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EXHIBIT 10.17
BOARD OF ADVISORS AND UNIT PURCHASE AGREEMENT
This BOARD OF ADVISOR AND UNIT PURCHASE AGREEMENT ("Agreement") is
dated as of June 30, 2000, by and among Sleepmaster Holdings L.L.C., a New
Jersey limited liability company (the "Company"), Sleepmaster L.L.C., a New
Jersey limited liability company ("Sleepmaster"), R. Xxx Xxxxx ("Advisor") and
Sleep Investor L.L.C., a Delaware limited liability company ("Sleep Investor").
The Company, Sleepmaster and the Advisor desire to enter into an
agreement regarding (i) the engagement of the Advisor as Chairman of the Board
of Advisors of the Company and its Subsidiaries, and (ii) the acquisition by the
Advisor of 129.71 units of the Company's Class C Common and 462.67 units of the
Company's Preferred Units upon the terms and conditions set forth herein.
Certain provisions of this Agreement are intended for the benefit
of, and will be enforceable by, Sleep Investor.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. As used herein, the following terms shall have
the following meanings.
"Advisor Securities" means the units of Class C Common and units
of Preferred Units acquired by the Advisor and will include units of Holdings'
Common Units issued with respect to Advisor Securities by way of a split,
dividend, combination, exchange, conversion, or other recapitalization, merger,
consolidation or reorganization. Advisor Securities will cease to be Advisor
Securities when transferred pursuant to a Qualified Public Offering or Sale of
the Company. Advisor Securities will continue to be Advisor Securities in the
hands of any holder other than the Advisor, including all transferees of the
Advisor (except for the Company and the Sleep Investor (or its designee)), and
except as otherwise provided herein, each such other holder of Advisor
Securities will succeed to all rights and obligations attributable to the
Advisor as a holder of Advisor Securities hereunder.
"Affiliate" means, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"Board" means the Company's board of advisors.
"Business Day" means any day other than a Saturday or Sunday or a
day on which commercial banks are required or authorized to close in New York,
New York.
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"Cause" means (i) a material breach of this Agreement by the
Advisor, (ii) a breach of the Advisor's duty of loyalty to the Company or its
Subsidiaries, (iii) the commission by the Advisor of a felony, a crime involving
moral turpitude or other act causing material harm to the standing and
reputation of the Company or any of its Subsidiaries, or (iv) the Advisor's
continued failure to perform his duties to the Company and its Subsidiaries.
"Change of Control" means that (a) any Person or group (within the
meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the
date hereof) other than the existing securityholders of the Company or
Sleepmaster and their permitted transferees shall acquire and own greater than
51% of the Common Units of the Company or Sleepmaster, as applicable, on a fully
diluted, as if converted basis or (b) any Person or group (within the meaning of
Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the date
hereof) shall acquire the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board of advisors
of the Company or Sleepmaster, as applicable.
"Class A Common" means the Company's Class A Common Units, or if
the Class A Common is hereafter exchanged into or exchanged for different units
or securities of the Company, such other units or securities, all as adjusted
for any unit split, unit dividend, combination, exchange, conversion,
recapitalization, merger, consolidation or reorganization.
"Class B Common" means the Company's Class B Common Units, or if
the Class B Common is hereafter exchanged into or exchanged for different units
or securities of the Company, such other units or securities, all as adjusted
for any unit split, unit dividend, combination, exchange, conversion,
recapitalization, merger, consolidation or reorganization.
"Class C Common" means the Company's Class C Common Units, or if
the Class C Common is hereafter exchanged into or exchanged for different units
or securities of the Company, such other units or securities, all as adjusted
for any unit split, unit dividend, combination, exchange, conversion,
recapitalization, merger, consolidation or reorganization.
"Common Units" means the Class A Common, the Class B Common and
the Class C Common, as adjusted for any unit split, unit dividend, or other
combination, exchange, conversion, recapitalization, merger, consolidation or
reorganization, or if such Common Units are exchanged for different interests or
securities of the Company, such other interests or securities and any other
Common Units of the Company hereinafter issued.
"Company Group" means the Company, Sleepmaster and their
respective Subsidiaries.
"Fair Value" of each unit of Class C Common and unit of Preferred
Units means the average of the closing prices of the sales of the Company's
membership interests on all securities exchanges on which the membership
interests may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day the membership
interests are not so listed, the average of the representative bid and asked
prices quoted on the Nasdaq National Market System ("Nasdaq NMS") as of 4:00
P.M., New York time, or, if on any day the membership interests are not quoted
in the Nasdaq NMS, the average of the highest bid
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and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which the Fair Value is being determined and the 20 consecutive
Business Days prior to such day. If at any time the Class C Common is not listed
on any securities exchange or quoted in the Nasdaq NMS or the over-the-counter
market, the Fair Value of each unit of Class C Common and unit of Preferred
Units shall be the fair market value of such unit as determined by the Board in
its good faith judgment.
"GAAP" means U.S. generally accepted accounting principles, as in
effect from time to time and as adopted by the Company with the consent of its
independent public accountants, consistently applied.
"Original Cost" will be equal to $223.153 per unit, with respect
to units of Class C Common and $1,400.016 per unit plus all accrued and unpaid
dividends thereon with respect to Preferred Units (as proportionately adjusted
for all subsequent unit splits, unit dividends and other recapitalizations).
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Preferred Units" means the Company's Preferred Units, as adjusted
for any unit split, unit dividend or other combination, exchange, conversion,
recapitalization, merger, consolidation or reorganization, or if the Preferred
Units are hereafter changed into or exchanged for different interests or
securities of the Company, such other interests or securities, and any other
preferred interests of the Company hereinafter issued.
"Public Offering" means any sale of securities of the Company in
an underwritten public offering.
"Qualified Public Offering" means any sale, in an underwritten
Public Offering registered under the Securities Act, of equity securities of the
Company having an aggregate value of at least $30 million.
"Registration Rights Agreement" means the Amended and Restated
Registration Rights Agreement dated as of March 3, 1998, by and among the
Company and certain other parties thereto.
"Sale of the Company" means the sale of the Company, in a single
transaction or a series of related transactions, to a third party (which is not
an Affiliate of the Company or of Sleep Investor) pursuant to which such third
party proposes to acquire all or substantially all of the outstanding Common
Units (whether by merger, consolidation, recapitalization, reorganization,
purchase of the outstanding Common Units or otherwise) or all or substantially
all of the consolidated assets of the Company or Sleepmaster.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
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"Securityholders Agreement" means the Amended and Restated
Securityholders Agreement dated as of March 3, 1998, by and among the Company
and certain other parties thereto.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association or other business entity of
which (i) if a corporation, a majority of the total voting power of securities
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a partnership,
association or other business entity, a majority of the partnership, limited
liability company, or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
partnership, limited liability company, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, limited
liability company, association or other business entity gains or losses or shall
be or control the managing director or general partner of such partnership,
association or other business entity.
2. Board of Advisors. On June 27, 2000, the Advisor agreed to serve
as chairman of the Board and chairman of the board of advisors or directors, as
applicable, of each member of the Company Group (in such capacities, the
"Chairman"). The Advisor hereby agrees to devote his best efforts to the
business and affairs of the Company and its Subsidiaries.
3. Compensation; Reimbursement.
(a) Advisory Board Fees. In consideration of the Advisor's
services set forth in Section 1 above, the Company shall pay the Advisor $5,000
per month (the "Advisory Board Fee"). The Advisory Board Fee shall be paid by
the Company in regular installments in accordance with the Company's general
payroll practices and shall be subject to customary withholding.
(b) Reimbursement. The Company shall reimburse the Advisor for
all reasonable expenses incurred by him in the course of performing the
Advisor's duties as Chairman of the Board which are consistent with the
Company's policies in effect from time to time with respect to travel,
entertainment and other business expenses, subject to the Company's requirements
with respect to reporting and documentation of such expenses.
(c) Other Benefits. The Advisor shall not be entitled any
fringe benefits or perquisites from the Company except as specifically described
herein.
4. Purchase and Sale of Advisor Securities.
(a) Upon execution of this Agreement, the Advisor will
purchase, and the Company will sell, 129.71 units of Class C Common at a price
of $223.152 per unit and 462.67 units of Preferred Units at a price of
$1,400.016 per unit. The Company will deliver to the
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Advisor certificates representing such units, and the Advisor will deliver to
the Company a promissory note having a face value of $676,697.29 and bearing
interest at a rate of [ %].
(b) Within thirty days after the Advisor purchases the units of
Class C Common and units of Preferred Units, the Advisor shall make an effective
election with the Internal Revenue Service under Section 83(b) of the Internal
Revenue Code and the regulations promulgated thereunder substantially in the
form of Exhibit A attached hereto.
(c) In connection with the purchase and sale of the Advisor
Securities hereunder, the Advisor represents and warrants to the company that:
(i) The Advisor Securities to be pursuant to the Advisor
pursuant to this Agreement will be acquired for the
Advisor'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 the Advisor Securities will not
be disposed of in contravention of the Securities
Act or any applicable state securities laws.
(ii) No commission, fee or other remuneration is to be
paid or given directly or indirectly, to any Person
for soliciting the Advisor to purchase the Advisor
Securities.
(iii) The Advisor is a director of the Company, is
sophisticated in financial matters and is able to
evaluate the risks and benefits of the investment in
the Advisor Securities and has determined that such
investment in the Advisor Securities is suitable for
the Advisor, based upon the Advisor's financial
situation and needs, as well as the Advisor's other
securities holdings.
(iv) Neither the Advisor nor, to the Advisor's knowledge,
the Company, any predecessor, affiliate, director,
officer, general partner or beneficial owner of 10%
or more of any class of the Company's equity
securities, or any promoter presently connected with
the Company in any capacity:
(A) has filed a registration statement which is
the subject of a currently effective
registration stop order entered pursuant to
any state's securities law within the last
five years;
(B) has been convicted within the last five years
of any felony or misdemeanor in connection
with the offer, purchase or sale of any
security or any felony involving fraud or
deceit, including, but not limited to,
forgery, embezzlement, obtaining money under
false pretenses, larceny or conspiracy to
defraud;
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(C) is currently subject to any state
administrative enforcement order or judgment
entered by the state securities administrator
within the last five years or is subject to
any state's administrative enforcement order
or judgment in which fraud or deceit,
including, but not limited to, making untrue
statements of material facts and omitting to
state material facts, was found and the order
or judgment was entered within the last five
years;
(D) is subject to any state's administrative
enforcement order or judgment which
prohibits, denies or revokes the use of any
exemption from registration in connection
with the offer, purchase or sale of
securities; or
(E) is currently subject to any order, judgment
or decree of any court of competent
jurisdiction, entered within the last five
years, temporarily or preliminarily
restraining or enjoining such party from
engaging in or continuing any conduct or
practice in connection with the purchase or
sale of any security or involving the making
of any false filing with the state.
(v) The Advisor is able to bear the economic risk of the
Advisor's investment in the Advisor Securities for
an indefinite period of time and the Advisor
understands that the Advisor Securities have not
been registered under the Securities Act and cannot
be sold unless subsequently registered under the
Securities Act or an exemption from such
registration is available.
(vi) The Advisor has had an opportunity to ask questions
and receive answers concerning the terms and
conditions of the offering of Advisor Securities and
has had full access to such other information
concerning the Company as the Advisor has requested.
The Advisor has reviewed, or has had an opportunity
to review, the following documents: (A) the
Company's limited liability company operating
agreement; (B) the loan agreements, notes and
related documents with the Company's Subsidiaries'
institutional lenders; and (C) all of the materials
provided by the Company and its Subsidiaries to any
Person providing financing to the Company and its
Subsidiaries, including, but not limited to, the
Company's pro forma balance sheet, as well as
financial projections, estimates, forecasts,
budgets, summaries, reports and other related
documents.
(vii) This Agreement constitutes the legal, valid and
binding obligation of the Advisor, enforceable in
accordance with its terms, and the execution,
delivery and performance of this Agreement by the
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Advisor does not and will not conflict with, violate
or cause a breach of any agreement, contract or
instrument to which the Advisor is a party or any
judgment, order or decree to which the Advisor is
subject.
5. Vesting of Advisor Securities.
(a) None of the units of Class C Common and units of Preferred
Units acquired by the Advisor hereunder are vested as of the date hereof.
(b) One hundred percent (100%) of the units of Class C Common
and units of Preferred Units will become vested in accordance with the following
schedule if, as of each such date, the Advisor is a member of the Board or the
boards of advisors or directors, as applicable, of the Company's Subsidiaries.
Cumulative Percentage of Units of Class C
Date Common and Preferred Units Which Will Vest
---------------------- ----------------------------------------------------
June 15, 2001 33 1/3%
June 15, 2002 33 1/3%
June 15, 2003 33 1/3%
If the Advisor ceases to be Chairman of the Board or the boards of
advisors or directors, as applicable, of any of the Company's Subsidiaries for
any reason, the cumulative percentage of the Class C Common and Preferred Units
to become vested will be determined on a pro rata basis according to the number
of days elapsed from the prior June 15 through the date of his resignation or
removal (the "Termination"). Units of Class C Common and units of Preferred
Units which have become vested are referred to herein as "Vested Interests," and
all other units of Class C Common and units of Preferred Units are referred to
herein as "Unvested Interests."
Upon the consummation of a Change of Control or a Sale of the
Company, all Unvested Interests shall automatically vest.
6. Repurchase Option on Advisor Interests. In the event the Advisor
ceases to serve as Chairman of the Board or the boards of advisors or directors,
as applicable, of any Subsidiary for any reason, the Advisor Securities (whether
held by the Advisor or one or more of the Advisor's transferees) will be subject
to repurchase by the Company and Sleep Investor (or its designees) pursuant to
the terms and conditions set forth in this Section 6 (the "Repurchase Option").
(a) (i) The purchase price for each Unvested Interest of
Advisor Securities will be the lower of (X) the Advisor's Original Cost for such
unit (with units having the lowest cost subject to repurchase prior to units
with a higher cost) and (Y) the Fair Value for such unit, (ii) the purchase
price for each Vested Interest of Advisor Securities will be the Fair Value for
such unit; and (iii) notwithstanding the foregoing, if the Advisor's Termination
is for Cause or by the voluntary resignation of the Advisor on or prior to June
15, 2003, then the purchase price for
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each Vested Interest and each Unvested Interest will be the lower of (X) the
Advisor's Original Cost for such unit (with units having the lowest cost subject
to repurchase prior to units with a higher cost) and (Y) the Fair Value for such
unit.
(b) The Board may elect to cause the Company to purchase (i)
all or a portion of the Unvested Interests and/or, (ii) all or a portion of the
Vested Interests by delivering written notice (the "Repurchase Notice") to the
holder or holders of the Advisor Securities within 45 days after the
Termination. The Repurchase Notice will set forth the number of Unvested
Interests and Vested Interests to be acquired from each holder, the aggregate
consideration to be paid for such securities and the time and place for the
closing of the transaction. The number of units of Advisor Securities to be
repurchased by the Company shall first be satisfied to the extent possible from
the Advisor Securities held by the Advisor at the time of delivery of the
Repurchase Notice. If the number of Advisor Securities then held by the Advisor
is less than the total number of units of Advisor Securities the Company has
elected to purchase, the Company shall purchase the remaining Advisor Securities
elected to be purchased from the other holder(s) of Advisor Securities, pro rata
according to the amount of such Advisor Securities held by such other holder(s)
at the time of delivery of such Repurchase Notice (determined as nearly as
practicable to the nearest share). The number of Unvested Interests and Vested
Interests to be repurchased hereunder will be allocated among the Advisor and
the other holders of Advisor Securities (if any) pro rata according to the
number of units of Advisor Securities to be purchased from such Persons.
(c) If for any reason the Company does not elect to purchase
all of the units of Advisor Securities that are subject to the Repurchase
Option, pursuant to such Repurchase Option, Sleep Investor (or its designees)
shall be entitled to exercise the Repurchase Option for the Advisor Securities
the Company has not elected to purchase (the "Available Securities"). Of the
Available Securities, the Vested Interests are referred to herein as "Available
Vested Interests" and Unvested Interests are referred to herein as "Available
Unvested Interests". As soon as practicable after the Company has determined
that there will be Available Securities, but in any event within 90 days after
the Termination, the Company shall give written notice (the "Option Notice") to
Sleep Investor (or its designees) setting forth the number of Available Vested
Interests, Available Unvested Interests, and the purchase price for each of such
Available Securities. Sleep Investor (or its designees) may elect to purchase
all or a portion of (i) Available Vested Interests, and/or (ii) all or a portion
of the Available Unvested Interests by giving written notice to the Company
within 30 days after the Option Notice has been given by the Company. As soon as
practicable, and in any event within ten days after the expiration of the 30-day
period set forth above, the Company shall notify each holder of Advisor
Securities as to the number of Vested Interests or Unvested Interests being
purchased from such holder by Sleep Investor (or its designees) (the
"Supplemental Repurchase Notice"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of such Advisor Securities, the
Company shall also deliver written notice to Sleep Investor (or its designees)
setting forth the number of Vested Interests and Unvested Interests which Sleep
Investor (or its designees) is entitled to purchase, the aggregate purchase
price and the time and place of the closing of the transaction.
(d) The closing of the purchase of the Advisor Securities
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice or Supplemental Repurchase Notice, which date
shall not be later than the 60th day after
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the delivery of the later of such notices to be delivered (or, if later, the
15th day after the Fair Value is finally determined) nor earlier than the fifth
day after such delivery. The Company and/or Sleep Investor (or its designee)
will pay for the Advisor Securities to be purchased pursuant to the Repurchase
Option by delivery of a certified or cashier's check or wire transfer of funds.
The purchasers of Advisor Securities hereunder will be entitled to receive
customary representations and warranties from the sellers as to title, authority
and capacity to sell.
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Advisor Securities by the Company shall be subject
to applicable legal restrictions. If any such restrictions prohibit the
repurchase of Advisor Securities hereunder which the Company is otherwise
entitled to make, the Company may make such repurchases as soon as it is
permitted to do so under such restrictions.
7. Restrictions on Transfer.
(a) If certificated, the Advisor Securities will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION
FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS
SET FORTH IN AN ADVISOR AND UNIT PURCHASE AGREEMENT BETWEEN THE
ISSUER AND THE SIGNATORY THERETO DATED AS OF JUNE 30, 2000. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
ISSUER'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Advisor Securities may sell, transfer or
dispose of any units of Advisor Securities (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
(c) Each holder of Advisor Securities agrees not to effect any
sale or distribution of any Advisor Securities or other equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
any of the Company's equity securities, during the seven days prior to and the
180 days after the effectiveness of any underwritten public offering, except as
part of such underwritten public offering or if otherwise permitted by the
Company.
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(d) Each holder of Advisor Securities acknowledges that the
Advisor Securities are subject to additional restrictions contained in the
Securityholders Agreement.
8. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Advisor that:
(a) Immediately following the consummation of the transactions
contemplated hereby, the authorized units of the Company shall consist of (i)
Class A Common, of which 8,511.22 units shall be issued and outstanding, (ii)
Class B Common, of which no units shall be issued and outstanding, (iii) Class C
Common, of which 7,667.24 units shall be issued and outstanding, and (iv)
Preferred Units, of which 37,606.10 units shall be issued and outstanding. As of
immediately following the consummation of the transactions contemplated hereby,
all of the outstanding units of the Company shall be validly issued, fully paid
and nonassessable.
(b) There are no statutory or contractual securityholders
preemptive rights or rights of refusal with respect to the issuance of the
Advisor Security hereunder. To the best of the Company's knowledge, the Company
has not violated any applicable federal or state securities laws in connection
with the offer, sale and issuance of the Advisor Securities hereunder do not
require registration under the Securities Act or any applicable state securities
laws. To the best of the Company's knowledge, there are no agreements between
the Company's members with respect to the voting or transfer of the Company's
securities, except for (a) the Securityholders Agreement, (b) the Registration
Rights Agreement and (c) this Advisor and Unit Purchase Agreement, and (d)
certain agreements among the Company, Sleep Investor and certain of the
Company's employees or executives.
9. Confidential Information. The Advisor acknowledges that the
information and data obtained by him during his relationship or interaction with
the Company Group concerning the business or affairs of the Company Group
("Confidential Information") are the property of such member of the Company
Group. Therefore, the Advisor agrees that, except as required by law or court
order, he shall not disclose to any unauthorized person or use for his own
account any Confidential Information without the prior written consent of the
Board, unless and to the extent that the aforementioned matters become generally
known to and available for use by the public other than as a result of the
Advisor's acts or omissions to act. The Advisor shall deliver to the Company
upon his resignation as Chairman of the Board or removal from such position, or
at any other time the Company may request, all memoranda, notes, plans, records,
reports, computer tapes and software and other documents and data (and copies
thereof) relating to the Confidential Information, Work Product (as defined
below) and the business of the Company Group which he may then possess or have
under his control.
10. Noncompete, Nonsolicitation.
(a) The Advisor acknowledges that in the course of his service
as Chairman of the Board and interaction with the Company he has become
familiar, and he will become familiar, with the Company Group's trade secrets
and with other Confidential Information and that his services have been and will
be of special, unique and extraordinary value to the Company Group. Therefore,
the Advisor agrees that, during the time he serves as Chairman and for a period
of one (1) year thereafter (the "Post-Termination Period"), he shall not
directly or
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indirectly own, operate, manage, control, participate in, consult with, advise,
provide services for, or in any manner engage in any business (including by
himself or in association with any person, firm, corporate or other business
organization or through any other entity) in competition with, or potential
competition with, the businesses of the Company Group as such businesses exist
or are in process on the date of resignation or removal of the Advisor as
Chairman of the Board, within any geographical area in which the Company Group
engages or has written plans to engage in such businesses. Nothing herein shall
prohibit the Advisor from being a passive owner of not more than 2% of the
outstanding stock of a corporation which is publicly traded, so long as the
Advisor has no active participation in the business of such corporation.
(b) From the date hereof through the Post-Termination Period,
the Advisor shall not directly or indirectly through another entity (i) induce
or attempt to induce any employee or independent contractor of the Company Group
to leave the employ or contracting relationship of the Company Group, or in any
way interfere with the relationship between the Company Group and any employee
or independent contractor thereof, including without limitation, inducing or
attempting to induce any union, employee or group of employees to interfere with
the business or operations of the Company Group, (ii) solicit for employment or
as an independent contractor or hire any person who was an employee or
independent contractor of the Company Group at any time during the period that
the Advisor serves as Chairman of the Board, or (iii) induce or attempt to
induce any customer, supplier, distributor, franchisee, licensee or other
business relation of the Company Group to cease doing business with the Company
Group, or in any way interfere with the relationship between any such customer,
supplier, distributor, franchisee, licensee or business relation and the Company
Group.
(c) The Advisor agrees that: (i) the covenants set forth in
this Section 10 are reasonable in geographical and temporal scope and in all
other respects, (ii) the Company Group would not have entered into this
Agreement but for the covenants of the Advisor contained herein, and (iii) the
covenants contained herein have been made in order to induce the Company Group
to enter into this Agreement.
(d) If, at the time of enforcement of this Section 10, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(e) The Advisor recognizes and affirms that in the event of his
breach of any provision of Section 10, money damages would be inadequate and the
Company Group would have no adequate remedy at law. Accordingly, the Advisor
agrees that in the event of a breach or a threatened breach by him of any of the
provisions of Section 10, the Company Group, in addition and supplementary to
other rights and remedies existing in its favor, may apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce or prevent any violations of the provisions
hereof (without posting a bond or other security).
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11. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally, mailed
by certified or registered mail, return receipt requested and postage prepaid,
or sent via a nationally recognized overnight courier, or sent via facsimile to
the recipient with telephonic confirmation by the sending party. Such notices,
demands and other communications will be sent to the address indicated below:
To the Company or Sleepmaster:
c/o Sleepmaster L.L.C.
0000 Xxxxx Xxxx
Xxxxxx, XX 00000
Attention: President
Telecopy No.: (000) 000-0000
With a copy to:
Citicorp Venture Capital, Ltd.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Mr. Xxxx Xxxxx
Telecopy No.: (000) 000-0000
To the Advisor:
R. Xxx Xxxxx
000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Telecopy No.: (000) 000-0000
To Sleep Investor:
c/o Citicorp Venture Capital, Ltd.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Mr. Xxxx Xxxxx
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
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or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
12. Miscellaneous.
(a) Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(b) Transfers in Violation of Agreement. Any transfer or
attempted transfer of any Advisor Securities in violation of any provision of
this Agreement shall be null and void, and the Company shall not record such
transfer on its books or treat any purported transferee of such Advisor
Securities as the owner of such stock for any purpose.
(c) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) Complete Agreement. This Agreement, the Securityholders
Agreement and the Registration Rights Agreement embody the complete agreement
and understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
(e) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(f) Successors and Assigns. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the Advisor, the Company, Sleep Investor and their respective successors and
assigns (including subsequent holders of Advisor Securities); provided that the
rights and obligations of the Advisor under this Agreement shall not be
assignable except in connection with a permitted transfer of Advisor Securities
hereunder.
(g) Third Party Beneficiary. This Agreement is intended for the
benefit of, and will be enforceable by, Sleep Investor.
(h) Rights of the Advisor. Nothing in this Agreement shall
interfere with or limit in any way the right of the Company or any Subsidiary to
remove the Advisor at any time, or to confer upon the Advisor any right to
continue to serve as a member of the Board or any
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Subsidiary for any period of time, or to continue to receive the Advisor's
current (or other) rate of compensation.
(i) GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS HERETO WILL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW 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; PROVIDED, THAT ANY QUESTIONS REQUIRING INTERPRETATION OF THE
LAWS GOVERNING LIMITED LIABILITY COMPANIES SHALL BE GOVERNED BY THE NEW JERSEY
LIMITED LIABILITY COMPANY ACT.
(j) Remedies. Each of the parties to this Agreement (including
Sleep Investor) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including reasonable attorneys'
fees) caused by any breach of any provision of this Agreement and to exercise
all other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
(k) Amendment and Waiver. The provisions of this Agreement may
be amended and waived only with the prior written consent of the Company, the
Advisor and Sleep Investor.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
SLEEPMASTER HOLDINGS L.L.C.
By: /S/ Xxxxx X. Xxxxxxx
--------------------
Name:
Title:
SLEEPMASTER L.L.C.
By: /S/ Xxxxx X. Xxxxxxx
--------------------
Name:
Title:
/S/ R. Xxx Xxxxx
----------------
R. XXX XXXXX
Agreed and Accepted:
SLEEP INVESTOR L.L.C.
By: /S/ Xxxxx X. Xxxxxxx
--------------------
Name:
Title:
16
EXHIBIT A
June 30, 2000
ELECTION TO INCLUDE SECURITIES IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned purchased units of Class C Common and units of
Preferred Units (the "Advisor Securities"), of Sleepmaster Holdings L.L.C.
("Holdings") on June 30, 2000. Under certain circumstances, Holdings has the
right to repurchase the Advisor Securities at cost from the undersigned (or from
the holder of the Advisor Securities, if different from the undersigned) should
the undersigned cease to be employed by the Company Group and its subsidiaries.
Hence, the Advisor Securities are subject to a substantial risk of forfeiture
and are non-transferable. The undersigned desires to make an election to have
the Advisor Securities taxed under the provision of Code Section 83(b) at the
time he purchased the Advisor Securities.
Therefore, pursuant to Code Section 83(b) and Treasury Regulation
Section 1.83-2 promulgated thereunder, the undersigned hereby makes an election,
with respect to the Advisor Securities (described below), to report as taxable
income for calendar year 2000 the excess (if any) of the Advisor Securities'
fair market value on June 30, 2000 over the purchase price thereof.
The following information is supplied in accordance with Treasury
Regulation Section 1.83-2(e):
1. The name, address and social security number of the
undersigned:
Name: R. Xxx Xxxxx
Address: 000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx
SSN:
2. A description of the property with respect to which the
election is being made: 129.71 units of Class C Common and 462.67 units of
Preferred Units of Sleepmaster Holdings L.L.C.
3. The date on which the property was transferred: June 30,
2000. The taxable year for which such election is made: calendar 2000.
4. The restrictions to which the property is subject: If
during the first three years after the purchase of the Advisor Securities the
undersigned ceases to be employed by the Company Group or any of its
subsidiaries, the unvested portion of the Advisor Securities will be subject to
repurchase by the Company Group at cost, and at any time prior to a public
offering by Holdings or a sale of Holdings the undersigned ceases to be employed
by the Company Group or any of its subsidiaries, the vested portion of the
Advisor Securities will be subject to repurchase by Holdings at fair value.
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0. The fair market value on June 30, 2000 of the property with
respect to which the election is being made, determined without regard to any
lapse restrictions: $223.152 per unit of Class C Common and $1,400.016 per unit
of Preferred Units.
6. The amount paid for such property: $223.152 per unit of
Class C Common and $1,400.016 per unit of Preferred Units.
A copy of this election has been furnished to the Secretary of
Holdings pursuant to Treasury Regulations Section 1.83-2(e)(7).
Dated: June 30, 2000 ----------------------------------
Name:
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