Exhibit 10.12
EXECUTION COPY
STOCKHOLDERS’
AGREEMENT
This Stockholders’ Agreement
(this “Agreement”), is entered into as of July 16,
2004 by and among Sealy Corporation, a Delaware corporation (the
“Company”), The Northwestern Mutual Life Insurance
Company (“Northwestern”), Teachers Insurance and
Annuity Association of America (“TIAA”) and Sealy
Paterson LLC (“SP”) (each, other than the Company, a
“Minority Investor” and collectively, the
“Minority Investors”) and Sealy Holding LLC, a Delaware
limited liability company (the “KKR
Investor”).
RECITALS
WHEREAS, the KKR Investor, an
affiliate of Kohlberg Kravis Roberts & Co. L.P., acquired
approximately 92% of the then outstanding shares of class A common
stock, par value $.01 per share, of the Company (the “Common
Stock”) on April 6, 2004;
WHEREAS, pursuant to the terms of
the Share Subscription Agreement dated as of the date hereof
between the Company and SP (the “Subscription
Agreement”), SP will acquire shares of Common
Stock;
WHEREAS, pursuant to the terms of
the Note and Stock Purchase Agreement dated as of the date hereof
between the Company, Northwestern and TIAA (the “Note
Purchase Agreement”), each of Northwestern and TIAA will
acquire shares of Common Stock; and
WHEREAS, simultaneously with
entering into the Subscription Agreement or the Note Purchase
Agreement, as the case may be, each Minority Investor is entering
into this Agreement;
WHEREAS, each Minority Investor, the
KKR Investor and the Company wish to enter into this Agreement
providing for certain rights and obligations of the Minority
Investors, the KKR Investor and the Company.
AGREEMENT
NOW, THEREFORE, in consideration of
the mutual covenants herein contained and for other good and
valuable consideration, the parties hereto agree as
follows:
1.
Definitions
As used in this Agreement, the
following capitalized terms shall have the following
meanings:
Affiliate : When used with respect to a specified
Person, another Person that, either directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is
under common control with, the Person specified.
Exempt Transaction
: Has the meaning set forth
in Section 2(c) hereof.
KKR Affiliate
: With respect to the KKR
Investor shall mean a Person that directly or indirectly through
one or more intermediaries controls, is controlled by or is under
common control with the KKR Investor; provided ,
however , that KKR Affiliate shall not in any event include
the limited partners of the members of the KKR Investor.
KKR Holder
: The KKR Investor and any
Person to whom the KKR Investor transfers shares of Common Stock
and any transferee thereof who is required by this Agreement to be
bound by the provisions of this Agreement.
KKR Shares
: As of any date of
determination, the shares of Common Stock then held by the KKR
Holders.
Minority Shares
: As of any date of
determination, the shares of Common Stock then held by the Minority
Investors; provided that Minority Shares shall not include
any shares of Common Stock held by Northwestern or TIAA that
(i) were acquired in a Public Offering or (ii) were
acquired in a brokers transaction and were freely tradeable without
restriction and unlegended at the time such shares were acquired by
Northwestern or TIAA.
Person : An individual, partnership, limited
liability company, joint venture, corporation, trust or
unincorporated organization, a government or any department, agency
or political subdivision thereof or other entity.
Private Sale
: Any sale of securities other
than a sale made in a public distribution pursuant to an effective
registration statement under the Securities Act.
Public Offering
: Any sale of the issued and
outstanding shares of Common Stock made in a public distribution
pursuant to an effective registration statement under the
Securities Act (other than a registration statement on
Form S-4 or Form S-8 or any similar or successor
forms).
Securities Act
: The Securities Act of 1933,
as amended from time to time and the rules and regulations
promulgated thereunder.
2.
(a) “
Tag-Along” Right With Respect to Private Sales by KKR
Holders . (i) Private Sales of Shares by KKR
Holders . Subject to the last sentence of
Section 3(a), with respect to any proposed Private Sale of any
KKR Shares by a KKR Holder or KKR Holders (collectively, for
purposes of this Section 2, the “KKR Holder”)
during the term of this Agreement to a Person (a “Proposed
Purchaser”), other than pursuant to an Exempt Transaction (as
defined in Section 2(c)), each Minority Investor shall have
the right and option, but not the obligation, to participate in
such sale, on the same terms and subject to the same conditions as
the sale by the KKR Holder, for the number of Minority Shares owned
by such Minority Investor equaling the number derived by
multiplying the total number of KKR Shares which the KKR Holder
proposes to sell (the “Proposed Number of Shares”) by a
fraction, the numerator of which is the total number of Minority
Shares held by such Minority Investor and the denominator of which
is the sum of (A) the total number of Minority Shares,
(B) the total number of KKR Shares, and (C) the total
number of shares of Common Stock (determined on a fully
diluted
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basis) owned by Persons entitled to the benefits
of any other “tag-along” rights arising as a result of
such sale.
(ii)
Notices
. The KKR
Holder shall notify, or cause to be notified, the Minority
Investors in writing of each proposed Private Sale subject to
Section 2(a)(i) above. Such notice shall set
forth: (A) the Proposed Number of Shares, (B) the
name and address of the Proposed Purchaser, (C) the proposed
amount of consideration, the material terms and conditions of such
sale (and if the proposed consideration is not cash, the notice
shall describe the terms of the proposed consideration) and the
proposed closing date of such sale, (D) the total number of
KKR Shares and the total number of shares of Common Stock
(determined on a fully diluted basis) owned by Persons entitled to
the benefits of any other “tag-along” rights arising as
a result of such sale and (D) that the Proposed Purchaser has
been informed of the “tag-along” right provided for in
this Section 2(a) and has agreed to purchase Minority
Shares held by the Minority Investors in accordance with the terms
hereof. The “tag-along” right may be exercised by
each Minority Investor by delivery of a written notice from such
Minority Investor to the KKR Holder (the “Tag-Along
Notice”) within 15 days following receipt of the notice
specified in the preceding sentence. The Tag-Along Notice
shall state the amount of Minority Shares that the Minority
Investor proposes to include in such sale to the Proposed
Purchaser. If any Minority Investor delivers a Tag-Along
Notice to the KKR Holder, each Minority Investor participating in
the proposed Private Sale shall (A) prior to closing of any
such sale, execute and deliver (or cause to be executed and
delivered) any purchase agreement or other documentation required
by the Proposed Purchaser to consummate the sale (including without
limitation all legal opinions, cross-receipts and certificates),
which purchase agreement and other documentation shall be on terms
no less favorable in respect of any material term to such Minority
Investor than those executed by the KKR Holder and (B) at the
closing of any such sale, deliver to the Proposed Purchaser the
certificate or certificates representing the Minority Shares to be
sold pursuant to such sale by such Minority Investor, duly endorsed
for transfer, against receipt of the purchase price
thereof.
(iii)
Number of
Shares to be Sold . If a Tag-Along Notice
is received pursuant to Section 2(a)(ii), each Minority
Investor shall be permitted to sell to the Proposed Purchaser up to
the number of Minority Shares determined as set forth in
Section 2(a)(i) above (the “Proposed Minority
Shares”), and the KKR Holder shall be permitted to sell to
the Proposed Purchaser up to a number of shares of Common Stock
(the “Proposed KKR Shares”) equal to the Proposed
Number of Shares, less the aggregate number of Proposed Minority
Shares and all other shares of Common Stock being sold to such
Proposed Purchaser in such transaction pursuant to tag-along rights
arising as a result of such sale; provided that the KKR
Holder and each Minority Investor shall have the right to sell
their pro rata share of a number of additional shares of Common
Stock up to the excess of the Proposed Number of Shares over the
number of Proposed KKR Shares, if the Proposed Purchaser wants to
purchase such additional shares. If no Tag-Along Notice is
received by the KKR Holder pursuant to Section 2(a)(ii), the
KKR Holder shall have the right to sell to the Proposed Purchaser
up to the Proposed Number of Shares on terms and conditions no more
favorable in any material respect to the KKR Holder than those
stated in the Tag-Along Notice.
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(b)
Piggyback
Registration Rights With Respect to Public Sales by KKR
Holders . (i) Public
Offering of Shares by KKR Holders . With respect to any
proposed Public Offering of any KKR Shares by a KKR Holder during
the term of this Agreement, each Minority Investor shall have the
right and option, but not the obligation, to participate in such
public distribution on the same terms and subject to the same
conditions as the sale by the KKR Holder for a number of Minority
Shares up to the total number of Minority Shares owned by such
Minority Investor, subject to
Section 2(b)(iii) below.
(ii)
Notices
. The KKR
Holder shall notify, or cause to be notified, the Minority
Investors in writing (a “Notice”) of each proposed
Public Offering (a “Proposed Registration”). Such
notice may be given before the filing of such registration
statement and need not specify any price or other terms or
conditions of such sale. If within 15 days of the delivery of
such Notice to the Minority Investors, the KKR Holder receives from
any Minority Investor a written request (a “Request”)
to register shares of Common Stock held by such Minority Investor
(which Request will be irrevocable), shares of Common Stock will be
so registered as and to the extent provided in this
Section 2(b) if KKR Shares are so registered. If a
Minority Investor delivers a Request to the KKR Holder, such
Minority Investor will participate in such public distribution, if
any, at the same price and on the same terms and conditions as the
KKR Holder, which price and other terms and conditions will be
determined on behalf of the KKR Holder and the Minority Investor by
the KKR Holder in its sole discretion. Nothing in this
Agreement shall create any obligation on the part of the KKR Holder
to cause a registration statement to become effective under the
Securities Act or to sell any shares of Common Stock pursuant to an
effective registration statement under the Securities
Act.
(iii)
Number of
Shares to be Sold . If a registration
pursuant to this Section 2(b) involves an underwritten
offering and the managing underwriter advises the Company in
writing that, in its opinion, the number of shares of Common Stock
requested to be included in such registration exceeds the number of
shares of Common Stock which can be sold in such offering, so as to
be likely to have an adverse effect on the price, timing or
distribution of the shares of Common Stock offered in such offering
as contemplated by the Company or that the inclusion of additional
selling stockholders is likely to have such an adverse effect, then
the Company will include in such registration (A) the number
of shares of Common Stock held by each Minority Investor equal to
the number derived by multiplying the total number of shares which,
in the opinion of such managing underwriter, can be sold without
having the adverse effect referred to above (the “Piggyback
Aggregate Registration Number”) by a fraction, the numerator
of which is the total number of Minority Shares held by such
Minority Investor and the denominator of which is the sum of
(i) the total number of Minority Shares, (ii) the total
number of KKR Shares, and (iii) the total number of shares of
Common Stock (determined on a fully diluted basis) held by Persons
entitled to the benefits of any other piggyback registration rights
arising as a result of such registration and (B) the number of
shares of Common Stock held by the KKR Holder equal to the
Piggyback Aggregate Registration Number, less the aggregate number
of Minority Shares and all other shares of Common Stock being
registered in such transaction pursuant to piggyback registration
rights arising as a result of such registration; provided
that in the event the aggregate number of shares of Common Stock to
be sold in any such public distribution is increased or decreased,
then the number of Minority Shares which
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such Minority Investor shall sell in such public
distribution shall be increased or decreased by the product of
(i) the number of shares of Common Stock by which the total
number of shares of Common Stock in such public distribution is
increased or decreased and (ii) a fraction the numerator of
which equals the number of Minority Shares held by such Minority
Investor originally so registered and the denominator of which is
the total number of shares of Common Stock originally so
registered.
(iv)
Custody
Agreement and Power of Attorney . Upon delivery of a
Request, the participating Minority Investors will, if requested by
the KKR Holder, execute and deliver to the KKR Holder a custody
agreement and power of attorney in form and substance reasonably
satisfactory to the KKR Holder with respect to the shares of Common
Stock to be registered pursuant to this Section 2(b) (a
“Custody Agreement and Power of Attorney”). The
custodian and attorney-in-fact under the Custody Agreement and
Power of Attorney will be the KKR Holder or its designee. The
Custody Agreement and Power of Attorney will provide, among other
things, that such Minority Investor will deliver to and deposit in
custody with the custodian and attorney-in-fact named therein a
certificate or certificates representing such shares of Common
Stock (duly endorsed in blank by the registered owner or owners
thereof or accompanied by duly executed stock powers in blank) and
irrevocably appoint said custodian and attorney-in-fact as such
Minority Investor’s agent and attorney-in-fact with full
power and authority to act under the Custody Agreement and Power of
Attorney on such Minority Investor’s behalf with respect to
the matters specified therein (including without limitation
executing an underwriting agreement and
cross-receipts).
(v)
Holdback
Agreement . (A) In
connection with the initial Public Offering, each Minority Investor
agrees not to effect any public sale or distribution, including any
sale pursuant to Rule 144 (or any successor provision) under
the Securities Act, of any shares of Common Stock (other than
dispositions made pursuant to the piggyback registration rights
described in this Section 2(b)), within 7 days before or such
number of days (not to exceed 180 days) as the managing
underwriters may require, after the effective date of such
registration, and (B) in connection with each subsequent
Public Offering, each Minority Investor agrees not to effect any
public sale or distribution, including any sale pursuant to
Rule 144 (or any successor provision) under the Securities
Act, of any Minority Shares (other than dispositions made pursuant
to the piggyback registration rights described in this
Section 2(b)) within 7 days before and a number of days after
to be determined by the managing underwriter and the KKR Investor;
provided however , that such restrictions will be no
more restrictive than those applicable to the KKR Investor for each
such Public Offering.
(vi)
Additional
Agreements . Each Minority
Investor agrees that it will execute and deliver or cause to be
executed and delivered such other agreements and other documents
(such as legal opinions, cross-receipts and certificates) as the
KKR Holder itself is delivering or as the KKR Holder may otherwise
reasonably request to implement the provisions of this
Section 2(b); provided that such additional agreements
will be on terms and conditions reasonably acceptable to the
Minority Investors.
(c)
Exempt
Transaction Defined . As used herein, the
term “Exempt Transaction” shall mean (i) sales by
the KKR Investor to any KKR Affiliates, (ii) sales by
any
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KKR Affiliate to another KKR Affiliate or to the
KKR Investor, (iii) transfers by the KKR Investor and its KKR
Affiliates to its partners or members (and any subsequent sales by
such partners or members) in the form of dividends or distributions
(whether upon liquidation or otherwise), or (iv) sales by any
KKR Holders made in a Public Offering; provided that in the
case of clauses (i) and (iii) above that such buyer or
member agrees in writing to be bound by the provisions of this
Agreement, including this paragraph (c).
3.
“Drag-Along” Right with Respect to Minority
Shares . (a) Sales by KKR Holders. In the
event that the KKR Holders determine, during the term of this
Agreement, to transfer more than 50% of the KKR Shares to a
Proposed Purchaser not affiliated with the KKR Holders,
other
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