575
Selling, general and
administrative........ 53 2,822 71,915 4,383 13 79,186
Amortization of
intangibles........... -- 99 2,638 225 -- 2,962
Interest expense, net.. 949 15,453 247 (128) -- 16,521
Loss (income) from
equity investees...... (795) (952) -- -- 1,747 --
Loss (income) from
nonguarantor equity
investees............. -- 15 (310) -- 295 --
Intercompany interest
allocation............ -- (14,871) 14,591 280 -- --
----- ------- -------- ------- ------- --------
Income (loss) before
income taxes........... (207) 565 1,992 774 (2,042) 1,082
Income expense
(benefit).............. (620) (230) 1,040 479 -- 669
----- ------- -------- ------- ------- --------
Net income (loss)....... $ 413 $ 795 $ 952 $ 295 $(2,042) $ 413
===== ======= ======== ======= ======= ========
</TABLE>
12
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
SEALY CORPORATION
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 1, 1998
(in thousands)
<TABLE>
<CAPTION>
Sealy Combined Combined
Sealy Mattress Guarantor Non-Guarantor
Corporation Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- -------- ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $ -- $ 9,781 $185,535 $18,022 $(4,079) $209,259
Costs and expenses:
Cost of goods sold..... -- 6,258 108,012 11,300 (4,086) 121,484
Selling, general and
administrative........ 572 2,880 59,891 5,960 -- 69,303
Compensation associated
with
Recapitalization...... 16,854 -- 1,440 -- -- 18,294
Amortization of
intangibles........... -- 99 2,914 149 -- 3,162
Interest expense, net.. 2,197 13,395 (41) (23) -- 15,528
Loss (income) from
equity investees...... (1,059) (1,552) -- -- 2,611 --
Loss (income) from
nonguarantor equity
investees............. -- 243 (181) -- (62) --
Intercompany interest
allocation............ -- (12,591) 11,890 701 -- --
-------- ------- -------- ------- ------- --------
Income (loss) before
income taxes and
extraordinary item..... (18,564) 1,049 1,610 (65) (2,542) (18,512)
Income tax expense
(benefit).............. (799) (10) 58 (3) 7 (747)
-------- ------- -------- ------- ------- --------
Income (loss) before
extraordinary item..... (17,765) 1,059 1,552 (62) (2,549) (17,765)
Extraordinary item...... 14,455 -- -- -- -- 14,455
-------- ------- -------- ------- ------- --------
Net income (loss)....... $(32,220) $ 1,059 $ 1,552 $ (62) $(2,549) $(32,220)
======== ======= ======== ======= ======= ========
</TABLE>
13
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
SEALY CORPORATION
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED FEBRUARY 28, 1999
(in thousands)
<TABLE>
<CAPTION>
Combined
Sealy Combined Non-
Sealy Mattress Guarantor Guarantor
Corporation Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities............. $ 30 $ 500 $(3,078) $ 1,235 $ -- $(1,313)
----- ------- ------- ------- ----- -------
Cash flows from
investing activities:
Purchase of property
and equipment, net... -- (210) (3,613) 583 -- (3,240)
Net activity in
investment in and
advances to (from)
subsidiaries and
affiliates........... 47 (2,444) 2,767 (370) -- --
----- ------- ------- ------- ----- -------
Net proceeds provided by
(used in) investing
activities............. 47 (2,654) (846) 213 -- (3,240)
Cash flows from
financing activities:
Treasury stock
repurchase costs, net
of direct expenses... (85) -- -- -- -- (85)
Proceeds from long-
term obligations,
net.................. -- 2,143 964 -- -- 3,107
Equity issuance....... 8 -- -- -- -- 8
----- ------- ------- ------- ----- -------
Net cash provided by
(used in) financing
activities.......... (77) 2,143 964 -- -- 3,030
----- ------- ------- ------- ----- -------
Change in cash and cash
equivalents............ -- (11) (2,960) 1,448 -- (1,523)
Cash and cash
equivalents:
Beginning of period..... -- 22 9,162 2,050 -- 11,234
----- ------- ------- ------- ----- -------
End of period........... $ -- $ 11 $ 6,202 $ 3,498 -- $ 9,711
===== ======= ======= ======= ===== =======
</TABLE>
14
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
SEALY CORPORATION
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 1, 1998
(in thousands)
<TABLE>
<CAPTION>
Combined
Sealy Combined Non-
Sealy Mattress Guarantor Guarantor
Corporation Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities............. $ (2,384) $ 929 $(7,707) $1,177 $ -- $ (7,985)
--------- --------- ------- ------ ----- ---------
Cash flows from
investing activities:
Purchase of property
and equipment, net... -- (174) (5,031) (95) -- (5,300)
Net activity in
investment in and
advances to (from)
subsidiaries and
affiliates........... 637,305 (649,074) 10,707 1,062 -- --
--------- --------- ------- ------ ----- ---------
Net proceeds provided by
(used in) investing
activities............. 637,305 (649,248) 5,676 967 -- (5,300)
Cash flows from
financing activities:
Treasury stock
repurchase costs, net
of direct expenses... (413,078) -- -- -- -- (413,078)
Proceeds from
(repayment of) long-
term obligations,
net.................. (327,799) 679,447 -- -- -- 351,648
Equity issuances...... 121,317 -- -- -- -- 121,317
Debt issuance costs... -- (31,128) -- -- -- (31,128)
Costs associated with
tender offer of prior
debt................. (15,361) -- -- -- -- (15,361)
--------- --------- ------- ------ ----- ---------
Net cash provided by
(used in) financing
activities.......... (634,921) 648,319 -- -- -- 13,398
--------- --------- ------- ------ ----- ---------
Change in cash and cash
equivalents............ -- -- (2,031) 2,144 -- 113
Cash and cash
equivalents:
Beginning of period..... -- 20 2,062 3,975 -- 6,057
--------- --------- ------- ------ ----- ---------
End of period........... $ -- $ 20 $ 31 $6,119 $ -- $ 6,170
========= ========= ======= ====== ===== =========
</TABLE>
15
<PAGE>
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three months ended February 28, 1999
Note H--Subsequent Event
In March, 1999 the Company's non-management shareholders and ten of the
Company's senior executives purchased all of the Company's common stock held by
Zell. The Company loaned a total of $812,820 to seven of those senior
executives to purchase their portion of such shares from Zell. Those loans are
five-year full recourse loans with an interest rate of five percent and are
secured by the shares being acquired by the executive.
16
<PAGE>
SEALY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2--Quarter Ended February 28, 1999 compared with quarter ended March 1,
1998
Net Sales. Net sales increased $13.1 million, or 6.2% for the quarter ended
February 28, 1999, when compared to the quarter ended March 1, 1998. The
increase is attributable to an increase in average unit selling price with
essentially no change in unit volume. The increase in average unit selling
price is primarily attributable to the introduction of the Crown Jewel DSS line
and a strong increase in the Stearns & Foster brand.
Cost of Goods Sold. Cost of goods sold for the quarter, as a percentage of
net sales, decreased 3.0 percentage points to 55.1%. This decrease is primarily
attributable to an increase in sales of higher end units, such as the Crown
Jewel DSS and Stearns & Foster brands; improved plant efficiencies, which
realized savings from a reduction in manufacturing overhead and reduced prices
for certain raw materials.
Selling, General, and Administrative. Selling, general, and administrative
expenses increased $9.9 million. This increase is primarily due to the
increased marketing expenses, of $5.9 million, associated with increased sales
volume, as well as higher cooperative advertising and promotions associated
with the new Crown Jewel DSS product launch. In addition, the Company incurred
$1.4 million associated with the relocation of the Corporate headquarters to
High Point, North Carolina, a foreign currency loss of $1.8 million associated
with its foreign operations (primarily associated with test market activities
in Brazil) and $0.8 million in costs associated with Year 2000 compliance.
Compensation Associated with Recapitalization. In the first quarter of 1998,
the Company recorded a charge of $18.3 million as a result of accelerated
vesting of stock options and restricted stock, other incentive based
compensation payments and option grants to employees in connection with the
Recapitalization.
Interest Expense. Interest expense, net of interest income, increased $1.0
million primarily due to higher debt levels as a result of the Recapitalization
in mid-December 1997.
Income Tax. The Company's effective income tax rates in 1999 and 1998 differ
from the Federal statutory rate principally because of the application of
purchase accounting, the effect of certain foreign tax rate differentials, and
state and local income taxes. The Company's effective tax rate for 1999 is
expected to be approximately 61.8% compared to 24.4% for 1998. The relatively
low effective tax rate for 1998 was due to low full year projected pretax
income resulting from increased leverage and compensation charges associated
with the Recapitalization.
Extraordinary Item. In the first quarter of 1998, the Company recorded a
$14.5 million charge, net of income tax benefit of $9.6 million, representing
the write-off of the remaining unamortized debt issue costs related to long-
term obligations repaid in connection with the Recapitalization as well as
consent fees and premiums paid related to the Tender Offer of the Parent Notes
in connection with the Recapitalization.
Net (Loss) Income. For the reasons set forth above, the Company recorded net
income of $0.4 million for the quarter ended February 28, 1999 versus a net
loss of $(32.2) million for the quarter ended March 1, 1998.
Liquidity and Capital Resources
The Company's principal sources of funds are cash flows from operations and
borrowings under its Revolving Credit Facility. The Company's principal use of
funds consists of payments of principal and interest on its Senior Credit
Agreements, capital expenditures and interest payments on its outstanding
Notes. Capital expenditures totaled $3.8 million for the quarter ended February
28, 1999. Management believes that annual capital expenditure limitations in
its current debt agreements will not significantly inhibit the Company from
17
<PAGE>
SEALY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
meeting its ongoing capital needs. At February 28, 1999, the Company had
approximately $90.9 million available under its Revolving Credit Facility with
Letters of Credit issued totaling approximately $3.8 million outstanding. The
weighted average interest rate on the Revolving Credit Facility at February 28,
1999 was 8.9%.
Management believes that the Company will have the necessary liquidity
through cash flow from operations, and availability under the Revolving Credit
Facility for the next several years to fund its expected capital expenditures,
obligations under its credit agreement and subordinated note indentures,
environmental liabilities, and for other needs required to manage and operate
its business.
Year 2000 Issue
Until recently, computer programs were generally written using two digits
rather than four to define the applicable year. Accordingly, such programs may
be unable to distinguish properly between the Year 1900 and the Year 2000. This
could result in system failures or data corruption for the Company, its
customers or suppliers which could cause disruptions of operations, including,
among other things, a temporary inability to process transactions or engage in
business activities or to receive information, services, raw materials and
supplies, or payment from suppliers, customers or business partners or any
other companies with which the Company conducts business.
The Company believes that the new business systems, including appropriate
software, being installed both alongside and as part of an upgrade of its
existing computer system will address the dating system flaw inherent in most
operating systems (the "Year 2000 Issue"). There can be no assurance, however,
that the new business systems will be installed and fully operational at all
locations and for all applications prior to the turn of the century, and
management has therefore deemed it necessary to convert its current system to
be Year 2000 compliant.
The Company conducted a comprehensive impact analysis to determine what
computing platforms and date-aware functions with respect to its existing
computer operating systems will be disrupted by the Year 2000 Issue. In January
1998, the Company completed a prioritization of the impacted areas identified
to date and commenced the detailed program code changes through a contracted
third party vendor which has experience in Year 2000 conversions for the
Company's existing system including the same release of such system. The
Company has received converted source code from the contracted vendor, has
validated the code, and is currently implementing the converted programs. The
Company's current timetable anticipates rollout and implementation to all
locations by August, 1999. As of March 31, 1999, 4 of 26 locations are in
"production status" with the Y2K compliant business system. Five more locations
are scheduled for April, 1999 implementation. At this time, the Company has not
deemed it necessary to develop contingency plans for any of the applications
being converted, however, the Company will continue to assess this and will
develop contingency plans for any applications not converted and operating by
August, 1999. Senior management regularly reviews the status of the Year 2000
program and the Company has hired an independent third party to review and
report on the Company's status and preparedness.
The Company is currently in the process of replacing personal computers and
phone systems that are not Year 2000 compliant. The Company has confirmed that
its primary manufacturing equipment is Year 2000 compliant. Major suppliers to
the Company have been contacted and the Company has received confirmation of
Year 2000 compliance or a timetable to be compliant from such suppliers. The
Company is in the preliminary stages of assessment of its customer status with
respect to the Year 2000 Issue. Contingency plans will be developed for any
significant suppliers or customers that are not Year 2000 compliant by August
1999 or earlier if the Company becomes aware that such entities may not be Year
2000 compliant in a timely manner.
18
<PAGE>
SEALY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
The Company is funding the expenditures related to the Year 2000 plan with
cash flows from operations The required code changes, testing and
implementation necessary to address the Year 2000 Issue are expected to cost
approximately $3.25 million and the Company has incurred $1.7 million through
February, 1999, with approximately $0.8 incurred during the current quarter.
The Company estimates that it is approximately 50% complete with the efforts
required to be Year 2000 compliant.
Even though the Company's Year 2000 plan should adequately address the Year
2000 Issue, there can be no assurance that unforeseen difficulties will not
arise. If the Company does not identify and fix all Year 2000 problems, or if a
major supplier or customer is unable to adequately address its Year 2000 Issue,
the Company's results of operations or financial condition could be materially
impacted. A possible worst case scenario might include one or more of the
Company's significant manufacturing or information technology systems being
interrupted causing a delay or curtailment in the production and/or
distribution of goods, a delay or curtailment in the billing and collection of
revenues, an inability to maintain accounting records accurately, and/or an
inability to manage its financial resources, potentially causing a material
impact on the Company's results of operations and financial position. The
Company is engaged in extensive efforts to provide a continuous, uninterrupted
flow of goods and services to customers.
Forward Looking Statements
This document contains forward-looking statements within the meaning of the
safe harbor provisions of the Private Securities litigation Report Act of 1995.
Although the Company believes its plans are based upon reasonable assumptions
as of the current date, it can give no assurances that such expectations can be
attained. Factors that could cause actual results to differ materially from the
Company's expectations include: general business and economic conditions,
competitive factors, raw materials pricing, and fluctuations in demand.
Item 3--Quantitative and Qualitative Disclosures About Market Risk
Information relative to the Company's market risk sensitive instruments by
major category at November 29, 1998 is presented under Item 7a of the
registrant's Annual Report on Form 10-K for the fiscal year ended November 29,
1998.
Foreign Currency Exposures
The Company's earnings are affected by fluctuations in the value of its
subsidiaries' functional currency as compared to the currencies of its foreign
denominated purchases. Foreign currency forward contracts are used to hedge
against the earnings effects of such fluctuations. The result of a uniform 10%
change in the value of the U.S. dollar relative to currencies of countries in
which the Company manufactures or sells its products would not be material to
earnings or financial position. This calculation assumes that each exchange
rate would change in the same direction relative to the U.S. dollar.
Interest Rate Risk
Because the Company's obligations under the bank credit agreement bear
interest at floating rates, the Company is sensitive to changes in prevailing
interest rates. The Company uses derivative instruments to manage its long-term
debt interest rate exposure, rather than for trading purposes. A 10% increase
or decrease in market interest rates that effect the Company's interest rate
derivative instruments would not have a material impact on earnings during the
next fiscal year.
19
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See Note F to the Condensed Consolidated Financial Statements, Part I,
Item 1 included herein.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<C> <S>
10.1 Stock Purchase Agreement entered into as of March 31, 1999, by and among
Bain Capital Fund V, L.P., Bain Capital Fund V-B, L.P., BCIP Associates,
BCIP Trust Associates, L.P., Randolph Street Partners II, Zell/Chilmark
Fund, L.P., and Sealy Corporation.
10.2 Stock Purchase Agreement entered into as of March 31, 1999, by and among
Bain Capital Fund V, L.P., Bain Capital Fund V-B, L.P., BCIP Associates
("BCIP") BCIP Trust Associates, L.P., Harvard Private Capital Holdings,
Inc., Sealy Investors 1, LLC, Sealy Investors 2, LLC, Sealy Investors 3,
LLC, Randolph Street Partners II, the Management Investors (as therein
defined) and Sealy Corporation.
10.3 Recourse Promissory Note dated March 31, 1999 and issued to Sealy
Mattress Company by Ronald Jones in the principal amount of $582,495.
10.4 Recourse Promissory Note dated March 31, 1999 and issued to Sealy
Mattress Company by David McIlquham in the principal amount of $48,203.
10.5 Recourse Promissory Note dated March 31, 1999 and issued to Sealy
Mattress Company by Bruce Barman in the principal amount of $48,203.
10.6 Recourse Promissory Note dated March 31, 1999 and issued to Sealy
Mattress Company by Gary Fazio in the principal amount of $48,203.
10.7 Recourse Promissory Note dated March 31, 1999 and issued to Sealy
Mattress Company by Douglas Fellmy in the principal amount of $48,203.
10.8 Recourse Promissory Note dated March 31, 1999 and issued to Sealy
Mattress Company by Richard Sowerby in the principal amount of $26,617.
10.9 Recourse Promissory Note dated March 31, 1999 and issued to Sealy
Mattress Company by E. Lee Wyatt in the principal amount of $10,896.
10.10 Pledge Agreement dated as of March 31, 1999, between Ronald Jones and
Sealy Mattress Company.
10.11 Pledge Agreement dated as of March 31, 1999, between David McIlquham and
Sealy Mattress Company.
10.12 Pledge Agreement dated as of March 31, 1999, between Bruce Barman and
Sealy Mattress Company.
10.13 Pledge Agreement dated as of March 31, 1999, between Gary Fazio and
Sealy Mattress Company.
10.14 Pledge Agreement dated as of March 31, 1999, between Douglas Fellmy and
Sealy Mattress Company.
10.15 Pledge Agreement dated as of March 31, 1999, between Richard Sowerby and
Sealy Mattress Company.
10.16 Pledge Agreement dated as of March 31, 1999, between E. Lee Wyatt and
Sealy Mattress Company.
27.1 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K:
None
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Sealy Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SEALY CORPORATION
Title
Signature
/s/ Ronald L. Jones
By: _________________________________ Chairman, President and Chief
Ronald L. Jones Executive Officer Ronald L. Jones
(Principal Executive Officer)
/s/ Lee Wyatt
By: _________________________________ Corporate Vice President--
E. Lee Wyatt Administration E. Lee Wyatt
(Principal Accounting Officer)
Date: April 14, 1999
21
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as of
---------
March 31, 1999, by and among 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"); Randolph Street Partners II ("Randolph");
---------- --------
Zell/Chilmark Fund, L.P. ("Seller"); and Sealy Corporation, a Delaware
------
corporation (the "Company"). Bain Fund V, Bain Fund V-B, BCIP, BCIP Trust and
-------
Randolph are referred to collectively herein as "Buyers". Buyers, Seller and
------
the Company are referred to collectively herein as the "Parties".
-------
WHEREAS, as of immediately prior to the execution of this Agreement, Seller
owns 2,862,000 shares (such shares, the "Pre-Converted Class A Shares") of Class
----------------------------
A Common (as herein defined) and 318,000 shares (such shares, the "Pre-Converted
-------------
Class L Shares") of Class L Common (as herein defined);
- --------------
WHEREAS, pursuant to Section 2(a) of this Agreement, on the date hereof,
Bain Fund V is converting (x) 285,240.4503 of the shares of Class A Common owned
by Bain Fund V into 285,240.4503 shares of Class B Common (as herein defined)
and (y) 65,015.3152 of the shares of Class L Common owned by Bain Fund V into
65,015.3152 shares of Class M Common (as herein defined);
WHEREAS, pursuant to Section 2(b) of this Agreement, on the date hereof,
Bain Fund V-B is converting (x) 3,000,000 of the shares of Class A Common owned
by Bain Fund V-B into 3,000,000 shares of Class B Common and (y) 400,000 of the
shares of Class L Common owned by Bain Fund V-B into 400,000 shares of Class M
Common;
WHEREAS, pursuant to Section 2(c) of this Agreement, on the date hereof,
BCIP is converting (x) 107,687.2807 of the shares of Class A Common owned by
BCIP into 107,687.2807 shares of Class B Common and (y) 24,580.1103 of the
shares of Class L Common owned by BCIP into 24,580.1103 shares of Class M
Common;
WHEREAS, pursuant to Section 2(d) of this Agreement, on the date hereof,
BCIP Trust is converting (x) 320,050.0166 of the shares of Class A Common owned
by BCIP Trust into 320,050.0166 shares of Class B Common and (y) 73,064.5515 of
the shares of Class L Common owned by BCIP Trust into 73,064.5515 shares of
Class M Common;
WHEREAS, pursuant to Section 2(e) of this Agreement, on the date hereof,
Seller is converting (x) 2,240,372.7328 of the Pre-Converted Class A Shares into
2,240,372.7328 shares of Class B Common and (y) 248,930.3036 of the Pre-
Converted Class L Shares into 248,930.3036 shares of Class M Common, so that,
after such conversion, Seller owns 621,627.2672 shares of Class A Common,
2,240,372.7328 shares of Class B Common, 69,069.6964 shares of Class L Common
and 248,930.3036 shares of Class M Common (such shares of Class A Common, Class
B Common, Class L Common and Class M Common, the "Purchase Shares");
---------------
<PAGE>
WHEREAS, the Seller has notified the Company and the Buyers that it
proposes to Transfer (as such term is defined in the Stockholders Agreement) the
Purchase Shares;
WHEREAS, the Company has (by execution of a counterpart of this Agreement)
waived its right of first offer under Section 4(c) of the Stockholders Agreement
with respect to the Purchase Shares;
WHEREAS, each of the Buyers is a "Bain Offering Holder" under Section
4(c)(iii) of the Stockholders Agreement; and
WHEREAS, the Buyers (as Bain Offering Holders) have exercised their
respective rights of first offer under Section 4(c)(iii) of the Stockholders
Agreement with respect to the Purchase Shares, and the Seller, in respect of its
obligations under the Stockholders Agreement, and in accordance with the terms
and conditions of this Agreement, desires to sell to Buyers, and Buyers desire
to purchase, the Purchase Shares.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
-----------
"Adverse Consequences" means all actions, suits, proceedings, hearings,
--------------------
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"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.
"Confidential Information" means any information concerning the businesses
------------------------
and affairs of the Company and its subsidiaries that is not already generally
available to the public.
"Person" means an individual, a partnership, a corporation, an association,
------
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Registration Rights Agreement" means the Registration Rights Agreement,
-----------------------------
dated as of December 18, 1997, among the Company, Seller, the Buyer and the
other equityholders of the Company named therein.
-2-
<PAGE>
"Sealy Certificate of Incorporation" means the Certificate of Incorporation
----------------------------------
of the Company as in effect on the date hereof.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
-----------------
or other security interest.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
----------------------
December 18, 1997, among the Company, Seller, the Buyer and the other
equityholders of the Company named therein.
2. Conversion of Common Stock by Seller and certain of the Buyers.
--------------------------------------------------------------
(a) As permitted by Section 6 of Part C of Article Four of the Sealy
Certificate of Incorporation, Bain Fund V hereby converts (the "Bain Fund V
-----------
Conversion") as of immediately prior to the Closing (as herein defined) (x)
- ----------
285,240.4503 of the shares of Class A Common owned by Bain Fund V into
285,240.4503 shares of Class B Common and (y) 65,015.3152 of the shares of Class
L Common owned by Bain Fund V into 65,015.3152 shares of Class M Common.
(b) As permitted by Section 6 of Part C of Article Four of the Sealy
Certificate of Incorporation, Bain Fund V-B hereby converts (the "Bain Fund V-B
-------------
Conversion") as of immediately prior to the Closing (x) 3,000,000 of the shares
- ----------
of Class A Common owned by Bain Fund V-B into 3,000,000 shares of Class B Common
and (y) 400,000 of the shares of Class L Common owned by Bain Fund V-B into
400,000 shares of Class M Common.
(c) As permitted by Section 6 of Part C of Article Four of the Sealy
Certificate of Incorporation, BCIP hereby converts (the "BCIP Conversion") as of
---------------
immediately prior to the Closing (x) 107,687.2807 of the shares of Class A
Common owned by BCIP into 107,687.2807 shares of Class B Common and (y)
24,580.1103 of the shares of Class L Common owned by BCIP into 24,580.1103
shares of Class M Common.
(d) As permitted by Section 6 of Part C of Article Four of the Sealy
Certificate of Incorporation, BCIP Trust hereby converts (the "BCIP Trust
----------
Conversion") as of immediately prior to the Closing (x) 320,050.0166 of the
- ----------
shares of Class A Common owned by BCIP Trust into 320,050.0166 shares of Class B
Common and (y) 73,064.5515 of the shares of Class L Common owned by BCIP Trust
into 73,064.5515 shares of Class M Common.
(e) As permitted by Section 6 of Part C of Article Four of the Sealy
Certificate of Incorporation, Seller hereby converts (the "Zell Conversion") as
---------------
of immediately prior to the Closing 2,240,372.7328 of the Pre-Converted Class A
Shares into 2,240,372.7328 shares of Class B Common and (y) 248,930.3036 of the
Pre-Converted Class L Shares into 248,930.3036 shares of Class M Common.
-3-
<PAGE>
(f) Seller, each Buyer and the Company hereby acknowledge and consent
to the Bain Fund V Conversion, the Bain Fund V-B Conversion, the BCIP
Conversion, the BCIP Trust Conversion and the Zell Conversion.
3. Purchase and Sale of Purchase Shares.
------------------------------------
(a) Basic Transaction. At the Closing, subject to the terms and
-----------------
conditions set forth herein, each Buyer shall purchase from Seller, and Seller
shall sell to each Buyer, the number and class of Purchase Shares for the
applicable purchase price, in each case, as set forth opposite the name of such
Buyer on Exhibit A hereto.
---------
(b) The Closing. The closing of the transactions contemplated by this
-----------
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis,
-------
153 East 53rd Street, New York, New York 10022 at 10 a.m. local time on the date
hereof (the "Closing Date").
------------
(c) Deliveries at the Closing. At the Closing, (i) Seller will
-------------------------
deliver to Buyers stock certificates representing the Purchase Shares, endorsed
in blank or accompanied by duly executed assignment documents, (ii) Seller will
deliver to Buyers and the Company an opinion of counsel, in the form of Exhibit
-------
B hereto, and (iii) each Buyer will deliver to Seller cash payable by wire
- -
transfer to an account designated by Buyer in the amount of the total purchase
price set forth opposite such Buyer's name on Exhibit A hereto.
---------
4. Representations and Warranties of Seller. Seller hereby represents
----------------------------------------
and warrants to Buyers that:
(a) Authorization of Transaction. Seller has full power and authority
----------------------------
to execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the legal, valid and binding obligation of Seller,
enforceable in accordance with its terms and conditions.. Seller need not give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(b) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject or, any provision of
its limited partnership agreement or other formation or organizational documents
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel any agreement, contract, lease, license, instrument, or other
arrangement to which Seller is a party or by which it is bound or to which any
of its assets is subject.
(c) Brokers' Fees. Seller has no liability or obligation to pay any
-------------
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any Buyer could become
liable or obligated.
-4-
<PAGE>
(d) Purchase Shares. Assuming the due authorization and valid
---------------
issuance of the shares of common stock issued to Seller by the Company upon the
Zell Conversion, Seller owns of record and owns beneficially the Purchase
Shares. Upon consummation of the transactions contemplated hereby in accordance
with the terms hereof, Buyers shall acquire the Purchase Shares, free and clear
of any restrictions on transfer (subject to any restrictions under applicable
securities laws, the Stockholders Agreement, the Registration Rights Agreement
or the Sealy Certificate of Incorporation) and free and clear of any Security
Interests, options, warrants, or any type of purchase right.
5. Representations and Warranties of the Buyers. Each Buyer hereby
--------------------------------------------
represents and warrants to the Company, Seller and each other Buyer on behalf of
itself that:
(a) Such Buyer is an "accredited investor," as defined under Rule 501
promulgated under the Securities Act.
(b) The Purchase Shares to be acquired by such Buyer pursuant to this
Agreement will be acquired by such Buyer without an intention by such Buyer to
distribute such Purchase Shares in violation of the Securities Act.
(c) This Agreement constitutes the legal, valid and binding obligation
of such Buyer, enforceable in accordance with its terms and conditions.
(d) Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which such Buyer is subject or, any provision of its formation or
organizational documents or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel any material agreement,
contract, lease, license, instrument, or other arrangement to which such Buyer
is a party or by which it is bound or to which any of its assets is subject.
6. Post-Closing Covenants. The Parties agree as follows with respect to
----------------------
the period following the Closing:
(a) General. In case at any time after the Closing any further action
-------
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 7 below).
(b) Confidentiality. Seller will treat and hold as such all of the
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to the Company or
destroy, at the request and option of the Company, all tangible embodiments (and
all copies) of the Confidential Information which are in his or its possession.
In the event that Seller is requested or required (by oral question or request
for
<PAGE>
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Company promptly of the request or
requirement so that the Company or Buyers may seek an appropriate protective
order or waive compliance with the provisions of this Section 6(b). If, in the
absence of a protective order or the receipt of a waiver hereunder, Seller is,
on the advice of counsel, compelled to disclose any Confidential Information to
any tribunal or else stand liable for contempt, Seller may disclose the
Confidential Information to the tribunal; provided, however, that Seller shall
-------- -------
use its reasonable best efforts to obtain, at the reasonable request of the
Company, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the Company shall designate.
7. Survival and Indemnification.
----------------------------
(a) Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties of the Parties contained in this Agreement shall
survive the Closing (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect forever thereafter (subject to any applicable statutes of
limitations).
(b) Indemnification Provisions for Benefit of Buyers. In the event
------------------------------------------------
Seller breaches any of its representations, warranties or covenants contained
herein, Seller agrees to indemnify each Buyer from and against the entirety of
any Adverse Consequences any such Buyer may suffer through and after the date of
the claim for indemnification resulting from, arising out of, relating to, in
the nature of, or caused by the breach.
(c) Indemnification Provisions for Benefit of Seller. In the event
------------------------------------------------
any Buyer breaches any of its representations, warranties or covenants contained
herein, such Buyer agrees to indemnify Seller and each of the other Buyers from
and against the entirety of any Adverse Consequences Seller or such other
Buyers, as the case may be, may suffer through and after the date of the claim
for indemnification resulting from, arising out of, relating to, in the nature
of, or caused by the breach.
(d) Determination of Adverse Consequences. The Parties shall make
-------------------------------------
appropriate adjustments for tax benefits and insurance coverage in determining
Adverse Consequences for purposes of this Section 7.
(e) Exclusive Remedy. The Buyers and Seller agree that the foregoing
----------------
indemnification provisions in this Section 7 shall be the exclusive remedy of
the Buyers and the Seller in the event of any breach of a representation or
warranty contained herein or otherwise, with respect to the transactions
contemplated hereby.
8. Right of First Offer. With respect to the purchase and sale of
--------------------
Purchase Shares pursuant to this Agreement, the Company hereby waives, and the
Buyers hereby exercise their rights of first offer pursuant to Section 4(c) of
the Stockholders Agreement.
-6-
<PAGE>
9. Miscellaneous.
-------------
(a) No Third-Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents
----------------
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(c) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(d) Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
(f) Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by
Buyers and Seller. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(g) Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(h) Expenses. Each of the Parties will bear its own costs and
--------
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, except that the fees and
expenses of Kirkland & Ellis shall be paid by the Company. Seller agrees that
none of the Company and its subsidiaries has borne or will bear any of Seller's
costs and expenses (including any of its legal fees and expenses) in connection
with this Agreement or any of the transactions contemplated hereby.
(i) Press Releases and Public Announcements. No Party shall, directly
---------------------------------------
or indirectly, issue any press release or make any public announcement relating
to the subject matter of this Agreement without the prior written approval of
Bain Fund V-B, Seller and the Company;
-7-
<PAGE>
provided, however, that the Company may make any public disclosure it believes
- -----------------
in good faith is required by any agreement which relates to its or its
subsidiaries publicly-traded securities or is required by applicable law;
provided, further, that Seller may make any disclosure it believes in good
- -------- -------
faith to be necessary disclosure it believes in good faith to be necessary or
proper to any of its direct or indirect partners.
(j) Succession and Assignment. This Agreement shall be binding upon
-------------------------
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of Bain Fund V-B and the Company.
(k) Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
-8-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SEALY CORPORATION
By: _______________________________
Name:
Title:
BAIN CAPITAL FUND V, L.P.
By: Bain Capital Partners V, L.P.,
its General Partner
By: Bain Capital Investors V, Inc.,
its General Partner
By: _______________________________
Name:
Title:
BAIN CAPITAL FUND V-B, L.P.
By: Bain Capital Partners V, L.P.,
its General Partner
By: Bain Capital Investors V, Inc.,
its General Partner
By: _______________________________
Name:
Title:
BCIP ASSOCIATES
By: _______________________________
A General Partner
<PAGE>
[CONTINUATION OF SIGNATURES FOR THIS STOCK PURCHASE AGREEMENT]
BCIP TRUST ASSOCIATES, L.P.
By: _______________________________
A General Partner
RANDOLPH STREET PARTNERS II
By: _______________________________
A General Partner
ZELL/CHILMARK FUND, L.P.
By: ZC Limited Partnership, its General Partner
By: ZC Partnership, its General Partner
By: ZC, Inc., its General Partner
By: _______________________________
Name:
Title:
<PAGE>
EXHIBIT 10.2
EXECUTION COPY
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as of
---------
March 31, 1999, by and among Bain Capital Fund V, L.P. ("Bain Fund V"); Bain
-----------
Capital Fund V-B, L.P. ("Bain Fund V-B" or "Seller"); 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"); Randolph Street Partners II
------- -------
("Randolph"); the Management Investors (as herein defined); and Sealy
--------
Corporation, a Delaware corporation (the "Company"). Harvard, SILLC 1, SILLC 2,
-------
SILLC 3 and the Management Investors are referred to collectively herein as
"Buyers". Bain Fund V, BCIP, BCIP Trust and Randolph are referred to
------
collectively herein as "Other Stockholders". Buyers, Other Stockholders, Seller
------------------
and the Company are referred to collectively herein as the "Parties".
-------
WHEREAS, as of immediately prior to the execution of this Agreement, Seller
has purchased from Zell/Chilmark Fund, L.P. ("Zell") 610,516.1160 shares of
----
Class A Common (as herein defined), 1,692,368.6105 shares of Class B Common (as
herein defined), 67,835.1240 shares of Class L Common (as herein defined) and
188,040.9567 shares of Class M Common (as herein defined) (such shares of Class
A Common, Class B Common, Class L Common and Class M Common, the "Bain Fund V-B
-------------
Purchase Shares") pursuant to that certain Stock Purchase Agreement, dated as of
- ---------------
the date hereof (the "Zell Stock Purchase Agreement") among Zell, the Company,
-----------------------------
Seller and the Other Stockholders; and
WHEREAS, Buyers desire to purchase from Seller, and Seller desires to sell
to Buyers, the following Bain Fund V-B Purchase Shares: 610,516.1160 shares of
Class A Common, 1,122,337.6364 shares of Class B Common, 67,835.1240 shares of
Class L Common and 124,704.1818 shares of Class M Common (such shares of Class A
Common, Class B Common, Class L Common and Class M Common, the "Purchase
--------
Shares);
WHEREAS, pursuant to Section 3(a) of this Agreement, as of immediately
after the Closing (as herein defined), SILLC 1 is converting (x) 149,768 of the
shares of Class A Common owned by SILLC 1 into 149,768 shares of Class B Common
and (y) 34,190 of the shares of Class L Common owned by SILLC 1 into 34,190
shares of Class M Common;
WHEREAS, pursuant to Section 3(b) of this Agreement, as of immediately
after the Closing, SILLC 2 is converting (x) 149,768 of the shares of Class A
Common owned by SILLC 2 into 149,768 shares of Class B Common and (y) 34,190 of
the shares of Class L Common owned by SILLC 2 into 34,190 shares of Class M
Common;
WHEREAS, pursuant to Section 3(c) of this Agreement, as of immediately
after the Closing, SILLC 3 is converting (x) 149,768 of the shares of Class A
Common owned by SILLC 3 into
<PAGE>
149,768 shares of Class B Common and (y) 34,190 of the shares of Class L Common
owned by SILLC 3 into 34,190 shares of Class M Common; and
WHEREAS, pursuant to Section 3(d) of this Agreement, as of immediately
after the Closing, Bain Fund V-B is converting (x) 2,259,082.0045 of the shares
of Class B Common owned by Bain Fund V-B into 2,259,082.0045 shares of Class A
Common and (y) 230,866.3589 of the shares of Class M Common owned by Bain Fund
V-B into 230,866.3589 shares of Class L Common.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
-----------
"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 Conversions" means collectively (i) the Bain Fund V
------------------------
Conversion, the Bain Fund V-B Conversion, the BCIP Conversion, the BCIP Trust
Conversion and the Zell Conversion (as such terms are defined in the Zell Stock
Purchase Agreement) and (ii) the SILLC 1 Conversion, the SILLC 2 Conversion, the
SILLC 3 Conversion and the Seller Conversion (as such terms are herein defined).
"Financial Investors" means collectively Harvard, SILLC 1, SILLC 2 and
-------------------
SILLC 3.
"Institutional Investors" means collectively the Financial Investors, Other
-----------------------
Stockholders and Seller.
"Management Investors" means collectively Ronald Jones, Jeffrey Claypool,
---------------------
David McIlquham, Kenneth Walker, Bruce Barman, Gary Fazio, Douglas Fellmy, Larry
Rogers, Richard Sowerby and E. Lee Wyatt.
"Person" means an individual, a partnership, a corporation, an association,
------
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Registration Rights Agreement" means the Registration Rights Agreement,
-----------------------------
dated as of December 18, 1997, among the Company, Seller, Other Stockholders and
Financial Investors.
-2-
<PAGE>
"Regulated Stockholder" shall have the meaning given to such term in the
---------------------
Sealy Certificate of Incorporation. As of the date hereof, the Regulated
Stockholders are SILLC 1, SILLC 2 and SILLC 3.
"Sealy Certificate of Incorporation" means the Certificate of Incorporation
----------------------------------
of the Company as in effect on the date hereof.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Stockholders Agreement" means the Stockholders Agreement, dated as of
----------------------
December 18, 1997, among the Company, Seller, Other Stockholders and Financial
Investors.
2. Purchase and Sale of Purchase Shares.
------------------------------------
(a) Basic Transaction. At the Closing, subject to the terms and
-----------------
conditions set forth herein, each Buyer shall purchase from Seller, and Seller
shall sell to each Buyer, the number and class of Purchase Shares for the
applicable purchase price, in each case, as set forth opposite the name of such
Buyer on Exhibit A hereto.
---------
(b) The Closing. The closing of the transactions contemplated by this
-----------
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis,
-------
153 East 53rd Street, New York, New York 10022 at 11 a.m. local time on the date
hereof (the "Closing Date").
------------
(c) Deliveries at the Closing. At the Closing, (i) Seller will
-------------------------
deliver to Buyers stock certificates representing the Purchase Shares, endorsed
in blank or accompanied by duly executed assignment documents and (ii) each
Buyer will deliver to Seller cash payable by wire transfer to an account
designated by Buyer in the amount of the total purchase price set forth opposite
such Buyer's name on Exhibit A hereto. In addition, at the Closing, each
---------
Management Investor shall execute and deliver to the Company an executive stock
agreement, in form and substance acceptable to the Company.
3. Conversion of Common Stock by SILLC 1, SILLC 2, SILLC 3 and Seller.
------------------------------------------------------------------
(a) As permitted by Section 6 of Part C of Article Four of the Sealy
Certificate of Incorporation, SILLC 1 hereby converts (the "SILLC 1 Conversion")
------------------
as of immediately after the Closing (x) 149,768 of the shares of Class A Common
owned by SILLC 1 into 149,768 shares of Class B Common and (y) 34,190 of the
shares of Class L Common owned by SILLC 1 into 34,190 shares of Class M Common.
(b) As permitted by Section 6 of Part C of Article Four of the Sealy
Certificate of Incorporation, SILLC 2 hereby converts (the "SILLC 2 Conversion")
------------------
as of immediately after the Closing (x) 149,768 of the shares of Class A Common
owned by SILLC 2 into 149,768 shares of
-3-
<PAGE>
Class B Common and (y) 34,190 of the shares of Class L Common owned by SILLC 2
into 34,190 shares of Class M Common.
(c) As permitted by Section 6 of Part C of Article Four of the Sealy
Certificate of Incorporation, SILLC 3 hereby converts (the "SILLC 3 Conversion")
------------------
as of immediately after the Closing (x) 149,768 of the shares of Class A Common
owned by SILLC 3 into 149,768 shares of Class B Common and (y) 34,190 of the
shares of Class L Common owned by SILLC 3 into 34,190 shares of Class M Common.
(d) As permitted by Section 6 of Part C of Article Four of the Sealy
Certificate of Incorporation, Bain Fund V-B hereby converts (the "Seller
------
Conversion") as of immediately after the Closing (x) 2,259,082.0045 of the
- ----------
shares of Class B Common owned by Bain Fund V-B into 2,259,082.0045 shares of
Class A Common and (y) 230,866.3589 of the shares of Class M Common owned by
Bain Fund V-B into 230,866.3589 shares of Class L Common.
(e) Institutional Investors, Management Investors and the Company
hereby acknowledge and consent to each of the Common Stock Conversions. Each
Regulated Stockholder hereby waives any and all rights (including any and all
rights to receive any notices and to any Deferral Period (as such term is
defined in the Sealy Certificate of Incorporation)) that such Regulated
Stockholder has under the Sealy Certificate of Incorporation in connection with
each of the Common Stock Conversions, including any and all rights arising out
of Section 6(vii) of Part C of Article Four of the Sealy Certificate of
Incorporation.
4. Representations and Warranties of Seller. Seller hereby represents
----------------------------------------
and warrants to each Buyer on behalf of itself that this Agreement constitutes
the legal, valid and binding obligation of Seller, enforceable in accordance
with its terms, and the execution, delivery and performance of this Agreement by
Seller does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Seller is a party or any judgment,
order or decree to which Seller is subject.
5. Representations and Warranties of the Financial Investors. Each
---------------------------------------------------------
Financial Investor hereby represents and warrants to the Company, Seller and
each other Buyer on behalf of itself that:
(a) Such Financial Investor is an "accredited investor," as defined
under Rule 501 promulgated under the Securities Act.
(b) This Agreement constitutes the legal, valid and binding obligation
of such Financial Investor, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by such Financial Investor
does not and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which such Financial Investor is a party or any
judgment, order or decree to which such Financial Investor is subject.
-4-
<PAGE>
6. Representations and Warranties of the Management Investors. Each
----------------------------------------------------------
Management Investor hereby represents and warrants to the Company, Seller and
each other Buyer on behalf of itself that:
(a) The Purchase Shares to be acquired by such Management Investor
pursuant to this Agreement will be acquired for such Management Investor's own
account and not with a view to, or intention of, distribution thereof in
violation of the Securities Act or any applicable state securities laws, and
such Purchase Shares will not be disposed of in contravention of the Securities
Act or any applicable state securities laws.
(b) Such Management Investor is an executive officer of the Company or
its subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of an investment in the Purchase Shares.
(c) Such Management Investor is able to bear the economic risk of his
investment in the Purchase Shares to be acquired by such Management Investor
pursuant to this Agreement for an indefinite period of time because the Purchase
Shares have not been registered under the Securities Act and, therefore, cannot
be sold unless subsequently registered under the Securities Act or an exemption
from such registration is available.
(d) Such Management Investor has had an opportunity to ask questions
and receive answers concerning the terms and conditions of the offering of the
Purchase Shares and has had full access to such other information concerning the
Company and its subsidiaries as he has requested.
(e) This Agreement constitutes the legal, valid and binding obligation
of such Management Investor, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by such Management
Investor does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which such Management Investor is a party
or any judgment, order or decree to which such Management Investor is subject.
7. Further Actions. In case at any time after the Closing any further
---------------
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
8. Stockholders Agreement and Registration Rights Agreement.
--------------------------------------------------------
(a) Waiver of Tag-Along Rights. With respect to the purchase and sale
--------------------------
of Purchase Shares pursuant to this Agreement, each Institutional Investor
hereby waives its respective tag-along rights, if any, pursuant to Section 4(d)
of the Stockholders Agreement.
-5-
<PAGE>
(b) Waiver of Joinder. The Company and each of the Institutional
-----------------
Investors, which represents all of the parties to the Stockholders Agreement,
(i) with respect to the sale of Purchase Shares from Seller to the Management
Investors at the Closing, hereby waive any and all of the requirements of
Section 4(e)(ii) of the Stockholders Agreement and acknowledge and agree that
the Management Investors will not become a party to the Stockholders Agreement,
(ii) with respect to the sale and transfer of Purchase Shares from Seller to the
Financial Investors at the Closing, hereby waive any and all of the requirements
of Section 4(e)(ii) of the Stockholders Agreement since the Financial Investors
are each already a party to the Stockholders Agreement and (iii) with respect to
the sale and transfer of shares of Common Stock from Zell to Seller and the
Other Stockholders pursuant to the terms of the Zell Stock Purchase Agreement,
hereby waive any and all of the requirements of Section 4(e)(ii) of the
Stockholders Agreement since Seller and the Other Stockholders are each already
a party to the Stockholders Agreement.
(c) Waiver of Opinion of Counsel. With respect to the sale of
----------------------------
Purchase Shares from Seller to the Financial Investors and the Management
Investors at the Closing, the Company and each of the Institutional Investors
hereby waive any and all of the requirements of Section 7(b) of the Stockholders
Agreement.
(d) Acknowledgment. The Institutional Investors and the Company
--------------
hereby agree that the Purchase Shares acquired pursuant to the consummation of
the transactions contemplated hereby by:
(i) Harvard shall be deemed (x) "Harvard Shares" and "Stockholder
Shares" for all purposes of the Stockholder Agreement and (y) "Harvard
Registrable Securities" and "Registrable Securities" for all purposes of
the Registration Rights Agreement; and
(ii) SILLC 1, SILLC 2 and SILLC 3 shall be deemed (x) "SILLC
Shares" and "Stockholder Shares" for all purposes of the Stockholders
Agreement and (y) "SILLC Registrable Securities" and "Registrable
Securities" for all purposes of the Registration Rights Agreement.
The Institutional Investors and the Company hereby agree that the shares of
Common Stock acquired by Bain Fund V, Bain Fund V-B, BCIP, BCIP Trust and
Randolph pursuant to the Zell Stock Purchase Agreement (other than the Purchase
Shares sold by Bain Fund V-B pursuant to this Agreement) (such shares, the "Zell
----
Purchase Shares") shall be deemed (x) "Bain Shares" and "Stockholder Shares" for
- ---------------
all purposes of the Stockholders Agreement and (y) "Bain Funds Registrable
Securities" and "Registrable Securities" for all purposes of the Registration
Rights Agreement. The Parties hereto agree that, after the Closing, (x) none of
the Purchase Shares or the Zell Purchase Shares shall be deemed to be "Zell
Shares" for purposes of the Stockholders Agreement and (y) none of the Purchase
Shares or the Zell Purchase Shares shall be deemed to be "Zell Registrable
Securities" for purposes of the Registration Rights Agreement. The Parties
hereto agree that, notwithstanding anything contained in the Registration Rights
Agreement, including
-6-
<PAGE>
Section 11(d) thereof, or in the Stockholders Agreement to the contrary, the
Management Investors shall not acquire or otherwise obtain any rights under the
Registration Rights Agreement or the Stockholders Agreement as a result of the
consummation of the transactions contemplated hereby or as a result of the
ownership by any Management Investor of any Purchase Shares. Accordingly, each
Management Investor hereby irrevocably waives any and all rights from the
Registration Rights Agreement and the Stockholders Agreement that such
Management Investor may otherwise obtain as a result of the consummation of the
transactions contemplated hereby or as a result of the ownership by any
Management Investor of any Purchase Shares.
9. Assignment of Rights under the Zell Stock Purchase Agreement. Seller
------------------------------------------------------------
hereby assigns to each Buyer a pro rata share of Seller's rights under the Zell
Stock Purchase Agreement based on the number of Bain Fund V-B Purchase Shares
which such Buyer is purchasing from Seller pursuant to the terms of this
Agreement. Seller and the Company hereby consent to such assignment.
10. Miscellaneous.
-------------
(a) No Third-Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents
----------------
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(c) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(d) Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
(f) Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by
Buyers and Seller. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default,
-7-
<PAGE>
misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
(g) Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(h) Expenses. Each of the Parties will bear its own costs and
--------
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, except that the fees and
expenses of Kirkland & Ellis shall be paid by the Company.
(i) Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of Seller and the Company;
provided, however, that the Company may make any public disclosure it believes
- -----------------
in good faith is required by any agreement which relates to its or its
subsidiaries publicly-traded securities or is required by applicable law.
(j) Succession and Assignment. This Agreement shall be binding upon
-------------------------
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of Seller and the Company.
(k) Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
-8-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SEALY CORPORATION
By: ____________________________________
Name:
Title:
BAIN CAPITAL FUND V, L.P.
By: Bain Capital Partners V, L.P.,
its General Partner
By: Bain Capital Investors V, Inc.,
its General Partner
By: ____________________________________
Name:
Title:
BAIN CAPITAL FUND V-B, L.P.
By: Bain Capital Partners V, L.P.,
its General Partner
By: Bain Capital Investors V, Inc.,
its General Partner
By: ____________________________________
Name:
Title:
BCIP ASSOCIATES
By: ____________________________________
A General Partner
<PAGE>
[CONTINUATION OF SIGNATURES FOR THIS STOCK PURCHASE AGREEMENT]
BCIP TRUST ASSOCIATES, L.P.
By: ___________________________________
A General Partner
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
SEALY INVESTORS 1, LLC
By: Bain Capital Partners V, L.P.,
its Administrative Member
By: Bain Capital Investors V, Inc.,
its General Partner
By: ___________________________________
Name:
Title:
SEALY INVESTORS 2, LLC
By: Bain Capital Partners V, L.P.,
its Administrative Member
By: Bain Capital Investors V, Inc.,
its General Partner
By: ___________________________________
Name:
Title:
<PAGE>
[CONTINUATION OF SIGNATURES FOR THIS STOCK PURCHASE AGREEMENT]
SEALY INVESTORS 3, LLC
By: Bain Capital Partners V, L.P.,
its Administrative Member
By: Bain Capital Investors V, Inc.,
its General Partner
By: ___________________________________
Name:
Title:
RANDOLPH STREET PARTNERS II
By: ___________________________________
A General Partner
<PAGE>
[CONTINUATION OF SIGNATURES FOR THIS STOCK PURCHASE AGREEMENT]
MANAGEMENT INVESTORS:
____________________________________
Ronald Jones
____________________________________
Jeffrey Claypool
____________________________________
David McIlquham
____________________________________
Kenneth Walker
____________________________________
Bruce Barman
____________________________________
Gary Fazio
____________________________________
Douglas Fellmy
____________________________________
Larry Rogers
____________________________________
Richard Sowerby
____________________________________
E. Lee Wyatt
<PAGE>
EXHIBIT 10.3
EXECUTION COPY
RECOURSE PROMISSORY NOTE
March 31, 1999 $582,495
Ronald Jones (the "Employee"), for value received, hereby promises to
--------
pay to Sealy Mattress Company, an Ohio corporation (the "Company"), the
-------
principal amount of five hundred eight-two thousand four hundred ninety-five
dollars ($582,495) on March 31, 2004 (the "Maturity Date"). The Company is a
-------------
wholly-owned subsidiary of Sealy Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Employee, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Employee has purchased from Seller
101,036.4120 shares of Class A Common Stock and 11,226.2680 shares of Class L
Common Stock (such shares of Class A Common Stock and Class L Common Stock, the
"Purchased Shares"), for an aggregate purchase price of $582,495 (the "Purchase
---------------- --------
Price"). The Company has loaned the Purchase Price to Employee and Employee has
- -----
issued this Note to the Company.
On the date hereof, Parent and the Employee have entered into an
Executive Stock Agreement (the "Executive Stock Agreement").
-------------------------
The amounts due under this Note are secured by a pledge of the
Purchased Shares, and the payment of the principal amount and accrued interest
under this Note is subject to certain offset rights under the Executive Stock
Agreement.
1. DEFINITIONS. For purposes of this Note, the following
-----------
capitalized terms have the following meaning.
"Class A Common Stock" means Parent's Class A Common Stock, par value
--------------------
$.01 per share.
"Class L Common Stock" means Parent's Class L Common Stock, par value
--------------------
$.01 per share.
"Employee Shares" means (i) all Purchased Shares, and (ii) all shares
---------------
issued with respect to the Purchased Shares referred to in clause (i) above by
way of a stock dividend or stock split or in connection with any combination,
exchange, conversion, merger, consolidation,
<PAGE>
recapitalization, or other reorganization affecting the Class A Common Stock or
Class L Common Stock.
2. PAYMENT OF PRINCIPAL.
--------------------
(A) SCHEDULED PAYMENT. The Employee will pay the entire unpaid
-----------------
principal amount of this Note on the Maturity Date.
(B) OPTIONAL PREPAYMENT. Subject to Section 3 hereof, the Employee
-------------------
may prepay the principal amount of this Note, in whole or in any $1,000
increment, at any time and from time to time.
(C) MANDATORY PREPAYMENTS.
---------------------
(I) If the Employee sells or otherwise transfers any of the Employee
Shares, then, on the date of the consummation of such sale or transfer, the
Employee shall be obligated, to the extent the Employee has obligations to
the Company under this Note, to pay to the Company an amount equal to the
gross proceeds received by the Employee for the Employee Shares sold or
otherwise transferred and such amount paid to the Company shall first
reduce accrued interest on this Note pursuant to Section 3 hereof and any
remaining amount paid to the Company shall reduce the principal amount of
this Note.
(II) If the Employee receives any cash dividends or other
distributions with respect to any of the Employee Shares, then, on the date
of the payment of such cash dividends or other distributions, as the case
may be, to the Employee, the Employee shall be obligated, to the extent the
Employee has obligations to the Company under this Note, to pay to the
Company an amount equal to the amount of such cash dividends or other
distributions, as the case may be, and such amount paid to the Company
shall first reduce accrued interest on this Note pursuant to Section 3
hereof and any remaining amount paid to the Company shall reduce the
principal amount of this Note.
3. INTEREST. Interest will accrue at the rate of five percent (5%)
--------
per annum (computed on the basis of a 360-day year, as appropriate, and the
actual number of days elapsed in any year) on the unpaid principal amount of
this Note outstanding from time to time, or (if less) at the highest rate then
permitted under applicable law. Interest accruing hereunder, will be payable to
the Company in cash, in arrears, prior to the optional or mandatory prepayment
of any principal amount of this Note pursuant to Sections 1(b) or 1(c) hereof,
and, in any event, on the Maturity Date. Interest will accrue on any amount of
principal until such time as payment therefor is actually delivered to the
Company. In addition, if the Employee receives any bonus from Parent or any of
Parent's subsidiaries (including the Company), then, on the date of the payment
of such bonus to the Employee, the Employee shall be obligated to pay to the
Company an amount equal to the lesser of (i) 25% of the amount of such bonus
(net of the amount of any customary withholding taxes) and (ii) the amount of
accrued and unpaid interest on this Note as of such date, and such amount paid
2
<PAGE>
shall reduce the accrued interest on this Note. The Employee acknowledges and
agrees that no provision contained herein (including the preceding sentence)
will entitle Employee to receive any bonus from Parent or any of Parent's
subsidiaries (including the Company).
4. EVENTS OF DEFAULT.
-----------------
(A) DEFINITION. An "Event of Default" will be deemed to have
---------- ----------------
occurred if:
(I) the Employee fails to pay any amount of the principal of or
interest on this Note as and when required pursuant to the terms hereof; or
(II) the Employee makes an assignment for the benefit of creditors or
admits in writing his or her inability to pay his or her debts generally as
they become due; or an order, judgment or decree is entered adjudicating
the Employee bankrupt or insolvent; or any order for relief with respect to
the Employee is entered under the Federal Bankruptcy Code; or the Employee
commences any proceeding relating to the Employee under any bankruptcy
reorganization, arrangement, insolvency, or readjustment of debt law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Employee and either (A) the Employee
by any act indicates its approval thereof, consent thereto or acquiescence
therein or (B) such petition, application or proceeding is not dismissed
within 30 days.
The foregoing will constitute Events of Default whatever the reason or cause for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
(B) CONSEQUENCES OF EVENTS OF DEFAULT.
---------------------------------
(I) If an Event of Default has occurred, then the aggregate
principal amount of this Note (together with all accrued interest thereon and
all other amounts due and payable with respect thereto) will become immediately
due and payable without any action on the part of the Company.
(II) If any Event of Default has occurred and is continuing, the
interest rate on this Note will increase immediately by an increment of 6
percentage points (i.e., 600 basis points), to the extent permitted by
applicable law. Any such increase of the interest rate resulting from the
operation of this Section 4(b)(ii) will terminate as of the close of business on
the next date on which no Event of Default exists (subject to subsequent
increases pursuant to this Section).
(III) The Company will also have any other rights which the Company
may have been afforded under any contract or agreement at any time and any other
rights which the Company may have pursuant to applicable law. The Employee
hereby waives diligence, presentment, protest
3
<PAGE>
and demand and notice of protest and demand, dishonor and nonpayment of this
Note, and expressly agrees that this Note, or any payment thereunder, may be
extended from time to time and that the Company may accept security for this
Note or release security for this Note, all without in any way affecting the
liability of the Employee thereunder. If the Employee fails to pay any amounts
due hereunder when due, then the Employee shall pay to the Company, in addition
to the amounts due, all costs of collection, including reasonable attorneys
fees.
5. AMENDMENT AND WAIVER. None of the terms or provisions of this
--------------------
Note may be altered, modified or amended except by an instrument in writing,
duly executed by the Company (with approval of Parent's board of directors) and
the Employee. The Company shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Company (with the approval of
Parent's board of directors), and then only to the extent therein set forth. A
waiver by the Company of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Company would
otherwise have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Company, any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.
6. CANCELLATION. After all principal and accrued interest at any
------------
time owed on this Note have been paid in full, this Note will be surrendered to
the Employee for cancellation.
7. PAYMENTS. All cash payments to be made to the Company will be
--------
made in the lawful money of the United States of America in immediately
available funds. Payments of principal and interest in respect of this Note
will be delivered to the Company at the Company's chief executive office.
8. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of
-----------------------------------
the several Sections of this Note are inserted for convenience only and do not
constitute a part of this Note. This Note shall be governed by and construed in
accordance with the laws of the state of North Carolina, without giving effect
to any rules, principles or provisions of choice of law or conflict of laws.
9. BUSINESS DAYS. If any payment is due, or any time period for
-------------
giving notice or taking action expires, on a day which is a Saturday, Sunday or
legal holiday in the State of North Carolina, then the payment will be due and
payable on, and the time period will automatically be extended to, the next
business day immediately following such Saturday, Sunday or legal holiday, and
interest will continue to accrue at the required rate under this Note until any
such payment is made.
10. USURY LAWS. It is the intention of the Employee and the Company
----------
to conform strictly to all applicable usury laws now or hereafter in force, and
any interest payable under this
4
<PAGE>
Note will be subject to reduction to the amount not in excess of the maximum
legal amount allowed under the applicable usury laws as now or hereafter
construed by the courts having jurisdiction over such matters. If the maturity
of this Note is accelerated by reason of an Event of Default, voluntary
prepayment by the Employee or otherwise, then earned interest may never include
more than the maximum amount permitted by law, computed from the date hereof
until payment, and any interest in excess of the maximum amount permitted by law
will be canceled automatically and, if theretofore paid, will at the option of
the Company either be rebated to the Employee or credited on the principal
amount of this Note, or if this Note has been paid, then the excess will be
rebated to the Employee. The aggregate of all interest (whether designated as
interest, service charges, points or otherwise) contracted for, chargeable, or
receivable under this Note will under no circumstances exceed the maximum legal
rate upon the unpaid principal balance of this Note remaining unpaid from time
to time. If such interest does exceed the maximum legal rate, it will be deemed
a mistake and such excess will be canceled automatically and, if theretofore
paid, rebated to the Employee or credited on the principal amount of this Note,
or if this Note has been repaid, then such excess will be rebated to the
Employee.
11. SEVERABILITY. If any provision of this Note is held by any court
------------
of competent jurisdiction to be illegal, void or unenforceable, such provision
will be of no force and effect, but such holding shall have no effect upon the
enforceability of any other provision.
12. GENERAL. This Note:
-------
(a) constitutes the entire agreement among the parties with respect
to the subject matter hereof;
(b) supersedes any and all prior understandings relating to such
subject matter; and
(c) will be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and assigns.
13. WAIVER OF JURY TRIAL. THE EMPLOYEE (AND, BY ITS ACCEPTANCE OF
--------------------
THIS NOTE, THE COMPANY) HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS NOTE OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
* * * * *
5
<PAGE>
IN WITNESS WHEREOF, the Employee has executed and delivered this Recourse
Promissory Note as of the date specified above.
______________________________
Ronald Jones
<PAGE>
EXHIBIT 10.4
EXECUTION COPY
RECOURSE PROMISSORY NOTE
March 31, 1999 $48,203
David McIlquham (the "Employee"), for value received, hereby promises
--------
to pay to Sealy Mattress Company, an Ohio corporation (the "Company"), the
-------
principal amount of forty-eight thousand two hundred three dollars ($48,203) on
March 31, 2004 (the "Maturity Date"). The Company is a wholly-owned subsidiary
-------------
of Sealy Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Employee, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Employee has purchased from Seller 8,361
shares of Class A Common Stock and 929 shares of Class L Common Stock (such
shares of Class A Common Stock and Class L Common Stock, the "Purchased
---------
Shares"), for an aggregate purchase price of $48,203 (the "Purchase Price").
--------------
The Company has loaned the Purchase Price to Employee and Employee has issued
this Note to the Company.
On the date hereof, Parent and the Employee have entered into an
Executive Stock Agreement (the "Executive Stock Agreement").
-------------------------
The amounts due under this Note are secured by a pledge of the
Purchased Shares, and the payment of the principal amount and accrued interest
under this Note is subject to certain offset rights under the Executive Stock
Agreement.
1. DEFINITIONS. For purposes of this Note, the following
-----------
capitalized terms have the following meaning.
"Class A Common Stock" means Parent's Class A Common Stock, par value
--------------------
$.01 per share.
"Class L Common Stock" means Parent's Class L Common Stock, par value
--------------------
$.01 per share.
"Employee Shares" means (i) all Purchased Shares, and (ii) all shares
---------------
issued with respect to the Purchased Shares referred to in clause (i) above by
way of a stock dividend or stock split or in connection with any combination,
exchange, conversion, merger, consolidation, recapitalization, or other
reorganization affecting the Class A Common Stock or Class L Common Stock.
<PAGE>
2. PAYMENT OF PRINCIPAL.
--------------------
(A) SCHEDULED PAYMENT. The Employee will pay the entire unpaid
-----------------
principal amount of this Note on the Maturity Date.
(B) OPTIONAL PREPAYMENT. Subject to Section 3 hereof, the Employee
-------------------
may prepay the principal amount of this Note, in whole or in any $1,000
increment, at any time and from time to time.
(C) MANDATORY PREPAYMENTS.
---------------------
(I) If the Employee sells or otherwise transfers any of the Employee
Shares, then, on the date of the consummation of such sale or transfer, the
Employee shall be obligated, to the extent the Employee has obligations to
the Company under this Note, to pay to the Company an amount equal to the
gross proceeds received by the Employee for the Employee Shares sold or
otherwise transferred and such amount paid to the Company shall first
reduce accrued interest on this Note pursuant to Section 3 hereof and any
remaining amount paid to the Company shall reduce the principal amount of
this Note.
(II) If the Employee receives any cash dividends or other
distributions with respect to any of the Employee Shares, then, on the date
of the payment of such cash dividends or other distributions, as the case
may be, to the Employee, the Employee shall be obligated, to the extent the
Employee has obligations to the Company under this Note, to pay to the
Company an amount equal to the amount of such cash dividends or other
distributions, as the case may be, and such amount paid to the Company
shall first reduce accrued interest on this Note pursuant to Section 3
hereof and any remaining amount paid to the Company shall reduce the
principal amount of this Note.
3. INTEREST. Interest will accrue at the rate of five percent (5%)
--------
per annum (computed on the basis of a 360-day year, as appropriate, and the
actual number of days elapsed in any year) on the unpaid principal amount of
this Note outstanding from time to time, or (if less) at the highest rate then
permitted under applicable law. Interest accruing hereunder, will be payable to
the Company in cash, in arrears, prior to the optional or mandatory prepayment
of any principal amount of this Note pursuant to Sections 1(b) or 1(c) hereof,
and, in any event, on the Maturity Date. Interest will accrue on any amount of
principal until such time as payment therefor is actually delivered to the
Company. In addition, if the Employee receives any bonus from Parent or any of
Parent's subsidiaries (including the Company), then, on the date of the payment
of such bonus to the Employee, the Employee shall be obligated to pay to the
Company an amount equal to the lesser of (i) 25% of the amount of such bonus
(net of the amount of any customary withholding taxes) and (ii) the amount of
accrued and unpaid interest on this Note as of such date, and such amount paid
shall reduce the accrued interest on this Note. The Employee acknowledges and
agrees that no provision contained herein (including the preceding sentence)
will entitle Employee to receive any bonus from Parent or any of Parent's
subsidiaries (including the Company).
2
<PAGE>
4. EVENTS OF DEFAULT.
-----------------
(A) DEFINITION. An "Event of Default" will be deemed to have occurred
---------- ----------------
if:
(I) the Employee fails to pay any amount of the principal of or
interest on this Note as and when required pursuant to the terms hereof; or
(II) the Employee makes an assignment for the benefit of
creditors or admits in writing his or her inability to pay his or her debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Employee bankrupt or insolvent; or any order for relief
with respect to the Employee is entered under the Federal Bankruptcy Code;
or the Employee commences any proceeding relating to the Employee under any
bankruptcy reorganization, arrangement, insolvency, or readjustment of debt
law of any jurisdiction; or any such petition or application is filed, or
any such proceeding is commenced, against the Employee and either (A) the
Employee by any act indicates its approval thereof, consent thereto or
acquiescence therein or (B) such petition, application or proceeding is not
dismissed within 30 days.
The foregoing will constitute Events of Default whatever the reason or cause for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
(B) CONSEQUENCES OF EVENTS OF DEFAULT.
---------------------------------
(I) If an Event of Default has occurred, then the aggregate
principal amount of this Note (together with all accrued interest thereon and
all other amounts due and payable with respect thereto) will become immediately
due and payable without any action on the part of the Company.
(II) If any Event of Default has occurred and is continuing, the
interest rate on this Note will increase immediately by an increment of 6
percentage points (i.e., 600 basis points), to the extent permitted by
applicable law. Any such increase of the interest rate resulting from the
operation of this Section 4(b)(ii) will terminate as of the close of business on
the next date on which no Event of Default exists (subject to subsequent
increases pursuant to this Section).
(III) The Company will also have any other rights which the Company
may have been afforded under any contract or agreement at any time and any other
rights which the Company may have pursuant to applicable law. The Employee
hereby waives diligence, presentment, protest and demand and notice of protest
and demand, dishonor and nonpayment of this Note, and expressly agrees that this
Note, or any payment thereunder, may be extended from time to time and that the
Company may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Employee thereunder. If the
Employee fails to pay any amounts due
3
<PAGE>
hereunder when due, then the Employee shall pay to the Company, in addition to
the amounts due, all costs of collection, including reasonable attorneys fees.
5. AMENDMENT AND WAIVER. None of the terms or provisions of this
--------------------
Note may be altered, modified or amended except by an instrument in writing,
duly executed by the Company (with approval of Parent's board of directors) and
the Employee. The Company shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Company (with the approval of
Parent's board of directors), and then only to the extent therein set forth. A
waiver by the Company of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Company would
otherwise have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Company, any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.
6. CANCELLATION. After all principal and accrued interest at any
------------
time owed on this Note have been paid in full, this Note will be surrendered to
the Employee for cancellation.
7. PAYMENTS. All cash payments to be made to the Company will be
--------
made in the lawful money of the United States of America in immediately
available funds. Payments of principal and interest in respect of this Note
will be delivered to the Company at the Company's chief executive office.
8. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of
-----------------------------------
the several Sections of this Note are inserted for convenience only and do not
constitute a part of this Note. This Note shall be governed by and construed in
accordance with the laws of the state of North Carolina, without giving effect
to any rules, principles or provisions of choice of law or conflict of laws.
9. BUSINESS DAYS. If any payment is due, or any time period for
-------------
giving notice or taking action expires, on a day which is a Saturday, Sunday or
legal holiday in the State of North Carolina, then the payment will be due and
payable on, and the time period will automatically be extended to, the next
business day immediately following such Saturday, Sunday or legal holiday, and
interest will continue to accrue at the required rate under this Note until any
such payment is made.
10. USURY LAWS. It is the intention of the Employee and the Company
----------
to conform strictly to all applicable usury laws now or hereafter in force, and
any interest payable under this Note will be subject to reduction to the amount
not in excess of the maximum legal amount allowed under the applicable usury
laws as now or hereafter construed by the courts having jurisdiction over such
matters. If the maturity of this Note is accelerated by reason of an Event of
Default, voluntary prepayment by the Employee or otherwise, then earned interest
may never include more than the
4
<PAGE>
maximum amount permitted by law, computed from the date hereof until payment,
and any interest in excess of the maximum amount permitted by law will be
canceled automatically and, if theretofore paid, will at the option of the
Company either be rebated to the Employee or credited on the principal amount of
this Note, or if this Note has been paid, then the excess will be rebated to the
Employee. The aggregate of all interest (whether designated as interest, service
charges, points or otherwise) contracted for, chargeable, or receivable under
this Note will under no circumstances exceed the maximum legal rate upon the
unpaid principal balance of this Note remaining unpaid from time to time. If
such interest does exceed the maximum legal rate, it will be deemed a mistake
and such excess will be canceled automatically and, if theretofore paid, rebated
to the Employee or credited on the principal amount of this Note, or if this
Note has been repaid, then such excess will be rebated to the Employee.
11. SEVERABILITY. If any provision of this Note is held by any court
------------
of competent jurisdiction to be illegal, void or unenforceable, such provision
will be of no force and effect, but such holding shall have no effect upon the
enforceability of any other provision.
12. GENERAL. This Note:
-------
(a) constitutes the entire agreement among the parties with respect
to the subject matter hereof;
(b) supersedes any and all prior understandings relating to such
subject matter; and
(c) will be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and assigns.
13. WAIVER OF JURY TRIAL. THE EMPLOYEE (AND, BY ITS ACCEPTANCE OF
--------------------
THIS NOTE, THE COMPANY) HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS NOTE OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
* * * * *
5
<PAGE>
IN WITNESS WHEREOF, the Employee has executed and delivered this Recourse
Promissory Note as of the date specified above.
______________________________
David McIlquham
<PAGE>
EXHIBIT 10.5
EXECUTION COPY
RECOURSE PROMISSORY NOTE
March 31, 1999 $48,203
Bruce Barman (the "Employee"), for value received, hereby promises to
--------
pay to Sealy Mattress Company, an Ohio corporation (the "Company"), the
-------
principal amount of forty-eight thousand two hundred three dollars ($48,203) on
March 31, 2004 (the "Maturity Date"). The Company is a wholly-owned subsidiary
-------------
of Sealy Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Employee, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Employee has purchased from Seller 8,361
shares of Class A Common Stock and 929 shares of Class L Common Stock (such
shares of Class A Common Stock and Class L Common Stock, the "Purchased
---------
Shares"), for an aggregate purchase price of $48,203 (the "Purchase Price").
--------------
The Company has loaned the Purchase Price to Employee and Employee has issued
this Note to the Company.
On the date hereof, Parent and the Employee have entered into an
Executive Stock Agreement (the "Executive Stock Agreement").
-------------------------
The amounts due under this Note are secured by a pledge of the
Purchased Shares, and the payment of the principal amount and accrued interest
under this Note is subject to certain offset rights under the Executive Stock
Agreement.
1. DEFINITIONS. For purposes of this Note, the following
-----------
capitalized terms have the following meaning.
"Class A Common Stock" means Parent's Class A Common Stock, par value
--------------------
$.01 per share.
"Class L Common Stock" means Parent's Class L Common Stock, par value
--------------------
$.01 per share.
"Employee Shares" means (i) all Purchased Shares, and (ii) all shares
---------------
issued with respect to the Purchased Shares referred to in clause (i) above by
way of a stock dividend or stock split or in connection with any combination,
exchange, conversion, merger, consolidation, recapitalization, or other
reorganization affecting the Class A Common Stock or Class L Common Stock.
<PAGE>
2. PAYMENT OF PRINCIPAL.
--------------------
(A) SCHEDULED PAYMENT. The Employee will pay the entire unpaid
-----------------
principal amount of this Note on the Maturity Date.
(B) OPTIONAL PREPAYMENT. Subject to Section 3 hereof, the Employee
-------------------
may prepay the principal amount of this Note, in whole or in any $1,000
increment, at any time and from time to time.
(C) MANDATORY PREPAYMENTS.
---------------------
(I) If the Employee sells or otherwise transfers any of the Employee
Shares, then, on the date of the consummation of such sale or transfer, the
Employee shall be obligated, to the extent the Employee has obligations to
the Company under this Note, to pay to the Company an amount equal to the
gross proceeds received by the Employee for the Employee Shares sold or
otherwise transferred and such amount paid to the Company shall first
reduce accrued interest on this Note pursuant to Section 3 hereof and any
remaining amount paid to the Company shall reduce the principal amount of
this Note.
(II) If the Employee receives any cash dividends or other
distributions with respect to any of the Employee Shares, then, on the date
of the payment of such cash dividends or other distributions, as the case
may be, to the Employee, the Employee shall be obligated, to the extent the
Employee has obligations to the Company under this Note, to pay to the
Company an amount equal to the amount of such cash dividends or other
distributions, as the case may be, and such amount paid to the Company
shall first reduce accrued interest on this Note pursuant to Section 3
hereof and any remaining amount paid to the Company shall reduce the
principal amount of this Note.
3. INTEREST. Interest will accrue at the rate of five percent (5%)
--------
per annum (computed on the basis of a 360-day year, as appropriate, and the
actual number of days elapsed in any year) on the unpaid principal amount of
this Note outstanding from time to time, or (if less) at the highest rate then
permitted under applicable law. Interest accruing hereunder, will be payable to
the Company in cash, in arrears, prior to the optional or mandatory prepayment
of any principal amount of this Note pursuant to Sections 1(b) or 1(c) hereof,
and, in any event, on the Maturity Date. Interest will accrue on any amount of
principal until such time as payment therefor is actually delivered to the
Company. In addition, if the Employee receives any bonus from Parent or any of
Parent's subsidiaries (including the Company), then, on the date of the payment
of such bonus to the Employee, the Employee shall be obligated to pay to the
Company an amount equal to the lesser of (i) 25% of the amount of such bonus
(net of the amount of any customary withholding taxes) and (ii) the amount of
accrued and unpaid interest on this Note as of such date, and such amount paid
shall reduce the accrued interest on this Note. The Employee acknowledges and
agrees that no provision contained herein (including the preceding sentence)
will entitle Employee to receive any bonus from Parent or any of Parent's
subsidiaries (including the Company).
2
<PAGE>
4. EVENTS OF DEFAULT.
-----------------
(A) DEFINITION. An "Event of Default" will be deemed to have
---------- ----------------
occurred if:
(I) the Employee fails to pay any amount of the principal of or
interest on this Note as and when required pursuant to the terms hereof; or
(II) the Employee makes an assignment for the benefit of
creditors or admits in writing his or her inability to pay his or her debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Employee bankrupt or insolvent; or any order for relief
with respect to the Employee is entered under the Federal Bankruptcy Code;
or the Employee commences any proceeding relating to the Employee under any
bankruptcy reorganization, arrangement, insolvency, or readjustment of debt
law of any jurisdiction; or any such petition or application is filed, or
any such proceeding is commenced, against the Employee and either (A) the
Employee by any act indicates its approval thereof, consent thereto or
acquiescence therein or (B) such petition, application or proceeding is not
dismissed within 30 days.
The foregoing will constitute Events of Default whatever the reason or cause for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
(B) CONSEQUENCES OF EVENTS OF DEFAULT.
---------------------------------
(I) If an Event of Default has occurred, then the aggregate
principal amount of this Note (together with all accrued interest thereon and
all other amounts due and payable with respect thereto) will become immediately
due and payable without any action on the part of the Company.
(II) If any Event of Default has occurred and is continuing, the
interest rate on this Note will increase immediately by an increment of 6
percentage points (i.e., 600 basis points), to the extent permitted by
applicable law. Any such increase of the interest rate resulting from the
operation of this Section 4(b)(ii) will terminate as of the close of business on
the next date on which no Event of Default exists (subject to subsequent
increases pursuant to this Section).
(III) The Company will also have any other rights which the Company
may have been afforded under any contract or agreement at any time and any other
rights which the Company may have pursuant to applicable law. The Employee
hereby waives diligence, presentment, protest and demand and notice of protest
and demand, dishonor and nonpayment of this Note, and expressly agrees that this
Note, or any payment thereunder, may be extended from time to time and that the
Company may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Employee thereunder. If the
Employee fails to pay any amounts due
3
<PAGE>
hereunder when due, then the Employee shall pay to the Company, in addition to
the amounts due, all costs of collection, including reasonable attorneys fees.
5. AMENDMENT AND WAIVER. None of the terms or provisions of this
--------------------
Note may be altered, modified or amended except by an instrument in writing,
duly executed by the Company (with approval of Parent's board of directors) and
the Employee. The Company shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Company (with the approval of
Parent's board of directors), and then only to the extent therein set forth. A
waiver by the Company of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Company would
otherwise have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Company, any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.
6. CANCELLATION. After all principal and accrued interest at any
------------
time owed on this Note have been paid in full, this Note will be surrendered to
the Employee for cancellation.
7. PAYMENTS. All cash payments to be made to the Company will be
--------
made in the lawful money of the United States of America in immediately
available funds. Payments of principal and interest in respect of this Note
will be delivered to the Company at the Company's chief executive office.
8. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of
-----------------------------------
the several Sections of this Note are inserted for convenience only and do not
constitute a part of this Note. This Note shall be governed by and construed in
accordance with the laws of the state of North Carolina, without giving effect
to any rules, principles or provisions of choice of law or conflict of laws.
9. BUSINESS DAYS. If any payment is due, or any time period for
-------------
giving notice or taking action expires, on a day which is a Saturday, Sunday or
legal holiday in the State of North Carolina, then the payment will be due and
payable on, and the time period will automatically be extended to, the next
business day immediately following such Saturday, Sunday or legal holiday, and
interest will continue to accrue at the required rate under this Note until any
such payment is made.
10. USURY LAWS. It is the intention of the Employee and the Company
----------
to conform strictly to all applicable usury laws now or hereafter in force, and
any interest payable under this Note will be subject to reduction to the amount
not in excess of the maximum legal amount allowed under the applicable usury
laws as now or hereafter construed by the courts having jurisdiction over such
matters. If the maturity of this Note is accelerated by reason of an Event of
Default, voluntary prepayment by the Employee or otherwise, then earned interest
may never include more than the
4
<PAGE>
maximum amount permitted by law, computed from the date hereof until payment,
and any interest in excess of the maximum amount permitted by law will be
canceled automatically and, if theretofore paid, will at the option of the
Company either be rebated to the Employee or credited on the principal amount of
this Note, or if this Note has been paid, then the excess will be rebated to the
Employee. The aggregate of all interest (whether designated as interest, service
charges, points or otherwise) contracted for, chargeable, or receivable under
this Note will under no circumstances exceed the maximum legal rate upon the
unpaid principal balance of this Note remaining unpaid from time to time. If
such interest does exceed the maximum legal rate, it will be deemed a mistake
and such excess will be canceled automatically and, if theretofore paid, rebated
to the Employee or credited on the principal amount of this Note, or if this
Note has been repaid, then such excess will be rebated to the Employee.
11. SEVERABILITY. If any provision of this Note is held by any court
------------
of competent jurisdiction to be illegal, void or unenforceable, such provision
will be of no force and effect, but such holding shall have no effect upon the
enforceability of any other provision.
12. GENERAL. This Note:
-------
(a) constitutes the entire agreement among the parties with respect
to the subject matter hereof;
(b) supersedes any and all prior understandings relating to such
subject matter; and
(c) will be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and assigns.
13. WAIVER OF JURY TRIAL. THE EMPLOYEE (AND, BY ITS ACCEPTANCE OF
--------------------
THIS NOTE, THE COMPANY) HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS NOTE OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
* * * * *
5
<PAGE>
IN WITNESS WHEREOF, the Employee has executed and delivered this Recourse
Promissory Note as of the date specified above.
______________________________
Bruce Barman
<PAGE>
EXHIBIT 10.6
EXECUTION COPY
RECOURSE PROMISSORY NOTE
March 31, 1999 $48,203
Gary Fazio (the "Employee"), for value received, hereby promises to
--------
pay to Sealy Mattress Company, an Ohio corporation (the "Company"), the
-------
principal amount of forty-eight thousand two hundred three dollars ($48,203) on
March 31, 2004 (the "Maturity Date"). The Company is a wholly-owned subsidiary
-------------
of Sealy Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Employee, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Employee has purchased from Seller 8,361
shares of Class A Common Stock and 929 shares of Class L Common Stock (such
shares of Class A Common Stock and Class L Common Stock, the "Purchased
---------
Shares"), for an aggregate purchase price of $48,203 (the "Purchase Price").
--------------
The Company has loaned the Purchase Price to Employee and Employee has issued
this Note to the Company.
On the date hereof, Parent and the Employee have entered into an
Executive Stock Agreement (the "Executive Stock Agreement").
-------------------------
The amounts due under this Note are secured by a pledge of the
Purchased Shares, and the payment of the principal amount and accrued interest
under this Note is subject to certain offset rights under the Executive Stock
Agreement.
1. DEFINITIONS. For purposes of this Note, the following
-----------
capitalized terms have the following meaning.
"Class A Common Stock" means Parent's Class A Common Stock, par value
--------------------
$.01 per share.
"Class L Common Stock" means Parent's Class L Common Stock, par value
--------------------
$.01 per share.
"Employee Shares" means (i) all Purchased Shares, and (ii) all shares
---------------
issued with respect to the Purchased Shares referred to in clause (i) above by
way of a stock dividend or stock split or in connection with any combination,
exchange, conversion, merger, consolidation, recapitalization, or other
reorganization affecting the Class A Common Stock or Class L Common Stock.
<PAGE>
2. PAYMENT OF PRINCIPAL.
--------------------
(A) SCHEDULED PAYMENT. The Employee will pay the entire unpaid
-----------------
principal amount of this Note on the Maturity Date.
(B) OPTIONAL PREPAYMENT. Subject to Section 3 hereof, the Employee
-------------------
may prepay the principal amount of this Note, in whole or in any $1,000
increment, at any time and from time to time.
(C) MANDATORY PREPAYMENTS.
---------------------
(I) If the Employee sells or otherwise transfers any of the Employee
Shares, then, on the date of the consummation of such sale or transfer, the
Employee shall be obligated, to the extent the Employee has obligations to
the Company under this Note, to pay to the Company an amount equal to the
gross proceeds received by the Employee for the Employee Shares sold or
otherwise transferred and such amount paid to the Company shall first
reduce accrued interest on this Note pursuant to Section 3 hereof and any
remaining amount paid to the Company shall reduce the principal amount of
this Note.
(II) If the Employee receives any cash dividends or other
distributions with respect to any of the Employee Shares, then, on the date
of the payment of such cash dividends or other distributions, as the case
may be, to the Employee, the Employee shall be obligated, to the extent the
Employee has obligations to the Company under this Note, to pay to the
Company an amount equal to the amount of such cash dividends or other
distributions, as the case may be, and such amount paid to the Company
shall first reduce accrued interest on this Note pursuant to Section 3
hereof and any remaining amount paid to the Company shall reduce the
principal amount of this Note.
3. INTEREST. Interest will accrue at the rate of five percent (5%)
--------
per annum (computed on the basis of a 360-day year, as appropriate, and the
actual number of days elapsed in any year) on the unpaid principal amount of
this Note outstanding from time to time, or (if less) at the highest rate then
permitted under applicable law. Interest accruing hereunder, will be payable to
the Company in cash, in arrears, prior to the optional or mandatory prepayment
of any principal amount of this Note pursuant to Sections 1(b) or 1(c) hereof,
and, in any event, on the Maturity Date. Interest will accrue on any amount of
principal until such time as payment therefor is actually delivered to the
Company. In addition, if the Employee receives any bonus from Parent or any of
Parent's subsidiaries (including the Company), then, on the date of the payment
of such bonus to the Employee, the Employee shall be obligated to pay to the
Company an amount equal to the lesser of (i) 25% of the amount of such bonus
(net of the amount of any customary withholding taxes) and (ii) the amount of
accrued and unpaid interest on this Note as of such date, and such amount paid
shall reduce the accrued interest on this Note. The Employee acknowledges and
agrees that no provision contained herein (including the preceding sentence)
will entitle Employee to receive any bonus from Parent or any of Parent's
subsidiaries (including the Company).
2
<PAGE>
4. EVENTS OF DEFAULT.
-----------------
(A) DEFINITION. An "Event of Default" will be deemed to have
---------- ----------------
occurred if:
(I) the Employee fails to pay any amount of the principal of or
interest on this Note as and when required pursuant to the terms hereof; or
(II) the Employee makes an assignment for the benefit of
creditors or admits in writing his or her inability to pay his or her debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Employee bankrupt or insolvent; or any order for relief
with respect to the Employee is entered under the Federal Bankruptcy Code;
or the Employee commences any proceeding relating to the Employee under any
bankruptcy reorganization, arrangement, insolvency, or readjustment of debt
law of any jurisdiction; or any such petition or application is filed, or
any such proceeding is commenced, against the Employee and either (A) the
Employee by any act indicates its approval thereof, consent thereto or
acquiescence therein or (B) such petition, application or proceeding is not
dismissed within 30 days.
The foregoing will constitute Events of Default whatever the reason or cause for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
(B) CONSEQUENCES OF EVENTS OF DEFAULT.
---------------------------------
(I) If an Event of Default has occurred, then the aggregate
principal amount of this Note (together with all accrued interest thereon and
all other amounts due and payable with respect thereto) will become immediately
due and payable without any action on the part of the Company.
(II) If any Event of Default has occurred and is continuing, the
interest rate on this Note will increase immediately by an increment of 6
percentage points (i.e., 600 basis points), to the extent permitted by
applicable law. Any such increase of the interest rate resulting from the
operation of this Section 4(b)(ii) will terminate as of the close of business on
the next date on which no Event of Default exists (subject to subsequent
increases pursuant to this Section).
(III) The Company will also have any other rights which the Company
may have been afforded under any contract or agreement at any time and any other
rights which the Company may have pursuant to applicable law. The Employee
hereby waives diligence, presentment, protest and demand and notice of protest
and demand, dishonor and nonpayment of this Note, and expressly agrees that this
Note, or any payment thereunder, may be extended from time to time and that the
Company may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Employee thereunder. If the
Employee fails to pay any amounts due
3
<PAGE>
hereunder when due, then the Employee shall pay to the Company, in addition to
the amounts due, all costs of collection, including reasonable attorneys fees.
5. AMENDMENT AND WAIVER. None of the terms or provisions of this
--------------------
Note may be altered, modified or amended except by an instrument in writing,
duly executed by the Company (with approval of Parent's board of directors) and
the Employee. The Company shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Company (with the approval of
Parent's board of directors), and then only to the extent therein set forth. A
waiver by the Company of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Company would
otherwise have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Company, any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.
6. CANCELLATION. After all principal and accrued interest at any
------------
time owed on this Note have been paid in full, this Note will be surrendered to
the Employee for cancellation.
7. PAYMENTS. All cash payments to be made to the Company will be
--------
made in the lawful money of the United States of America in immediately
available funds. Payments of principal and interest in respect of this Note
will be delivered to the Company at the Company's chief executive office.
8. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of
-----------------------------------
the several Sections of this Note are inserted for convenience only and do not
constitute a part of this Note. This Note shall be governed by and construed in
accordance with the laws of the state of North Carolina, without giving effect
to any rules, principles or provisions of choice of law or conflict of laws.
9. BUSINESS DAYS. If any payment is due, or any time period for
-------------
giving notice or taking action expires, on a day which is a Saturday, Sunday or
legal holiday in the State of North Carolina, then the payment will be due and
payable on, and the time period will automatically be extended to, the next
business day immediately following such Saturday, Sunday or legal holiday, and
interest will continue to accrue at the required rate under this Note until any
such payment is made.
10. USURY LAWS. It is the intention of the Employee and the Company
----------
to conform strictly to all applicable usury laws now or hereafter in force, and
any interest payable under this Note will be subject to reduction to the amount
not in excess of the maximum legal amount allowed under the applicable usury
laws as now or hereafter construed by the courts having jurisdiction over such
matters. If the maturity of this Note is accelerated by reason of an Event of
Default, voluntary prepayment by the Employee or otherwise, then earned interest
may never include more than the
4
<PAGE>
maximum amount permitted by law, computed from the date hereof until payment,
and any interest in excess of the maximum amount permitted by law will be
canceled automatically and, if theretofore paid, will at the option of the
Company either be rebated to the Employee or credited on the principal amount of
this Note, or if this Note has been paid, then the excess will be rebated to the
Employee. The aggregate of all interest (whether designated as interest, service
charges, points or otherwise) contracted for, chargeable, or receivable under
this Note will under no circumstances exceed the maximum legal rate upon the
unpaid principal balance of this Note remaining unpaid from time to time. If
such interest does exceed the maximum legal rate, it will be deemed a mistake
and such excess will be canceled automatically and, if theretofore paid, rebated
to the Employee or credited on the principal amount of this Note, or if this
Note has been repaid, then such excess will be rebated to the Employee.
11. SEVERABILITY. If any provision of this Note is held by any court
------------
of competent jurisdiction to be illegal, void or unenforceable, such provision
will be of no force and effect, but such holding shall have no effect upon the
enforceability of any other provision.
12. GENERAL. This Note:
-------
(a) constitutes the entire agreement among the parties with respect
to the subject matter hereof;
(b) supersedes any and all prior understandings relating to such
subject matter; and
(c) will be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and assigns.
13. WAIVER OF JURY TRIAL. THE EMPLOYEE (AND, BY ITS ACCEPTANCE OF
--------------------
THIS NOTE, THE COMPANY) HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS NOTE OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
* * * * *
5
<PAGE>
IN WITNESS WHEREOF, the Employee has executed and delivered this Recourse
Promissory Note as of the date specified above.
______________________________
Gary Fazio
<PAGE>
EXHIBIT 10.7
EXECUTION COPY
RECOURSE PROMISSORY NOTE
March 31, 1999 $48,203
Douglas Fellmy (the "Employee"), for value received, hereby promises
--------
to pay to Sealy Mattress Company, an Ohio corporation (the "Company"), the
-------
principal amount of forty-eight thousand two hundred three dollars ($48,203) on
March 31, 2004 (the "Maturity Date"). The Company is a wholly-owned subsidiary
-------------
of Sealy Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Employee, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Employee has purchased from Seller 8,361
shares of Class A Common Stock and 929 shares of Class L Common Stock (such
shares of Class A Common Stock and Class L Common Stock, the "Purchased
---------
Shares"), for an aggregate purchase price of $48,203 (the "Purchase Price").
--------------
The Company has loaned the Purchase Price to Employee and Employee has issued
this Note to the Company.
On the date hereof, Parent and the Employee have entered into an
Executive Stock Agreement (the "Executive Stock Agreement").
-------------------------
The amounts due under this Note are secured by a pledge of the
Purchased Shares, and the payment of the principal amount and accrued interest
under this Note is subject to certain offset rights under the Executive Stock
Agreement.
1. DEFINITIONS. For purposes of this Note, the following
-----------
capitalized terms have the following meaning.
"Class A Common Stock" means Parent's Class A Common Stock, par value
--------------------
$.01 per share.
"Class L Common Stock" means Parent's Class L Common Stock, par value
--------------------
$.01 per share.
"Employee Shares" means (i) all Purchased Shares, and (ii) all shares
---------------
issued with respect to the Purchased Shares referred to in clause (i) above by
way of a stock dividend or stock split or in connection with any combination,
exchange, conversion, merger, consolidation, recapitalization, or other
reorganization affecting the Class A Common Stock or Class L Common Stock.
<PAGE>
2. PAYMENT OF PRINCIPAL.
--------------------
(A) SCHEDULED PAYMENT. The Employee will pay the entire unpaid
-----------------
principal amount of this Note on the Maturity Date.
(B) OPTIONAL PREPAYMENT. Subject to Section 3 hereof, the Employee
-------------------
may prepay the principal amount of this Note, in whole or in any $1,000
increment, at any time and from time to time.
(C) MANDATORY PREPAYMENTS.
---------------------
(I) If the Employee sells or otherwise transfers any of the Employee
Shares, then, on the date of the consummation of such sale or transfer, the
Employee shall be obligated, to the extent the Employee has obligations to
the Company under this Note, to pay to the Company an amount equal to the
gross proceeds received by the Employee for the Employee Shares sold or
otherwise transferred and such amount paid to the Company shall first
reduce accrued interest on this Note pursuant to Section 3 hereof and any
remaining amount paid to the Company shall reduce the principal amount of
this Note.
(II) If the Employee receives any cash dividends or other
distributions with respect to any of the Employee Shares, then, on the date
of the payment of such cash dividends or other distributions, as the case
may be, to the Employee, the Employee shall be obligated, to the extent the
Employee has obligations to the Company under this Note, to pay to the
Company an amount equal to the amount of such cash dividends or other
distributions, as the case may be, and such amount paid to the Company
shall first reduce accrued interest on this Note pursuant to Section 3
hereof and any remaining amount paid to the Company shall reduce the
principal amount of this Note.
3. INTEREST. Interest will accrue at the rate of five percent (5%)
--------
per annum (computed on the basis of a 360-day year, as appropriate, and the
actual number of days elapsed in any year) on the unpaid principal amount of
this Note outstanding from time to time, or (if less) at the highest rate then
permitted under applicable law. Interest accruing hereunder, will be payable to
the Company in cash, in arrears, prior to the optional or mandatory prepayment
of any principal amount of this Note pursuant to Sections 1(b) or 1(c) hereof,
and, in any event, on the Maturity Date. Interest will accrue on any amount of
principal until such time as payment therefor is actually delivered to the
Company. In addition, if the Employee receives any bonus from Parent or any of
Parent's subsidiaries (including the Company), then, on the date of the payment
of such bonus to the Employee, the Employee shall be obligated to pay to the
Company an amount equal to the lesser of (i) 25% of the amount of such bonus
(net of the amount of any customary withholding taxes) and (ii) the amount of
accrued and unpaid interest on this Note as of such date, and such amount paid
shall reduce the accrued interest on this Note. The Employee acknowledges and
agrees that no provision contained herein (including the preceding sentence)
will entitle Employee to receive any bonus from Parent or any of Parent's
subsidiaries (including the Company).
2
<PAGE>
4. EVENTS OF DEFAULT.
-----------------
(A) DEFINITION. An "Event of Default" will be deemed to have
---------- ----------------
occurred
if:
(I) the Employee fails to pay any amount of the principal of or
interest on this Note as and when required pursuant to the terms hereof; or
(II) the Employee makes an assignment for the benefit of creditors or
admits in writing his or her inability to pay his or her debts generally as
they become due; or an order, judgment or decree is entered adjudicating
the Employee bankrupt or insolvent; or any order for relief with respect to
the Employee is entered under the Federal Bankruptcy Code; or the Employee
commences any proceeding relating to the Employee under any bankruptcy
reorganization, arrangement, insolvency, or readjustment of debt law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Employee and either (A) the Employee
by any act indicates its approval thereof, consent thereto or acquiescence
therein or (B) such petition, application or proceeding is not dismissed
within 30 days.
The foregoing will constitute Events of Default whatever the reason or cause for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
(B) CONSEQUENCES OF EVENTS OF DEFAULT.
---------------------------------
(I) If an Event of Default has occurred, then the aggregate
principal amount of this Note (together with all accrued interest thereon and
all other amounts due and payable with respect thereto) will become immediately
due and payable without any action on the part of the Company.
(II) If any Event of Default has occurred and is continuing, the
interest rate on this Note will increase immediately by an increment of 6
percentage points (i.e., 600 basis points), to the extent permitted by
applicable law. Any such increase of the interest rate resulting from the
operation of this Section 4(b)(ii) will terminate as of the close of business on
the next date on which no Event of Default exists (subject to subsequent
increases pursuant to this Section).
(III) The Company will also have any other rights which the Company
may have been afforded under any contract or agreement at any time and any other
rights which the Company may have pursuant to applicable law. The Employee
hereby waives diligence, presentment, protest and demand and notice of protest
and demand, dishonor and nonpayment of this Note, and expressly agrees that this
Note, or any payment thereunder, may be extended from time to time and that the
Company may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Employee thereunder. If the
Employee fails to pay any amounts due
3
<PAGE>
hereunder when due, then the Employee shall pay to the Company, in addition to
the amounts due, all costs of collection, including reasonable attorneys fees.
5. AMENDMENT AND WAIVER. None of the terms or provisions of this
--------------------
Note may be altered, modified or amended except by an instrument in writing,
duly executed by the Company (with approval of Parent's board of directors) and
the Employee. The Company shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Company (with the approval of
Parent's board of directors), and then only to the extent therein set forth. A
waiver by the Company of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Company would
otherwise have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Company, any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.
6. CANCELLATION. After all principal and accrued interest at any
------------
time owed on this Note have been paid in full, this Note will be surrendered to
the Employee for cancellation.
7. PAYMENTS. All cash payments to be made to the Company will be
--------
made in the lawful money of the United States of America in immediately
available funds. Payments of principal and interest in respect of this Note will
be delivered to the Company at the Company's chief executive office.
8. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of
-----------------------------------
the several Sections of this Note are inserted for convenience only and do not
constitute a part of this Note. This Note shall be governed by and construed in
accordance with the laws of the state of North Carolina, without giving effect
to any rules, principles or provisions of choice of law or conflict of laws.
9. BUSINESS DAYS. If any payment is due, or any time period for
-------------
giving notice or taking action expires, on a day which is a Saturday, Sunday or
legal holiday in the State of North Carolina, then the payment will be due and
payable on, and the time period will automatically be extended to, the next
business day immediately following such Saturday, Sunday or legal holiday, and
interest will continue to accrue at the required rate under this Note until any
such payment is made.
10. USURY LAWS. It is the intention of the Employee and the Company
----------
to conform strictly to all applicable usury laws now or hereafter in force, and
any interest payable under this Note will be subject to reduction to the amount
not in excess of the maximum legal amount allowed under the applicable usury
laws as now or hereafter construed by the courts having jurisdiction over such
matters. If the maturity of this Note is accelerated by reason of an Event of
Default, voluntary prepayment by the Employee or otherwise, then earned interest
may never include more than the
4
<PAGE>
maximum amount permitted by law, computed from the date hereof until payment,
and any interest in excess of the maximum amount permitted by law will be
canceled automatically and, if theretofore paid, will at the option of the
Company either be rebated to the Employee or credited on the principal amount of
this Note, or if this Note has been paid, then the excess will be rebated to the
Employee. The aggregate of all interest (whether designated as interest, service
charges, points or otherwise) contracted for, chargeable, or receivable under
this Note will under no circumstances exceed the maximum legal rate upon the
unpaid principal balance of this Note remaining unpaid from time to time. If
such interest does exceed the maximum legal rate, it will be deemed a mistake
and such excess will be canceled automatically and, if theretofore paid, rebated
to the Employee or credited on the principal amount of this Note, or if this
Note has been repaid, then such excess will be rebated to the Employee.
11. SEVERABILITY. If any provision of this Note is held by any court
------------
of competent jurisdiction to be illegal, void or unenforceable, such provision
will be of no force and effect, but such holding shall have no effect upon the
enforceability of any other provision.
12. GENERAL. This Note:
-------
(a) constitutes the entire agreement among the parties with respect
to the subject matter hereof;
(b) supersedes any and all prior understandings relating to such
subject matter; and
(c) will be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and assigns.
13. WAIVER OF JURY TRIAL. THE EMPLOYEE (AND, BY ITS ACCEPTANCE OF
--------------------
THIS NOTE, THE COMPANY) HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS NOTE OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
* * * * *
5
<PAGE>
IN WITNESS WHEREOF, the Employee has executed and delivered this Recourse
Promissory Note as of the date specified above.
______________________________
Douglas Fellmy
<PAGE>
EXHIBIT 10.8
EXECUTION COPY
RECOURSE PROMISSORY NOTE
March 31, 1999 $26,617
Richard Sowerby (the "Employee"), for value received, hereby promises
--------
to pay to Sealy Mattress Company, an Ohio corporation (the "Company"), the
-------
principal amount of twenty-six thousand six hundred seventeen dollars ($26,617)
on March 31, 2004 (the "Maturity Date"). The Company is a wholly-owned
-------------
subsidiary of Sealy Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Employee, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Employee has purchased from Seller
101,036.4120 shares of Class A Common Stock and 11,226.2680 shares of Class L
Common Stock (such shares of Class A Common Stock and Class L Common Stock, the
"Purchased Shares"), for an aggregate purchase price of $582,495 (the "Purchase
---------------- --------
Price"). The Company has loaned the Purchase Price to Employee and Employee has
- -----
issued this Note to the Company.
On the date hereof, Parent and the Employee have entered into an
Executive Stock Agreement (the "Executive Stock Agreement").
-------------------------
The amounts due under this Note are secured by a pledge of the
Purchased Shares, and the payment of the principal amount and accrued interest
under this Note is subject to certain offset rights under the Executive Stock
Agreement.
1. DEFINITIONS. For purposes of this Note, the following
-----------
capitalized terms have the following meaning.
"Class A Common Stock" means Parent's Class A Common Stock, par value
--------------------
$.01 per share.
"Class L Common Stock" means Parent's Class L Common Stock, par value
--------------------
$.01 per share.
"Employee Shares" means (i) all Purchased Shares, and (ii) all shares
---------------
issued with respect to the Purchased Shares referred to in clause (i) above by
way of a stock dividend or stock split or in connection with any combination,
exchange, conversion, merger, consolidation, recapitalization, or other
reorganization affecting the Class A Common Stock or Class L Common Stock.
<PAGE>
2. PAYMENT OF PRINCIPAL.
--------------------
(A) SCHEDULED PAYMENT. The Employee will pay the entire unpaid
-----------------
principal amount of this Note on the Maturity Date.
(B) OPTIONAL PREPAYMENT. Subject to Section 3 hereof, the Employee
-------------------
may prepay the principal amount of this Note, in whole or in any $1,000
increment, at any time and from time to time.
(C) MANDATORY PREPAYMENTS.
---------------------
(I) If the Employee sells or otherwise transfers any of the Employee
Shares, then, on the date of the consummation of such sale or transfer, the
Employee shall be obligated, to the extent the Employee has obligations to
the Company under this Note, to pay to the Company an amount equal to the
gross proceeds received by the Employee for the Employee Shares sold or
otherwise transferred and such amount paid to the Company shall first
reduce accrued interest on this Note pursuant to Section 3 hereof and any
remaining amount paid to the Company shall reduce the principal amount of
this Note.
(II) If the Employee receives any cash dividends or other
distributions with respect to any of the Employee Shares, then, on the date
of the payment of such cash dividends or other distributions, as the case
may be, to the Employee, the Employee shall be obligated, to the extent the
Employee has obligations to the Company under this Note, to pay to the
Company an amount equal to the amount of such cash dividends or other
distributions, as the case may be, and such amount paid to the Company
shall first reduce accrued interest on this Note pursuant to Section 3
hereof and any remaining amount paid to the Company shall reduce the
principal amount of this Note.
3. INTEREST. Interest will accrue at the rate of five percent (5%)
--------
per annum (computed on the basis of a 360-day year, as appropriate, and the
actual number of days elapsed in any year) on the unpaid principal amount of
this Note outstanding from time to time, or (if less) at the highest rate then
permitted under applicable law. Interest accruing hereunder, will be payable to
the Company in cash, in arrears, prior to the optional or mandatory prepayment
of any principal amount of this Note pursuant to Sections 1(b) or 1(c) hereof,
and, in any event, on the Maturity Date. Interest will accrue on any amount of
principal until such time as payment therefor is actually delivered to the
Company. In addition, if the Employee receives any bonus from Parent or any of
Parent's subsidiaries (including the Company), then, on the date of the payment
of such bonus to the Employee, the Employee shall be obligated to pay to the
Company an amount equal to the lesser of (i) 25% of the amount of such bonus
(net of the amount of any customary withholding taxes) and (ii) the amount of
accrued and unpaid interest on this Note as of such date, and such amount paid
shall reduce the accrued interest on this Note. The Employee acknowledges and
agrees that no provision contained herein (including the preceding sentence)
will entitle Employee to receive any bonus from Parent or any of Parent's
subsidiaries (including the Company).
2
<PAGE>
4. EVENTS OF DEFAULT.
-----------------
(A) DEFINITION. An "Event of Default" will be deemed to have
---------- ----------------
occurred if:
(I) the Employee fails to pay any amount of the principal of or
interest on this Note as and when required pursuant to the terms hereof; or
(II) the Employee makes an assignment for the benefit of creditors or
admits in writing his or her inability to pay his or her debts generally as
they become due; or an order, judgment or decree is entered adjudicating
the Employee bankrupt or insolvent; or any order for relief with respect to
the Employee is entered under the Federal Bankruptcy Code; or the Employee
commences any proceeding relating to the Employee under any bankruptcy
reorganization, arrangement, insolvency, or readjustment of debt law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Employee and either (A) the Employee
by any act indicates its approval thereof, consent thereto or acquiescence
therein or (B) such petition, application or proceeding is not dismissed
within 30 days.
The foregoing will constitute Events of Default whatever the reason or cause for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
(B) CONSEQUENCES OF EVENTS OF DEFAULT.
---------------------------------
(I) If an Event of Default has occurred, then the aggregate
principal amount of this Note (together with all accrued interest thereon and
all other amounts due and payable with respect thereto) will become immediately
due and payable without any action on the part of the Company.
(II) If any Event of Default has occurred and is continuing, the
interest rate on this Note will increase immediately by an increment of 6
percentage points (i.e., 600 basis points), to the extent permitted by
applicable law. Any such increase of the interest rate resulting from the
operation of this Section 4(b)(ii) will terminate as of the close of business on
the next date on which no Event of Default exists (subject to subsequent
increases pursuant to this Section).
(III) The Company will also have any other rights which the Company
may have been afforded under any contract or agreement at any time and any other
rights which the Company may have pursuant to applicable law. The Employee
hereby waives diligence, presentment, protest and demand and notice of protest
and demand, dishonor and nonpayment of this Note, and expressly agrees that this
Note, or any payment thereunder, may be extended from time to time and that the
Company may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Employee thereunder. If the
Employee fails to pay any amounts due
3
<PAGE>
hereunder when due, then the Employee shall pay to the Company, in addition to
the amounts due, all costs of collection, including reasonable attorneys fees.
5. AMENDMENT AND WAIVER. None of the terms or provisions of this
--------------------
Note may be altered, modified or amended except by an instrument in writing,
duly executed by the Company (with approval of Parent's board of directors) and
the Employee. The Company shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Company (with the approval of
Parent's board of directors), and then only to the extent therein set forth. A
waiver by the Company of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Company would
otherwise have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Company, any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.
6. CANCELLATION. After all principal and accrued interest at any
------------
time owed on this Note have been paid in full, this Note will be surrendered to
the Employee for cancellation.
7. PAYMENTS. All cash payments to be made to the Company will be
--------
made in the lawful money of the United States of America in immediately
available funds. Payments of principal and interest in respect of this Note will
be delivered to the Company at the Company's chief executive office.
8. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings
-----------------------------------
of the several Sections of this Note are inserted for convenience only and do
not constitute a part of this Note. This Note shall be governed by and construed
in accordance with the laws of the state of North Carolina, without giving
effect to any rules, principles or provisions of choice of law or conflict of
laws.
9. BUSINESS DAYS. If any payment is due, or any time period for
-------------
giving notice or taking action expires, on a day which is a Saturday, Sunday or
legal holiday in the State of North Carolina, then the payment will be due and
payable on, and the time period will automatically be extended to, the next
business day immediately following such Saturday, Sunday or legal holiday, and
interest will continue to accrue at the required rate under this Note until any
such payment is made.
10. USURY LAWS. It is the intention of the Employee and the Company
----------
to conform strictly to all applicable usury laws now or hereafter in force, and
any interest payable under this Note will be subject to reduction to the amount
not in excess of the maximum legal amount allowed under the applicable usury
laws as now or hereafter construed by the courts having jurisdiction over such
matters. If the maturity of this Note is accelerated by reason of an Event of
Default, voluntary prepayment by the Employee or otherwise, then earned interest
may never include more than the
4
<PAGE>
maximum amount permitted by law, computed from the date hereof until payment,
and any interest in excess of the maximum amount permitted by law will be
canceled automatically and, if theretofore paid, will at the option of the
Company either be rebated to the Employee or credited on the principal amount of
this Note, or if this Note has been paid, then the excess will be rebated to the
Employee. The aggregate of all interest (whether designated as interest, service
charges, points or otherwise) contracted for, chargeable, or receivable under
this Note will under no circumstances exceed the maximum legal rate upon the
unpaid principal balance of this Note remaining unpaid from time to time. If
such interest does exceed the maximum legal rate, it will be deemed a mistake
and such excess will be canceled automatically and, if theretofore paid, rebated
to the Employee or credited on the principal amount of this Note, or if this
Note has been repaid, then such excess will be rebated to the Employee.
11. SEVERABILITY. If any provision of this Note is held by any
------------
court of competent jurisdiction to be illegal, void or unenforceable, such
provision will be of no force and effect, but such holding shall have no effect
upon the enforceability of any other provision.
12. GENERAL. This Note:
-------
(a) constitutes the entire agreement among the parties with respect
to the subject matter hereof;
(b) supersedes any and all prior understandings relating to such
subject matter; and
(c) will be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and assigns.
13. WAIVER OF JURY TRIAL. THE EMPLOYEE (AND, BY ITS ACCEPTANCE OF
--------------------
THIS NOTE, THE COMPANY) HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS NOTE OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
* * * * *
5
<PAGE>
IN WITNESS WHEREOF, the Employee has executed and delivered this
Recourse Promissory Note as of the date specified above.
______________________________
Richard Sowerby
6
<PAGE>
EXHIBIT 10.9
EXECUTION COPY
RECOURSE PROMISSORY NOTE
March 31, 1999 $10,896
E. Lee Wyatt (the "Employee"), for value received, hereby promises
---------
to pay to Sealy Mattress Company, an Ohio corporation (the "Company"), the
--------
amount of ten thousand eight hundred ninety-six dollars ($10,896) on March 31,
2004 (the "Maturity Date"). The Company is a wholly-owned subsidiary Sealy
-------------
Corporation, a Delaware corporation ("Parent").
-------
Reference is hereby made to the Stock Purchase Agreement, dated as
of the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Employee, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Employee has purchased from Seller 1,890
shares of Class A Common Stock and 210 shares of Class L Common Stock (such
shares of Class A Common Stock and Class L Common Stock, the "Purchased
---------
Shares"), for an aggregate purchase price of $10,896 (the "Purchase Price").
--------------
The Company has loaned the Purchase Price to Employee and Employee has issued
this Note to the Company.
On the date hereof, Parent and the Employee have entered into an
Executive Stock Agreement (the "Executive Stock Agreement").
-------------------------
The amounts due under this Note are secured by a pledge of the
Purchased Shares, and the payment of the principal amount and accrued interest
under this Note is subject to certain offset rights under the Executive Stock
Agreement.
1. DEFINITIONS. For purposes of this Note, the following
-----------
capitalized terms have the following meaning.
"Class A Common Stock" means Parent's Class A Common Stock, par
--------------------
value $.01 per share.
"Class L Common Stock" means Parent's Class L Common Stock, par
--------------------
value $.01 per share.
"Employee Shares" means (i) all Purchased Shares, and (ii) all
---------------
shares issued with respect to the Purchased Shares referred to in clause (i)
above by way of a stock dividend or stock split or in connection with any
combination, exchange, conversion, merger, consolidation, recapitalization, or
other reorganization affecting the Class A Common Stock or Class L Common Stock.
<PAGE>
2. PAYMENT OF PRINCIPAL.
--------------------
(A) SCHEDULED PAYMENT. The Employee will pay the entire unpaid
-----------------
principal amount of this Note on the Maturity Date.
(B) OPTIONAL PREPAYMENT. Subject to Section 3 hereof, the Employee
-------------------
may prepay the principal amount of this Note, in whole or in any $1,000
increment, at any time and from time to time.
(C) MANDATORY PREPAYMENTS.
---------------------
(I) If the Employee sells or otherwise transfers any of the Employee
Shares, then, on the date of the consummation of such sale or transfer, the
Employee shall be obligated, to the extent the Employee has obligations to
the Company under this Note, to pay to the Company an amount equal to the
gross proceeds received by the Employee for the Employee Shares sold or
otherwise transferred and such amount paid to the Company shall first
reduce accrued interest on this Note pursuant to Section 3 hereof and any
remaining amount paid to the Company shall reduce the principal amount of
this Note.
(II) If the Employee receives any cash dividends or other
distributions with respect to any of the Employee Shares, then, on the date
of the payment of such cash dividends or other distributions, as the case
may be, to the Employee, the Employee shall be obligated, to the extent the
Employee has obligations to the Company under this Note, to pay to the
Company an amount equal to the amount of such cash dividends or other
distributions, as the case may be, and such amount paid to the Company
shall first reduce accrued interest on this Note pursuant to Section 3
hereof and any remaining amount paid to the Company shall reduce the
principal amount of this Note.
3. INTEREST. Interest will accrue at the rate of five percent (5%)
--------
per annum (computed on the basis of a 360-day year, as appropriate, and the
actual number of days elapsed in any year) on the unpaid principal amount of
this Note outstanding from time to time, or (if less) at the highest rate then
permitted under applicable law. Interest accruing hereunder, will be payable to
the Company in cash, in arrears, prior to the optional or mandatory prepayment
of any principal amount of this Note pursuant to Sections 1(b) or 1(c) hereof,
and, in any event, on the Maturity Date. Interest will accrue on any amount of
principal until such time as payment therefor is actually delivered to the
Company. In addition, if the Employee receives any bonus from Parent or any of
Parent's subsidiaries (including the Company), then, on the date of the payment
of such bonus to the Employee, the Employee shall be obligated to pay to the
Company an amount equal to the lesser of (i) 25% of the amount of such bonus
(net of the amount of any customary withholding taxes) and (ii) the amount of
accrued and unpaid interest on this Note as of such date, and such amount paid
shall reduce the accrued interest on this Note. The Employee acknowledges and
agrees that no provision contained herein (including the preceding sentence)
will entitle Employee to receive any bonus from Parent or any of Parent's
subsidiaries (including the Company).
2
<PAGE>
4. EVENTS OF DEFAULT.
-----------------
(A) DEFINITION. An "Event of Default" will be deemed to have
---------- ----------------
occurred if:
(I) the Employee fails to pay any amount of the principal of or
interest on this Note as and when required pursuant to the terms hereof; or
(II) the Employee makes an assignment for the benefit of creditors or
admits in writing his or her inability to pay his or her debts generally as
they become due; or an order, judgment or decree is entered adjudicating
the Employee bankrupt or insolvent; or any order for relief with respect to
the Employee is entered under the Federal Bankruptcy Code; or the Employee
commences any proceeding relating to the Employee under any bankruptcy
reorganization, arrangement, insolvency, or readjustment of debt law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Employee and either (A) the Employee
by any act indicates its approval thereof, consent thereto or acquiescence
therein or (B) such petition, application or proceeding is not dismissed
within 30 days.
The foregoing will constitute Events of Default whatever the reason or cause for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
(B) CONSEQUENCES OF EVENTS OF DEFAULT.
---------------------------------
(I) If an Event of Default has occurred, then the aggregate
principal amount of this Note (together with all accrued interest thereon and
all other amounts due and payable with respect thereto) will become immediately
due and payable without any action on the part of the Company.
(II) If any Event of Default has occurred and is continuing, the
interest rate on this Note will increase immediately by an increment of 6
percentage points (i.e., 600 basis points), to the extent permitted by
applicable law. Any such increase of the interest rate resulting from the
operation of this Section 4(b)(ii) will terminate as of the close of business on
the next date on which no Event of Default exists (subject to subsequent
increases pursuant to this Section).
(III) The Company will also have any other rights which the Company
may have been afforded under any contract or agreement at any time and any other
rights which the Company may have pursuant to applicable law. The Employee
hereby waives diligence, presentment, protest and demand and notice of protest
and demand, dishonor and nonpayment of this Note, and expressly agrees that this
Note, or any payment thereunder, may be extended from time to time and that the
Company may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Employee thereunder. If the
Employee fails to pay any amounts due
3
<PAGE>
hereunder when due, then the Employee shall pay to the Company, in addition to
the amounts due, all costs of collection, including reasonable attorneys fees.
5. AMENDMENT AND WAIVER. None of the terms or provisions of this
--------------------
Note may be altered, modified or amended except by an instrument in writing,
duly executed by the Company (with approval of Parent's board of directors) and
the Employee. The Company shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Company (with the approval of
Parent's board of directors), and then only to the extent therein set forth. A
waiver by the Company of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Company would
otherwise have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Company, any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.
6. CANCELLATION. After all principal and accrued interest at any
------------
time owed on this Note have been paid in full, this Note will be surrendered to
the Employee for cancellation.
7. PAYMENTS. All cash payments to be made to the Company will be
--------
made in the lawful money of the United States of America in immediately
available funds. Payments of principal and interest in respect of this Note will
be delivered to the Company at the Company's chief executive office.
8. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings
-----------------------------------
of the several Sections of this Note are inserted for convenience only and do
not constitute a part of this Note. This Note shall be governed by and construed
in accordance with the laws of the state of North Carolina, without giving
effect to any rules, principles or provisions of choice of law or conflict of
laws.
9. BUSINESS DAYS. If any payment is due, or any time period for
-------------
giving notice or taking action expires, on a day which is a Saturday, Sunday or
legal holiday in the State of North Carolina, then the payment will be due and
payable on, and the time period will automatically be extended to, the next
business day immediately following such Saturday, Sunday or legal holiday, and
interest will continue to accrue at the required rate under this Note until any
such payment is made.
10. USURY LAWS. It is the intention of the Employee and the Company
----------
to conform strictly to all applicable usury laws now or hereafter in force, and
any interest payable under this Note will be subject to reduction to the amount
not in excess of the maximum legal amount allowed under the applicable usury
laws as now or hereafter construed by the courts having jurisdiction over such
matters. If the maturity of this Note is accelerated by reason of an Event of
Default, voluntary prepayment by the Employee or otherwise, then earned interest
may never include more than the
4
<PAGE>
maximum amount permitted by law, computed from the date hereof until payment,
and any interest in excess of the maximum amount permitted by law will be
canceled automatically and, if theretofore paid, will at the option of the
Company either be rebated to the Employee or credited on the principal amount of
this Note, or if this Note has been paid, then the excess will be rebated to the
Employee. The aggregate of all interest (whether designated as interest, service
charges, points or otherwise) contracted for, chargeable, or receivable under
this Note will under no circumstances exceed the maximum legal rate upon the
unpaid principal balance of this Note remaining unpaid from time to time. If
such interest does exceed the maximum legal rate, it will be deemed a mistake
and such excess will be canceled automatically and, if theretofore paid, rebated
to the Employee or credited on the principal amount of this Note, or if this
Note has been repaid, then such excess will be rebated to the Employee.
11. SEVERABILITY. If any provision of this Note is held by any
------------
court of competent jurisdiction to be illegal, void or unenforceable, such
provision will be of no force and effect, but such holding shall have no effect
upon the enforceability of any other provision.
12. GENERAL. This Note:
-------
(a) constitutes the entire agreement among the parties with respect
to the subject matter hereof;
(b) supersedes any and all prior understandings relating to such
subject matter; and
(c) will be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and assigns.
13. WAIVER OF JURY TRIAL. THE EMPLOYEE (AND, BY ITS ACCEPTANCE OF
--------------------
THIS NOTE, THE COMPANY) HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS NOTE OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
* * * * *
5
<PAGE>
IN WITNESS WHEREOF, the Employee has executed and delivered this
Recourse Promissory Note as of the date specified above.
______________________________
E. Lee Wyatt
6
<PAGE>
EXHIBIT 10.10
EXECUTION COPY
PLEDGE AGREEMENT
This Pledge Agreement (this "Pledge Agreement") is made as of March
----------------
31, 1999, between Ronald Jones ("Pledgor"), and Sealy Mattress Company, an Ohio
-------
corporation (the "Company"). The Company is a wholly-owned subsidiary of Sealy
-------
Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Pledgor, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Pledgor has purchased from Seller
101,036.4120 shares of Parent's Class A Common Stock, par value $.01 per share,
and 11,226.2680 shares of Parent's Class L Common Stock, par value $.01 per
share (such shares of Class A Common and Class L Common, the "Pledged Shares"),
--------------
for an aggregate purchase price of $582,495 (the "Purchase Price"). The Company
--------------
has loaned the Purchase Price to Pledgor and Pledgor has issued to the Company a
recourse promissory note (the "Note") in principal amount equal to the Purchase
----
Price. This Pledge Agreement provides the terms and conditions upon which the
Note is secured by a pledge to the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Company to accept the Note,
Pledgor and the Company hereby agree as follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants to the
------
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note and full payment and performance of the obligations and liabilities of
Pledgor hereunder.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
--------------------------
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment or stock
powers sufficient to transfer title thereto to the Company.
3. Voting Rights. Notwithstanding anything to the contrary
-------------
contained herein, during the term of this Pledge Agreement until such time as
there exists a default in the payment of principal on the Note or any other
default under the Note or hereunder, Pledgor shall be entitled to all voting
rights with respect to the Pledged Shares. Upon the occurrence of and during
the continuance of any such default, Pledgor shall no longer be able to vote the
Pledged Shares.
4. Stock Dividends; Distributions, etc. If, while this Pledge
-----------------------------------
Agreement is in effect, Pledgor becomes entitled to receive or receives any
securities or other property in addition to, in substitution of, or in exchange
for any of the Pledged Shares (whether as a distribution in
<PAGE>
connection with any recapitalization, reorganization or reclassification, a
stock distribution or dividend or otherwise), Pledgor shall accept such
securities or other property on behalf of and for the benefit of the Company as
additional security for Pledgor's obligations under the Note and shall promptly
deliver such additional security to the Company together with duly executed
forms of assignment or stock powers, and such additional security shall be
deemed to be part of the Pledged Shares hereunder.
5. Default. If Pledgor defaults in the payment of the principal or
-------
interest under the Note when it becomes due (whether upon acceleration or
otherwise) or any other event of default under the Note or this Pledge Agreement
occurs (including the bankruptcy or insolvency of Pledgor), the Company may
exercise any and all the rights, powers and remedies of any owner of the Pledged
Shares (including the right to vote the shares) and shall have and may exercise
without demand any and all the rights and remedies granted to a secured party
upon default under the Uniform Commercial Code of North Carolina or otherwise
available to the Company under applicable law. Without limiting the foregoing,
the Company is authorized to sell, assign and deliver at its discretion, from
time to time, all or any part of the Pledged Shares at any private sale or
public auction, on not less than ten days written notice to Pledgor, in a
commercially reasonable manner. Pledgor shall have no right to redeem the
Pledged Shares after any such sale or assignment. At any such sale or auction,
the Company may bid for, and become the purchaser of, the whole or any part of
the Pledged Shares offered for sale. In case of any such sale, after deducting
the costs, attorneys' fees and other expenses of sale and delivery, the
remaining proceeds of such sale shall be applied to the principal of and accrued
interest on the Note; provided that after payment in full of the indebtedness
evidenced by the Note, the balance of the proceeds of sale then remaining shall
be paid to Pledgor and Pledgor shall be entitled to the return of any of the
Pledged Shares remaining in the hands of the Company. Pledgor shall be liable
for any deficiency if the remaining proceeds are insufficient to pay the
indebtedness under the Note in full, including the reasonable fees of any
attorneys employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses (including
-------------------------
reasonable attorneys' fees) incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of the Pledged Shares hereunder.
7. Payment of Indebtedness and Release of Pledged Shares. Upon
-----------------------------------------------------
payment in full of the indebtedness evidenced by the Note (including all
principal and accrued interest thereof), the Company shall surrender the Pledged
Shares to Pledgor together with all forms of assignment or stock powers.
8. No Other Liens; No Sales or Transfers. Pledgor hereby represents
-------------------------------------
and warrants that he or she has good and valid title to all of the Pledged
Shares, free and clear of all liens, security interests and other encumbrances,
and Pledgor hereby covenants that, until such time as all of the outstanding
principal of and interest on the Note has been repaid, Pledgor shall not (i)
create, incur, assume or suffer to exist any pledge, security interest,
encumbrance, lien or charge of any kind against the Pledged Shares or Pledgor's
rights or a holder thereof, other than pursuant to this Pledge
2
<PAGE>
Agreement, or (ii) without the prior written consent of the Company (with
approval of Parent's board of directors), sell or otherwise transfer any Pledged
Shares or any interest therein.
9. Further Assurances. Pledgor agrees that at any time and from
------------------
time to time upon the written request of the Company, Pledgor shall execute and
deliver such further documents (including UCC financing statements) and do such
further acts and things as the Company may reasonably request in order to effect
the purposes of this Pledge Agreement.
10. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. No Waiver; Cumulative Remedies. The Company shall not by any
------------------------------
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company (with approval of Parent's board of directors), and then only to the
extent therein set forth. A waiver by the Company of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Company would otherwise have on any future occasion. No
failure to exercise nor any delay in exercising on the part of the Company, any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.
12. Amendments; Applicable Law. None of the terms or provisions of
--------------------------
this Pledge Agreement may be altered, modified or amended except by an
instrument in writing, duly executed by the Company (with approval of Parent's
board of directors) and Pledgor. This Agreement and all obligations of the
Pledgor hereunder shall together with the rights and remedies of the Company
hereunder, inure to the benefit of the Company and its successors and assigns.
This Pledge Agreement shall be governed by and construed in accordance with the
laws of the state of North Carolina, without giving effect to any rules,
principles or provisions of choice of law or conflict of laws.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
SEALY MATTRESS COMPANY
___________________________
Name:
Title:
___________________________
Ronald Jones
4
<PAGE>
EXHIBIT 10.11
EXECUTION COPY
PLEDGE AGREEMENT
This Pledge Agreement (this "Pledge Agreement") is made as of March
----------------
31, 1999, between David McIlquham ("Pledgor"), and Sealy Mattress Company, an
-------
Ohio corporation (the "Company"). The Company is a wholly-owned subsidiary of
-------
Sealy Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Pledgor, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Pledgor has purchased from Seller 8,361
shares of Parent's Class A Common Stock, par value $.01 per share, and 929
shares of Parent's Class L Common Stock, par value $.01 per share (such shares
of Class A Common and Class L Common, the "Pledged Shares"), for an aggregate
--------------
purchase price of $48,203 (the "Purchase Price"). The Company has loaned the
--------------
Purchase Price to Pledgor and Pledgor has issued to the Company a recourse
promissory note (the "Note") in principal amount equal to the Purchase Price.
----
This Pledge Agreement provides the terms and conditions upon which the Note is
secured by a pledge to the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Company to accept the Note,
Pledgor and the Company hereby agree as follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants to the
------
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note and full payment and performance of the obligations and liabilities of
Pledgor hereunder.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
--------------------------
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment or stock
powers sufficient to transfer title thereto to the Company.
3. Voting Rights. Notwithstanding anything to the contrary
-------------
contained herein, during the term of this Pledge Agreement until such time as
there exists a default in the payment of principal on the Note or any other
default under the Note or hereunder, Pledgor shall be entitled to all voting
rights with respect to the Pledged Shares. Upon the occurrence of and during
the continuance of any such default, Pledgor shall no longer be able to vote the
Pledged Shares.
4. Stock Dividends; Distributions, etc. If, while this Pledge
-----------------------------------
Agreement is in effect, Pledgor becomes entitled to receive or receives any
securities or other property in addition to, in substitution of, or in exchange
for any of the Pledged Shares (whether as a distribution in
<PAGE>
connection with any recapitalization, reorganization or reclassification, a
stock distribution or dividend or otherwise), Pledgor shall accept such
securities or other property on behalf of and for the benefit of the Company as
additional security for Pledgor's obligations under the Note and shall promptly
deliver such additional security to the Company together with duly executed
forms of assignment or stock powers, and such additional security shall be
deemed to be part of the Pledged Shares hereunder.
5. Default. If Pledgor defaults in the payment of the principal or
-------
interest under the Note when it becomes due (whether upon acceleration or
otherwise) or any other event of default under the Note or this Pledge Agreement
occurs (including the bankruptcy or insolvency of Pledgor), the Company may
exercise any and all the rights, powers and remedies of any owner of the Pledged
Shares (including the right to vote the shares) and shall have and may exercise
without demand any and all the rights and remedies granted to a secured party
upon default under the Uniform Commercial Code of North Carolina or otherwise
available to the Company under applicable law. Without limiting the foregoing,
the Company is authorized to sell, assign and deliver at its discretion, from
time to time, all or any part of the Pledged Shares at any private sale or
public auction, on not less than ten days written notice to Pledgor, in a
commercially reasonable manner. Pledgor shall have no right to redeem the
Pledged Shares after any such sale or assignment. At any such sale or auction,
the Company may bid for, and become the purchaser of, the whole or any part of
the Pledged Shares offered for sale. In case of any such sale, after deducting
the costs, attorneys' fees and other expenses of sale and delivery, the
remaining proceeds of such sale shall be applied to the principal of and accrued
interest on the Note; provided that after payment in full of the indebtedness
evidenced by the Note, the balance of the proceeds of sale then remaining shall
be paid to Pledgor and Pledgor shall be entitled to the return of any of the
Pledged Shares remaining in the hands of the Company. Pledgor shall be liable
for any deficiency if the remaining proceeds are insufficient to pay the
indebtedness under the Note in full, including the reasonable fees of any
attorneys employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses (including
-------------------------
reasonable attorneys' fees) incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of the Pledged Shares hereunder.
7. Payment of Indebtedness and Release of Pledged Shares. Upon
-----------------------------------------------------
payment in full of the indebtedness evidenced by the Note (including all
principal and accrued interest thereof), the Company shall surrender the Pledged
Shares to Pledgor together with all forms of assignment or stock powers.
8. No Other Liens; No Sales or Transfers. Pledgor hereby represents
-------------------------------------
and warrants that he or she has good and valid title to all of the Pledged
Shares, free and clear of all liens, security interests and other encumbrances,
and Pledgor hereby covenants that, until such time as all of the outstanding
principal of and interest on the Note has been repaid, Pledgor shall not (i)
create, incur, assume or suffer to exist any pledge, security interest,
encumbrance, lien or charge of any kind against the Pledged Shares or Pledgor's
rights or a holder thereof, other than pursuant to this Pledge
2
<PAGE>
Agreement, or (ii) without the prior written consent of the Company (with
approval of Parent's board of directors), sell or otherwise transfer any Pledged
Shares or any interest therein.
9. Further Assurances. Pledgor agrees that at any time and from
------------------
time to time upon the written request of the Company, Pledgor shall execute and
deliver such further documents (including UCC financing statements) and do such
further acts and things as the Company may reasonably request in order to effect
the purposes of this Pledge Agreement.
10. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. No Waiver; Cumulative Remedies. The Company shall not by any
------------------------------
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company (with approval of Parent's board of directors), and then only to the
extent therein set forth. A waiver by the Company of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Company would otherwise have on any future occasion. No
failure to exercise nor any delay in exercising on the part of the Company, any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.
12. Amendments; Applicable Law. None of the terms or provisions of
--------------------------
this Pledge Agreement may be altered, modified or amended except by an
instrument in writing, duly executed by the Company (with approval of Parent's
board of directors) and Pledgor. This Agreement and all obligations of the
Pledgor hereunder shall together with the rights and remedies of the Company
hereunder, inure to the benefit of the Company and its successors and assigns.
This Pledge Agreement shall be governed by and construed in accordance with the
laws of the state of North Carolina, without giving effect to any rules,
principles or provisions of choice of law or conflict of laws.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
SEALY MATTRESS COMPANY
__________________________________
Name:
Title:
__________________________________
David McIlquham
<PAGE>
EXHIBIT 10.12
EXECUTION COPY
PLEDGE AGREEMENT
This Pledge Agreement (this "Pledge Agreement") is made as of March
----------------
31, 1999, between Bruce Barman ("Pledgor"), and Sealy Mattress Company, an Ohio
-------
corporation (the "Company"). The Company is a wholly-owned subsidiary of Sealy
-------
Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Pledgor, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Pledgor has purchased from Seller 8,361
shares of Parent's Class A Common Stock, par value $.01 per share, and 929
shares of Parent's Class L Common Stock, par value $.01 per share (such shares
of Class A Common and Class L Common, the "Pledged Shares"), for an aggregate
--------------
purchase price of $48,203 (the "Purchase Price"). The Company has loaned the
--------------
Purchase Price to Pledgor and Pledgor has issued to the Company a recourse
promissory note (the "Note") in principal amount equal to the Purchase Price.
----
This Pledge Agreement provides the terms and conditions upon which the Note is
secured by a pledge to the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Company to accept the Note,
Pledgor and the Company hereby agree as follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants to the
------
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note and full payment and performance of the obligations and liabilities of
Pledgor hereunder.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
--------------------------
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment or stock
powers sufficient to transfer title thereto to the Company.
3. Voting Rights. Notwithstanding anything to the contrary
-------------
contained herein, during the term of this Pledge Agreement until such time as
there exists a default in the payment of principal on the Note or any other
default under the Note or hereunder, Pledgor shall be entitled to all voting
rights with respect to the Pledged Shares. Upon the occurrence of and during
the continuance of any such default, Pledgor shall no longer be able to vote the
Pledged Shares.
4. Stock Dividends; Distributions, etc. If, while this Pledge
-----------------------------------
Agreement is in effect, Pledgor becomes entitled to receive or receives any
securities or other property in addition to, in substitution of, or in exchange
for any of the Pledged Shares (whether as a distribution in
<PAGE>
connection with any recapitalization, reorganization or reclassification, a
stock distribution or dividend or otherwise), Pledgor shall accept such
securities or other property on behalf of and for the benefit of the Company as
additional security for Pledgor's obligations under the Note and shall promptly
deliver such additional security to the Company together with duly executed
forms of assignment or stock powers, and such additional security shall be
deemed to be part of the Pledged Shares hereunder.
5. Default. If Pledgor defaults in the payment of the principal or
-------
interest under the Note when it becomes due (whether upon acceleration or
otherwise) or any other event of default under the Note or this Pledge Agreement
occurs (including the bankruptcy or insolvency of Pledgor), the Company may
exercise any and all the rights, powers and remedies of any owner of the Pledged
Shares (including the right to vote the shares) and shall have and may exercise
without demand any and all the rights and remedies granted to a secured party
upon default under the Uniform Commercial Code of North Carolina or otherwise
available to the Company under applicable law. Without limiting the foregoing,
the Company is authorized to sell, assign and deliver at its discretion, from
time to time, all or any part of the Pledged Shares at any private sale or
public auction, on not less than ten days written notice to Pledgor, in a
commercially reasonable manner. Pledgor shall have no right to redeem the
Pledged Shares after any such sale or assignment. At any such sale or auction,
the Company may bid for, and become the purchaser of, the whole or any part of
the Pledged Shares offered for sale. In case of any such sale, after deducting
the costs, attorneys' fees and other expenses of sale and delivery, the
remaining proceeds of such sale shall be applied to the principal of and accrued
interest on the Note; provided that after payment in full of the indebtedness
evidenced by the Note, the balance of the proceeds of sale then remaining shall
be paid to Pledgor and Pledgor shall be entitled to the return of any of the
Pledged Shares remaining in the hands of the Company. Pledgor shall be liable
for any deficiency if the remaining proceeds are insufficient to pay the
indebtedness under the Note in full, including the reasonable fees of any
attorneys employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses (including
-------------------------
reasonable attorneys' fees) incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of the Pledged Shares hereunder.
7. Payment of Indebtedness and Release of Pledged Shares. Upon
-----------------------------------------------------
payment in full of the indebtedness evidenced by the Note (including all
principal and accrued interest thereof), the Company shall surrender the Pledged
Shares to Pledgor together with all forms of assignment or stock powers.
8. No Other Liens; No Sales or Transfers. Pledgor hereby represents
-------------------------------------
and warrants that he or she has good and valid title to all of the Pledged
Shares, free and clear of all liens, security interests and other encumbrances,
and Pledgor hereby covenants that, until such time as all of the outstanding
principal of and interest on the Note has been repaid, Pledgor shall not (i)
create, incur, assume or suffer to exist any pledge, security interest,
encumbrance, lien or charge of any kind against the Pledged Shares or Pledgor's
rights or a holder thereof, other than pursuant to this Pledge
2
<PAGE>
Agreement, or (ii) without the prior written consent of the Company (with
approval of Parent's board of directors), sell or otherwise transfer any Pledged
Shares or any interest therein.
9. Further Assurances. Pledgor agrees that at any time and from
------------------
time to time upon the written request of the Company, Pledgor shall execute and
deliver such further documents (including UCC financing statements) and do such
further acts and things as the Company may reasonably request in order to effect
the purposes of this Pledge Agreement.
10. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. No Waiver; Cumulative Remedies. The Company shall not by any
------------------------------
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company (with approval of Parent's board of directors), and then only to the
extent therein set forth. A waiver by the Company of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Company would otherwise have on any future occasion. No
failure to exercise nor any delay in exercising on the part of the Company, any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.
12. Amendments; Applicable Law. None of the terms or provisions of
--------------------------
this Pledge Agreement may be altered, modified or amended except by an
instrument in writing, duly executed by the Company (with approval of Parent's
board of directors) and Pledgor. This Agreement and all obligations of the
Pledgor hereunder shall together with the rights and remedies of the Company
hereunder, inure to the benefit of the Company and its successors and assigns.
This Pledge Agreement shall be governed by and construed in accordance with the
laws of the state of North Carolina, without giving effect to any rules,
principles or provisions of choice of law or conflict of laws.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
SEALY MATTRESS COMPANY
________________________________
Name:
Title:
________________________________
Bruce Barman
<PAGE>
EXHIBIT 10.13
EXECUTION COPY
PLEDGE AGREEMENT
This Pledge Agreement (this "Pledge Agreement") is made as of March
----------------
31, 1999, between Gary Fazio ("Pledgor"), and Sealy Mattress Company, an Ohio
-------
corporation (the "Company"). The Company is a wholly-owned subsidiary of Sealy
-------
Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Pledgor, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Pledgor has purchased from Seller 8,361
shares of Parent's Class A Common Stock, par value $.01 per share, and 929
shares of Parent's Class L Common Stock, par value $.01 per share (such shares
of Class A Common and Class L Common, the "Pledged Shares"), for an aggregate
--------------
purchase price of $48,203 (the "Purchase Price"). The Company has loaned the
--------------
Purchase Price to Pledgor and Pledgor has issued to the Company a recourse
promissory note (the "Note") in principal amount equal to the Purchase Price.
----
This Pledge Agreement provides the terms and conditions upon which the Note is
secured by a pledge to the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Company to accept the Note,
Pledgor and the Company hereby agree as follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants to the
------
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note and full payment and performance of the obligations and liabilities of
Pledgor hereunder.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
--------------------------
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment or stock
powers sufficient to transfer title thereto to the Company.
3. Voting Rights. Notwithstanding anything to the contrary
-------------
contained herein, during the term of this Pledge Agreement until such time as
there exists a default in the payment of principal on the Note or any other
default under the Note or hereunder, Pledgor shall be entitled to all voting
rights with respect to the Pledged Shares. Upon the occurrence of and during
the continuance of any such default, Pledgor shall no longer be able to vote the
Pledged Shares.
4. Stock Dividends; Distributions, etc. If, while this Pledge
-----------------------------------
Agreement is in effect, Pledgor becomes entitled to receive or receives any
securities or other property in addition to, in substitution of, or in exchange
for any of the Pledged Shares (whether as a distribution in
<PAGE>
connection with any recapitalization, reorganization or reclassification, a
stock distribution or dividend or otherwise), Pledgor shall accept such
securities or other property on behalf of and for the benefit of the Company as
additional security for Pledgor's obligations under the Note and shall promptly
deliver such additional security to the Company together with duly executed
forms of assignment or stock powers, and such additional security shall be
deemed to be part of the Pledged Shares hereunder.
5. Default. If Pledgor defaults in the payment of the principal or
-------
interest under the Note when it becomes due (whether upon acceleration or
otherwise) or any other event of default under the Note or this Pledge Agreement
occurs (including the bankruptcy or insolvency of Pledgor), the Company may
exercise any and all the rights, powers and remedies of any owner of the Pledged
Shares (including the right to vote the shares) and shall have and may exercise
without demand any and all the rights and remedies granted to a secured party
upon default under the Uniform Commercial Code of North Carolina or otherwise
available to the Company under applicable law. Without limiting the foregoing,
the Company is authorized to sell, assign and deliver at its discretion, from
time to time, all or any part of the Pledged Shares at any private sale or
public auction, on not less than ten days written notice to Pledgor, in a
commercially reasonable manner. Pledgor shall have no right to redeem the
Pledged Shares after any such sale or assignment. At any such sale or auction,
the Company may bid for, and become the purchaser of, the whole or any part of
the Pledged Shares offered for sale. In case of any such sale, after deducting
the costs, attorneys' fees and other expenses of sale and delivery, the
remaining proceeds of such sale shall be applied to the principal of and accrued
interest on the Note; provided that after payment in full of the indebtedness
evidenced by the Note, the balance of the proceeds of sale then remaining shall
be paid to Pledgor and Pledgor shall be entitled to the return of any of the
Pledged Shares remaining in the hands of the Company. Pledgor shall be liable
for any deficiency if the remaining proceeds are insufficient to pay the
indebtedness under the Note in full, including the reasonable fees of any
attorneys employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses (including
-------------------------
reasonable attorneys' fees) incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of the Pledged Shares hereunder.
7. Payment of Indebtedness and Release of Pledged Shares. Upon
-----------------------------------------------------
payment in full of the indebtedness evidenced by the Note (including all
principal and accrued interest thereof), the Company shall surrender the Pledged
Shares to Pledgor together with all forms of assignment or stock powers.
8. No Other Liens; No Sales or Transfers. Pledgor hereby represents
-------------------------------------
and warrants that he or she has good and valid title to all of the Pledged
Shares, free and clear of all liens, security interests and other encumbrances,
and Pledgor hereby covenants that, until such time as all of the outstanding
principal of and interest on the Note has been repaid, Pledgor shall not (i)
create, incur, assume or suffer to exist any pledge, security interest,
encumbrance, lien or charge of any kind against the Pledged Shares or Pledgor's
rights or a holder thereof, other than pursuant to this Pledge
2
<PAGE>
Agreement, or (ii) without the prior written consent of the Company (with
approval of Parent's board of directors), sell or otherwise transfer any Pledged
Shares or any interest therein.
9. Further Assurances. Pledgor agrees that at any time and from
------------------
time to time upon the written request of the Company, Pledgor shall execute and
deliver such further documents (including UCC financing statements) and do such
further acts and things as the Company may reasonably request in order to effect
the purposes of this Pledge Agreement.
10. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. No Waiver; Cumulative Remedies. The Company shall not by any
------------------------------
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company (with approval of Parent's board of directors), and then only to the
extent therein set forth. A waiver by the Company of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Company would otherwise have on any future occasion. No
failure to exercise nor any delay in exercising on the part of the Company, any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.
12. Amendments; Applicable Law. None of the terms or provisions of
--------------------------
this Pledge Agreement may be altered, modified or amended except by an
instrument in writing, duly executed by the Company (with approval of Parent's
board of directors) and Pledgor. This Agreement and all obligations of the
Pledgor hereunder shall together with the rights and remedies of the Company
hereunder, inure to the benefit of the Company and its successors and assigns.
This Pledge Agreement shall be governed by and construed in accordance with the
laws of the state of North Carolina, without giving effect to any rules,
principles or provisions of choice of law or conflict of laws.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
SEALY MATTRESS COMPANY
__________________________________
Name:
Title:
__________________________________
Gary Fazio
<PAGE>
EXHIBIT 10.14
EXECUTION COPY
PLEDGE AGREEMENT
This Pledge Agreement (this "Pledge Agreement") is made as of March
----------------
31, 1999, between Douglas Fellmy ("Pledgor"), and Sealy Mattress Company, an
-------
Ohio corporation (the "Company"). The Company is a wholly-owned subsidiary of
-------
Sealy Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Pledgor, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Pledgor has purchased from Seller 8,361
shares of Parent's Class A Common Stock, par value $.01 per share, and 929
shares of Parent's Class L Common Stock, par value $.01 per share (such shares
of Class A Common and Class L Common, the "Pledged Shares"), for an aggregate
--------------
purchase price of $48,203 (the "Purchase Price"). The Company has loaned the
--------------
Purchase Price to Pledgor and Pledgor has issued to the Company a recourse
promissory note (the "Note") in principal amount equal to the Purchase Price.
----
This Pledge Agreement provides the terms and conditions upon which the Note is
secured by a pledge to the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Company to accept the Note,
Pledgor and the Company hereby agree as follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants to the
------
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note and full payment and performance of the obligations and liabilities of
Pledgor hereunder.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
--------------------------
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment or stock
powers sufficient to transfer title thereto to the Company.
3. Voting Rights. Notwithstanding anything to the contrary
-------------
contained herein, during the term of this Pledge Agreement until such time as
there exists a default in the payment of principal on the Note or any other
default under the Note or hereunder, Pledgor shall be entitled to all voting
rights with respect to the Pledged Shares. Upon the occurrence of and during
the continuance of any such default, Pledgor shall no longer be able to vote the
Pledged Shares.
4. Stock Dividends; Distributions, etc. If, while this Pledge
-----------------------------------
Agreement is in effect, Pledgor becomes entitled to receive or receives any
securities or other property in addition to, in substitution of, or in exchange
for any of the Pledged Shares (whether as a distribution in
<PAGE>
connection with any recapitalization, reorganization or reclassification, a
stock distribution or dividend or otherwise), Pledgor shall accept such
securities or other property on behalf of and for the benefit of the Company as
additional security for Pledgor's obligations under the Note and shall promptly
deliver such additional security to the Company together with duly executed
forms of assignment or stock powers, and such additional security shall be
deemed to be part of the Pledged Shares hereunder.
5. Default. If Pledgor defaults in the payment of the principal or
-------
interest under the Note when it becomes due (whether upon acceleration or
otherwise) or any other event of default under the Note or this Pledge Agreement
occurs (including the bankruptcy or insolvency of Pledgor), the Company may
exercise any and all the rights, powers and remedies of any owner of the Pledged
Shares (including the right to vote the shares) and shall have and may exercise
without demand any and all the rights and remedies granted to a secured party
upon default under the Uniform Commercial Code of North Carolina or otherwise
available to the Company under applicable law. Without limiting the foregoing,
the Company is authorized to sell, assign and deliver at its discretion, from
time to time, all or any part of the Pledged Shares at any private sale or
public auction, on not less than ten days written notice to Pledgor, in a
commercially reasonable manner. Pledgor shall have no right to redeem the
Pledged Shares after any such sale or assignment. At any such sale or auction,
the Company may bid for, and become the purchaser of, the whole or any part of
the Pledged Shares offered for sale. In case of any such sale, after deducting
the costs, attorneys' fees and other expenses of sale and delivery, the
remaining proceeds of such sale shall be applied to the principal of and accrued
interest on the Note; provided that after payment in full of the indebtedness
evidenced by the Note, the balance of the proceeds of sale then remaining shall
be paid to Pledgor and Pledgor shall be entitled to the return of any of the
Pledged Shares remaining in the hands of the Company. Pledgor shall be liable
for any deficiency if the remaining proceeds are insufficient to pay the
indebtedness under the Note in full, including the reasonable fees of any
attorneys employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses (including
-------------------------
reasonable attorneys' fees) incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of the Pledged Shares hereunder.
7. Payment of Indebtedness and Release of Pledged Shares. Upon
-----------------------------------------------------
payment in full of the indebtedness evidenced by the Note (including all
principal and accrued interest thereof), the Company shall surrender the Pledged
Shares to Pledgor together with all forms of assignment or stock powers.
8. No Other Liens; No Sales or Transfers. Pledgor hereby represents
-------------------------------------
and warrants that he or she has good and valid title to all of the Pledged
Shares, free and clear of all liens, security interests and other encumbrances,
and Pledgor hereby covenants that, until such time as all of the outstanding
principal of and interest on the Note has been repaid, Pledgor shall not (i)
create, incur, assume or suffer to exist any pledge, security interest,
encumbrance, lien or charge of any kind against the Pledged Shares or Pledgor's
rights or a holder thereof, other than pursuant to this Pledge
2
<PAGE>
Agreement, or (ii) without the prior written consent of the Company (with
approval of Parent's board of directors), sell or otherwise transfer any Pledged
Shares or any interest therein.
9. Further Assurances. Pledgor agrees that at any time and from
------------------
time to time upon the written request of the Company, Pledgor shall execute and
deliver such further documents (including UCC financing statements) and do such
further acts and things as the Company may reasonably request in order to effect
the purposes of this Pledge Agreement.
10. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. No Waiver; Cumulative Remedies. The Company shall not by any
------------------------------
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company (with approval of Parent's board of directors), and then only to the
extent therein set forth. A waiver by the Company of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Company would otherwise have on any future occasion. No
failure to exercise nor any delay in exercising on the part of the Company, any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.
12. Amendments; Applicable Law. None of the terms or provisions of
--------------------------
this Pledge Agreement may be altered, modified or amended except by an
instrument in writing, duly executed by the Company (with approval of Parent's
board of directors) and Pledgor. This Agreement and all obligations of the
Pledgor hereunder shall together with the rights and remedies of the Company
hereunder, inure to the benefit of the Company and its successors and assigns.
This Pledge Agreement shall be governed by and construed in accordance with the
laws of the state of North Carolina, without giving effect to any rules,
principles or provisions of choice of law or conflict of laws.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
SEALY MATTRESS COMPANY
___________________________
Name:
Title:
___________________________
Douglas Fellmy
<PAGE>
EXHIBIT 10.15
EXECUTION COPY
PLEDGE AGREEMENT
This Pledge Agreement (this "Pledge Agreement") is made as of March
----------------
31, 1999, between Richard Sowerby ("Pledgor"), and Sealy Mattress Company, an
-------
Ohio corporation (the "Company"). The Company is a wholly-owned subsidiary of
-------
Sealy Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Pledgor, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Pledgor has purchased from Seller 4,617
shares of Parent's Class A Common Stock, par value $.01 per share, and 513
shares of Parent's Class L Common Stock, par value $.01 per share (such shares
of Class A Common and Class L Common, the "Pledged Shares"), for an aggregate
--------------
purchase price of $26,617 (the "Purchase Price"). The Company has loaned the
--------------
Purchase Price to Pledgor and Pledgor has issued to the Company a recourse
promissory note (the "Note") in principal amount equal to the Purchase Price.
----
This Pledge Agreement provides the terms and conditions upon which the Note is
secured by a pledge to the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Company to accept the Note,
Pledgor and the Company hereby agree as follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants to the
------
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note and full payment and performance of the obligations and liabilities of
Pledgor hereunder.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
--------------------------
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment or stock
powers sufficient to transfer title thereto to the Company.
3. Voting Rights. Notwithstanding anything to the contrary
-------------
contained herein, during the term of this Pledge Agreement until such time as
there exists a default in the payment of principal on the Note or any other
default under the Note or hereunder, Pledgor shall be entitled to all voting
rights with respect to the Pledged Shares. Upon the occurrence of and during
the continuance of any such default, Pledgor shall no longer be able to vote the
Pledged Shares.
4. Stock Dividends; Distributions, etc. If, while this Pledge
-----------------------------------
Agreement is in effect, Pledgor becomes entitled to receive or receives any
securities or other property in addition to, in substitution of, or in exchange
for any of the Pledged Shares (whether as a distribution in
<PAGE>
connection with any recapitalization, reorganization or reclassification, a
stock distribution or dividend or otherwise), Pledgor shall accept such
securities or other property on behalf of and for the benefit of the Company as
additional security for Pledgor's obligations under the Note and shall promptly
deliver such additional security to the Company together with duly executed
forms of assignment or stock powers, and such additional security shall be
deemed to be part of the Pledged Shares hereunder.
5. Default. If Pledgor defaults in the payment of the principal or
-------
interest under the Note when it becomes due (whether upon acceleration or
otherwise) or any other event of default under the Note or this Pledge Agreement
occurs (including the bankruptcy or insolvency of Pledgor), the Company may
exercise any and all the rights, powers and remedies of any owner of the Pledged
Shares (including the right to vote the shares) and shall have and may exercise
without demand any and all the rights and remedies granted to a secured party
upon default under the Uniform Commercial Code of North Carolina or otherwise
available to the Company under applicable law. Without limiting the foregoing,
the Company is authorized to sell, assign and deliver at its discretion, from
time to time, all or any part of the Pledged Shares at any private sale or
public auction, on not less than ten days written notice to Pledgor, in a
commercially reasonable manner. Pledgor shall have no right to redeem the
Pledged Shares after any such sale or assignment. At any such sale or auction,
the Company may bid for, and become the purchaser of, the whole or any part of
the Pledged Shares offered for sale. In case of any such sale, after deducting
the costs, attorneys' fees and other expenses of sale and delivery, the
remaining proceeds of such sale shall be applied to the principal of and accrued
interest on the Note; provided that after payment in full of the indebtedness
evidenced by the Note, the balance of the proceeds of sale then remaining shall
be paid to Pledgor and Pledgor shall be entitled to the return of any of the
Pledged Shares remaining in the hands of the Company. Pledgor shall be liable
for any deficiency if the remaining proceeds are insufficient to pay the
indebtedness under the Note in full, including the reasonable fees of any
attorneys employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses (including
-------------------------
reasonable attorneys' fees) incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of the Pledged Shares hereunder.
7. Payment of Indebtedness and Release of Pledged Shares. Upon
-----------------------------------------------------
payment in full of the indebtedness evidenced by the Note (including all
principal and accrued interest thereof), the Company shall surrender the Pledged
Shares to Pledgor together with all forms of assignment or stock powers.
8. No Other Liens; No Sales or Transfers. Pledgor hereby represents
-------------------------------------
and warrants that he or she has good and valid title to all of the Pledged
Shares, free and clear of all liens, security interests and other encumbrances,
and Pledgor hereby covenants that, until such time as all of the outstanding
principal of and interest on the Note has been repaid, Pledgor shall not (i)
create, incur, assume or suffer to exist any pledge, security interest,
encumbrance, lien or charge of any kind against the Pledged Shares or Pledgor's
rights or a holder thereof, other than pursuant to this Pledge
2
<PAGE>
Agreement, or (ii) without the prior written consent of the Company (with
approval of Parent's board of directors), sell or otherwise transfer any Pledged
Shares or any interest therein.
9. Further Assurances. Pledgor agrees that at any time and from
------------------
time to time upon the written request of the Company, Pledgor shall execute and
deliver such further documents (including UCC financing statements) and do such
further acts and things as the Company may reasonably request in order to effect
the purposes of this Pledge Agreement.
10. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. No Waiver; Cumulative Remedies. The Company shall not by any
------------------------------
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company (with approval of Parent's board of directors), and then only to the
extent therein set forth. A waiver by the Company of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Company would otherwise have on any future occasion. No
failure to exercise nor any delay in exercising on the part of the Company, any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.
12. Amendments; Applicable Law. None of the terms or provisions of
--------------------------
this Pledge Agreement may be altered, modified or amended except by an
instrument in writing, duly executed by the Company (with approval of Parent's
board of directors) and Pledgor. This Agreement and all obligations of the
Pledgor hereunder shall together with the rights and remedies of the Company
hereunder, inure to the benefit of the Company and its successors and assigns.
This Pledge Agreement shall be governed by and construed in accordance with the
laws of the state of North Carolina, without giving effect to any rules,
principles or provisions of choice of law or conflict of laws.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
SEALY MATTRESS COMPANY
________________________________
Name:
Title:
________________________________
Richard Sowerby
<PAGE>
EXHIBIT 10.16
PLEDGE AGREEMENT
This Pledge Agreement (this "Pledge Agreement") is made as of March
----------------
31, 1999, between E. Lee Wyatt ("Pledgor"), and Sealy Mattress Company, an Ohio
-------
corporation (the "Company"). The Company is a wholly-owned subsidiary of Sealy
-------
Corporation, a Delaware corporation ("Parent").
------
Reference is hereby made to the Stock Purchase Agreement, dated as of
the date hereof, among Bain Capital Fund V-B, L.P. ("Seller"), the Company,
------
Pledgor, the other "Buyers" listed therein and the other parties named therein
pursuant to which, on the date hereof, Pledgor has purchased from Seller 1,890
shares of Parent's Class A Common Stock, par value $.01 per share, and 210
shares of Parent's Class L Common Stock, par value $.01 per share (such shares
of Class A Common and Class L Common, the "Pledged Shares"), for an aggregate
--------------
purchase price of $10,896 (the "Purchase Price"). The Company has loaned the
--------------
Purchase Price to Pledgor and Pledgor has issued to the Company a recourse
promissory note (the "Note") in principal amount equal to the Purchase Price.
----
This Pledge Agreement provides the terms and conditions upon which the Note is
secured by a pledge to the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Company to accept the Note,
Pledgor and the Company hereby agree as follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants to the
------
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note and full payment and performance of the obligations and liabilities of
Pledgor hereunder.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
--------------------------
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment or stock
powers sufficient to transfer title thereto to the Company.
3. Voting Rights. Notwithstanding anything to the contrary
-------------
contained herein, during the term of this Pledge Agreement until such time as
there exists a default in the payment of principal on the Note or any other
default under the Note or hereunder, Pledgor shall be entitled to all voting
rights with respect to the Pledged Shares. Upon the occurrence of and during
the continuance of any such default, Pledgor shall no longer be able to vote the
Pledged Shares.
4. Stock Dividends; Distributions, etc. If, while this Pledge
-----------------------------------
Agreement is in effect, Pledgor becomes entitled to receive or receives any
securities or other property in addition to, in substitution of, or in exchange
for any of the Pledged Shares (whether as a distribution in
<PAGE>
connection with any recapitalization, reorganization or reclassification, a
stock distribution or dividend or otherwise), Pledgor shall accept such
securities or other property on behalf of and for the benefit of the Company as
additional security for Pledgor's obligations under the Note and shall promptly
deliver such additional security to the Company together with duly executed
forms of assignment or stock powers, and such additional security shall be
deemed to be part of the Pledged Shares hereunder.
5. Default. If Pledgor defaults in the payment of the principal or
-------
interest under the Note when it becomes due (whether upon acceleration or
otherwise) or any other event of default under the Note or this Pledge Agreement
occurs (including the bankruptcy or insolvency of Pledgor), the Company may
exercise any and all the rights, powers and remedies of any owner of the Pledged
Shares (including the right to vote the shares) and shall have and may exercise
without demand any and all the rights and remedies granted to a secured party
upon default under the Uniform Commercial Code of North Carolina or otherwise
available to the Company under applicable law. Without limiting the foregoing,
the Company is authorized to sell, assign and deliver at its discretion, from
time to time, all or any part of the Pledged Shares at any private sale or
public auction, on not less than ten days written notice to Pledgor, in a
commercially reasonable manner. Pledgor shall have no right to redeem the
Pledged Shares after any such sale or assignment. At any such sale or auction,
the Company may bid for, and become the purchaser of, the whole or any part of
the Pledged Shares offered for sale. In case of any such sale, after deducting
the costs, attorneys' fees and other expenses of sale and delivery, the
remaining proceeds of such sale shall be applied to the principal of and accrued
interest on the Note; provided that after payment in full of the indebtedness
evidenced by the Note, the balance of the proceeds of sale then remaining shall
be paid to Pledgor and Pledgor shall be entitled to the return of any of the
Pledged Shares remaining in the hands of the Company. Pledgor shall be liable
for any deficiency if the remaining proceeds are insufficient to pay the
indebtedness under the Note in full, including the reasonable fees of any
attorneys employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses (including
-------------------------
reasonable attorneys' fees) incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of the Pledged Shares hereunder.
7. Payment of Indebtedness and Release of Pledged Shares. Upon
-----------------------------------------------------
payment in full of the indebtedness evidenced by the Note (including all
principal and accrued interest thereof), the Company shall surrender the Pledged
Shares to Pledgor together with all forms of assignment or stock powers.
8. No Other Liens; No Sales or Transfers. Pledgor hereby represents
-------------------------------------
and warrants that he or she has good and valid title to all of the Pledged
Shares, free and clear of all liens, security interests and other encumbrances,
and Pledgor hereby covenants that, until such time as all of the outstanding
principal of and interest on the Note has been repaid, Pledgor shall not (i)
create, incur, assume or suffer to exist any pledge, security interest,
encumbrance, lien or charge of any kind against the Pledged Shares or Pledgor's
rights or a holder thereof, other than pursuant to this Pledge
2
<PAGE>
Agreement, or (ii) without the prior written consent of the Company (with
approval of Parent's board of directors), sell or otherwise transfer any Pledged
Shares or any interest therein.
9. Further Assurances. Pledgor agrees that at any time and from
------------------
time to time upon the written request of the Company, Pledgor shall execute and
deliver such further documents (including UCC financing statements) and do such
further acts and things as the Company may reasonably request in order to effect
the purposes of this Pledge Agreement.
10. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. No Waiver; Cumulative Remedies. The Company shall not by any
------------------------------
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company (with approval of Parent's board of directors), and then only to the
extent therein set forth. A waiver by the Company of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Company would otherwise have on any future occasion. No
failure to exercise nor any delay in exercising on the part of the Company, any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.
12. Amendments; Applicable Law. None of the terms or provisions of
--------------------------
this Pledge Agreement may be altered, modified or amended except by an
instrument in writing, duly executed by the Company (with approval of Parent's
board of directors) and Pledgor. This Agreement and all obligations of the
Pledgor hereunder shall together with the rights and remedies of the Company
hereunder, inure to the benefit of the Company and its successors and assigns.
This Pledge Agreement shall be governed by and construed in accordance with the
laws of the state of North Carolina, without giving effect to any rules,
principles or provisions of choice of law or conflict of laws.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
SEALY MATTRESS COMPANY
__________________________
Name:
Title:
__________________________
E. Lee Wyatt
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-28-1999
<PERIOD-START> NOV-30-1998
<PERIOD-END> FEB-28-1999
<CASH> 9,711
<SECURITIES> 0
<RECEIVABLES> 121,673
<ALLOWANCES> 8,824
<INVENTORY> 47,326
<CURRENT-ASSETS> 194,061
<PP&E> 194,048
<DEPRECIATION> 57,795
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<CURRENT-LIABILITIES> 141,883
<BONDS> 686,118
0
0
<COMMON> 315
<OTHER-SE> (137,963)
<TOTAL-LIABILITY-AND-EQUITY> 753,479
<SALES> 222,326
<TOTAL-REVENUES> 222,326
<CGS> 122,575
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<LOSS-PROVISION> 635
<INTEREST-EXPENSE> 16,521
<INCOME-PRETAX> 1,082
<INCOME-TAX> 669
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<CHANGES> 0
<NET-INCOME> 413
<EPS-PRIMARY> $.01
<EPS-DILUTED> $.01
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