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EXHIBIT 4.7
PREFERRED UNIT REPLACEMENT ISO OPTION AGREEMENT
PREFERRED UNIT REPLACEMENT ISO OPTION AGREEMENT, dated as of
June 30, 2000, by and between SLEEPMASTER HOLDINGS L.L.C., a New Jersey limited
liability company (the "Company"), and Xxxxxxx Xxxxxxx (the "Executive").
Capitalized terms used but not otherwise defined herein shall have the meanings
assigned to such terms in Section 1.
WHEREAS, the Executive is currently a management employee of
Crescent Sleep Products Company, a Delaware company ("Crescent"), and the
Company desires to grant the Executive certain unit purchase options in
accordance with the terms hereof pursuant to the Agreement and Plan of Merger,
dated as of June 29, 2000, by and among Crescent, Sleepmaster L.L.C., a New
Jersey limited liability company and a subsidiary of the Company, Crescent
Acquisition Corp., a Delaware corporation to be merged with and into Crescent
(as amended, restated or modified from time to time, the "Merger Agreement") in
exchange for certain stock options held by the Executive prior to the
transactions contemplated thereby; and
WHEREAS, the options so exchanged by the Executive are
intended to be Incentive Stock Options for purposes of Section 422 of the
Internal Revenue Code of 1986 (the "Code") and the options received pursuant to
this agreement are intended to be substituted options for purposes of Code
Section 424;
NOW THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties to this Agreement
agree as follows:
1. DEFINITIONS. As used herein, the following terms
shall have the following meanings:
"Board" means the Board of Advisors of the Company.
"Cause" has the meaning set forth in the Employment
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute.
"Employment Agreement" means the Employment and Management
Securities Agreement among the Company, the Executive, Crescent and certain
other parties dated as of the date hereof.
"Expiration Date" means the close of business on March 17,
2008, subject to earlier expiration as provided in Section 3.
"Fair Market Value" of each membership interest means the
average of the closing prices of the sales of the Company's membership
interests on all securities exchanges on which the
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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 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 Market Value is being determined and the 20 consecutive business
days prior to such day. If at any time a class of membership interest is not
listed on any securities exchange or quoted in the Nasdaq NMS or the
over-the-counter market, the Fair Market Value of each membership interest
shall be the Fair Market Value of such unit as determined by the Board in its
good faith judgment.
"Form" means those forms of the Internal Revenue Service used
by taxpayers to file federal income tax returns or reports required under the
Code or applicable Treasury Regulations promulgated thereunder.
"Liquidation Value" means the face value of the Preferred
Unit plus all accrued and unpaid dividends.
"Measurement Date" means the date on which any taxable income
resulting from the exercise of an Option is determined under applicable federal
income tax law.
"Operating Agreement" means the Third Amended and Restated
Limited Liability Company Operating Agreement of the Company.
"Option" has the meaning set forth in Section 2(a).
"Option Agreements" means, collectively, this Agreement and
each of the other Preferred Unit Replacement ISO Option Agreements, each dated
as of the date hereof, by and between the Company and each of certain
management employees of the Company entered into in connection with the Merger
Agreement, in each case as the same may be amended, restated or modified from
time to time.
"Option and SAR Cancellation Agreement" means the Option and
SAR Cancellation Agreement between the Executive and Crescent dated as of June
28, 2000.
"Option Units" means, collectively, (i) all Preferred Units
issued or issuable upon the exercise of an Option, which amount shall not
exceed 479.74 Preferred Units in the aggregate, and (ii) any units or other
interests of the Company issued with respect to the Preferred Units set forth
in clause (i) by way of merger, consolidation, reclassification, unit split,
reverse unit split, unit dividend or other recapitalization with respect to the
Preferred Units. Option Units shall continue to be Option Units in the hands of
any holder other than Executive (including, without limitation, any Permitted
Transferee of the Executive), except for the Company, or any transferee in an
underwritten public offering registered under the Securities Act. Except as
otherwise provided
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herein, each other holder of Option Units will succeed to the rights and
obligations attributable to the Executive as a holder of Option Units
hereunder.
"Permitted Transferee" means those Persons to whom the
Executive is authorized to transfer Option Units pursuant to the terms hereof,
including those Persons to whom Options may be transferred under Section 2(e).
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a government entity (or any
department, agency or political subdivision thereof.)
"Preferred Units" means the Company's Preferred Units, having
the rights and privileges set forth in the Operating Agreement or if such
outstanding Preferred Unit is hereafter changed into or exchanged for different
securities of the Company, such other securities.
"Registration Rights Agreement" means the Amended and
Restated Registration Rights Agreement, dated as of March 3, 1998, by and among
the Company, Sleep Investor, LLC and certain other parties thereto.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securityholders Agreement" means the Amended and Restated
Securityholders Agreement, dated as of March 3, 1998, by and among the Company,
Sleep Investor, LLC 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, limited liability company, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
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. THE OPTIONS.
(a) Terms of the Options. The Company hereby grants to
Executive, as of the date hereof, an option (the "Option") to purchase up to
479.74 units of the Company's Preferred Units at the exercise price of $402.365
per Option Unit (the "Exercise Price"), subject to the terms and conditions set
forth herein. All rights of the Executive as the holder of the Options issued
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hereunder shall be solely determined by the provisions of this Agreement. The
Executive's Options will expire as provided in Section 3 hereof.
(b) Form of the Options. The Options granted hereunder
are intended to be replacement options for purposes of Code Section 424; they
replace those prior options held by the Executive that first became exercisable
in 1999 and would have become exercisable in 2000 and, therefore, are
designated as Incentive Stock Options.
(c) Payment of Exercise Price. Subject to Section 3
below, the Options may be exercised in whole or in part, at any time and from
time to time, upon payment of an amount (the "Option Price") equal to the
product of (i) the applicable Exercise Price for the applicable Options
multiplied by (ii) the number of Option Units to be acquired. Payment shall be
made (w) in cash, by bank or certified check, (x) by delivering to the Company
for cancellation certificates for units of the Company's membership interests
already owned by the Executive having a Fair Market Value equal to the full
purchase price of the units being acquired, (y) by surrendering options held by
the Executive for units of the Company's membership interests having a Fair
Market Value equal to the full purchase price of the units being acquired, or
(z) a combination of cash and such units or options.
(d) Procedure for Exercise. The Executive may exercise
all or any portion of the Options at any time and from time to time prior to
their expiration as set forth in Section 3, by filing written notice of
exercise to the Company, accompanied by a statement of the Executive that he
has read and has been afforded an opportunity to ask questions of management of
the Company regarding all financial and other information provided to him
regarding the Company, together with payment of the Option Price in accordance
with the provisions of Section 2(c) above. As a condition to any exercise of
any Option, the Executive will (i) permit the Company to deliver to him all
financial and other information regarding the Company (if any) it believes
necessary to enable the Executive to make an informed investment decision, (ii)
make all customary investment representations which the Company requires,
including those set forth on Exhibit A attached hereto, and (iii) execute a
joinder to the Securityholders Agreement, the Registration Rights Agreement and
the Operating Agreement.
(e) Non-Transferability of Options. The Executive's
Options are personal to the Executive and are not transferable by the Executive
other than by will or the laws of descent and distribution. During the
Executive's lifetime, only the Executive may exercise the Options. In the event
of the Executive's death, the Options may be exercised only (i) by the executor
or administrator of the Executive's estate or the Person or Persons to whom the
Executive's rights under the Options shall pass by will or the laws of descent
and distribution (provided that each beneficiary shall execute and deliver an
undertaking in writing to be bound by the terms of this Agreement in form and
substance acceptable to the Committee) and (ii) to the extent that the
Executive was entitled to exercise such Options hereunder at the date of the
Executive's death.
(f) Adjustments. If and to the extent specified by the
Board, the number of units of Preferred Units which may be issued pursuant to
the exercise of Options, and the Exercise Price of the Option Units, shall be
equitably adjusted for any unit dividend, unit split, recapitalization, merger,
consolidation or other recapitalization with respect to the Preferred Units;
provided, that any
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Options to purchase fractional units of Preferred Units resulting from any such
adjustment shall be rounded to the nearest whole unit. Adjustments under this
Section 2(f) shall be made by the Board in its reasonable discretion, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
3. EXPIRATION; REPURCHASE OF UNITS.
(a) The Options not exercised shall expire on the
Expiration Date. Furthermore, if any part of any Option is not exercised prior
to the date the Executive's employment with Crescent is terminated (the
"Termination Date"), such unexercised portion of the Options shall expire and
be forfeited on such date; provided, however, that if the Executive (i) dies or
becomes subject to any Disability (as defined in the Employment Agreement), the
part of the Option that is unexercised shall expire 180 days from the date of
death or Disability, but in no event after the Expiration Date, (ii) retires
(with the approval of the Board), the part of the Option that is unexercised
shall expire 90 days from the date of retirement, but in no event after the
Expiration Date and (iii) is discharged other than for Cause, the part of the
Option that is unexercised shall expire 30 days from the date of discharge, but
in no event after the Expiration Date. In the event of the death of the
Executive, Options that are unexercised on the date of his death may be
exercised by only the executor or administrator of the Executive's estate or
the person or persons to whom the Executive's rights under the Options pass by
will or by the laws of descent and distribution. In the event that the
Executive (or the Executive's executor, administrator or permitted successor as
described in the immediately preceding sentence) exercises any Option following
the Executive's Termination Date, the repurchase right of the Company and Sleep
Investor L.L.C. set forth in Section 6 of the Employment Agreement shall be
extended for a period of sixty (60) days.
(b) In the event the Executive's employment with the
Company is terminated for any reason (including death or Disability), the
Option Units actually issued (whether held by the Executive or one or more
Permitted Transferees and including any Option Units acquired subsequent to
such termination of employment) will be subject to repurchase by the Company
pursuant to the terms and conditions of Section 6 of the Employment Agreement.
4. RESTRICTIONS ON OPTION UNITS; SECURITIES LAWS
MATTERS.
(a) Restrictions on Transfer of Option Units. The
Executive may not sell, pledge, or otherwise transfer any interest in any
Option Units without the prior written consent of the Company. If Executive or
anyone claiming under or through Executive attempts to violate this Section
4(A), such attempted violation shall be null, void, and without effect.
(b) Securities Laws Matters. Executive hereby
acknowledges that the Option Units that Executive may acquire by exercising the
Option shall be acquired for investment without a view to distribution, within
the meaning of the Securities Act, and shall not be sold, transferred,
assigned, pledged, or hypothecated in the absence of an effective registration
statement for the Option Units under the Securities Act and applicable state
securities laws or an applicable exemption from the registration requirements
of the Act and any applicable state securities laws. Executive also agrees that
the Option Units that Executive may acquire by exercising the Option will not
be sold
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or otherwise disposed of in any manner that would constitute a violation of any
applicable federal or state securities laws.
(c) Restricted Securities. All Preferred Units issued
pursuant to the terms of this Agreement shall constitute "restricted
securities," as that term is defined in Rule 144 promulgated by the Securities
and Exchange Commission pursuant to the Securities Act, and may not be
transferred except in compliance with the registration requirements of the
Securities Act or an exemption therefrom. In connection with any such transfer,
the Company may require the transferor to provide a written opinion of counsel
to the effect that such transfer complies with the Securities Act and other
applicable securities laws.
(d) Listing, Registration, and Legal Compliance. If at
any time the Board, determines that the listing, registration, or qualification
of the Option Units upon any securities exchange or under any state or federal
securities or other law or regulation, or the consent, or approval of any
governmental regulatory body, is reasonably required as a condition to or in
connection with the purchase or issuance of Option Units upon the exercise of
Options, no Options may be granted or exercised, in whole or in part, unless
such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
Executive agrees to supply the Company with such certificates, representations,
and information as the Company shall request and shall otherwise cooperate with
the Company in obtaining such listing, registration, qualification, consent, or
approval. The Company hereby agrees to make all such filings and registrations
as are reasonably required to effectuate the terms of this Agreement. In the
case of officers and other persons subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, the Board may impose, at any time, any
limitations upon the exercise of Options that, in the Board's discretion, are
necessary or desirable in order to comply with such Section 16(b) and the rules
and regulations thereunder.
5. AMENDMENT AND WAIVER. The Board may amend or modify
any Option; provided, that no amendment or modification shall impair or
adversely affect the rights of Executive without the consent of Executive. To
the extent any amendment of the Operating Agreement requires the consent of
holders of Preferred Units, such amendment shall require the consent of holders
of a majority of the Preferred Units on an as-exercised basis (i.e., assuming
full exercise of all options to purchase Preferred Units).
6. WITHHOLDING TAX REQUIREMENTS.
(a) Amount of Withholding. It shall be a condition to
the exercise of any Option that Executive make appropriate payment or other
provision acceptable to the Company with respect to any withholding tax
requirement arising from such exercise. The amount of withholding tax required,
if any, with respect to any Option exercise (the "Withholding Amount") shall be
determined by the treasurer or other appropriate officer of the Company, and
Executive shall furnish such information as such officer requests in order to
make such determination.
(b) Withholding Procedure. If the Company determines
that withholding tax is required with respect to any Option exercise, the
Company shall notify Executive of the Withholding Amount, and Executive shall
pay to the Company an amount not less than the Withholding Amount.
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In lieu of making such payment, the Executive may pay the Withholding Amount by
either (i) delivering to the Company a number of units of Preferred Units
having an aggregate Liquidation Value as of the Measurement Date not less than
the Withholding Amount, or (ii) directing the Company to withhold and not
deliver or issue to the Executive a number of units of Preferred Units,
otherwise issuable upon the exercise of the Option, having an aggregate
Liquidation Value as of the Measurement Date not less than the Withholding
Amount. In addition, if the Committee approves, the Executive may elect
pursuant to the prior sentence to deliver or direct the withholding of units of
Preferred Units having an aggregate Liquidation Value in excess of the minimum
Withholding Amount but not in excess of the Executive's applicable highest
marginal combined federal income and state income tax rate, as estimated in
good faith by such Executive. Any fractional interests resulting from the
delivery or withholding of units of Preferred Units to meet withholding tax
requirements shall be settled in cash. All amounts paid to or withheld by the
Company and the value of all units of Preferred Units delivered to or withheld
by the Company pursuant to this Section 6 shall be deposited in accordance with
applicable law by the Company as withholding tax for Executive's account. If
the treasurer or other appropriate officer of the Company determines that no
withholding tax is required with respect to the exercise of any Option, but it
is determined subsequently that the exercise resulted in taxable income as to
which withholding is required (as a result of a disposition of the Option Units
or otherwise), Executive shall promptly, upon being notified of the withholding
requirement, pay to the Company (by means acceptable to the Company) the amount
required to be withheld, and the Company may, at its election, condition any
transfer of Option Units issued upon exercise of the Option upon receipt of
such payment.
(c) Notification of Inquiries and Agreements. Executive
and each Permitted Transferee shall notify the Company in writing within 10
days after the date Executive or any such Permitted Transferee (i) first
obtains knowledge of any Internal Revenue Service inquiry, audit, assertion,
determination, investigation, or question relating in any manner to the value
of Options granted hereunder; (ii) includes or agrees (including, without
limitation, in any settlement, closing, or other similar agreement) to include
in gross income with respect to any Option granted under this Agreement (A) any
amount in excess of the amount reported on Form 1099 or Form W-2 to the
Executive by the Company, or (B) if the Executive received no such Form, any
amount; or (iii) sells, disposes, or otherwise transfers Option Units acquired
pursuant to this Agreement. Upon request, Executive or any such Permitted
Transferee shall provide to the Company any information or document relating to
any event described in the preceding sentence which the Company (in its sole
discretion) requires in order to calculate and substantiate any change in the
Company's tax liability as a result of such event.
7. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE. As
an inducement to the Company to enter into this Agreement and grant the
Options, the Executive hereby represents and warrants to the Company as
follows:
(a) Capacity and Power. The Executive has full capacity,
power and authority to execute and deliver this Agreement, to perform his or
her obligations under this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Executive and constitutes a valid and binding agreement, enforceable against
him or her in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar
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laws affecting the enforceability of creditors' rights generally, general
equitable principles and the discretion of courts in granting equitable
remedies.
(b) No Conflict. The execution, delivery and performance
by the Executive of this Agreement and the transactions contemplated hereby and
the fulfillment by him or her of and compliance by him or her with the terms
and conditions of this Agreement do not and will not, violate or conflict with
any terms or provisions of (i) any contract, deed, lease or other agreement to
which he or she is a party or to which any of his or her assets are subject or
(ii) any judgment, decree, order, statute, rule or regulation applicable to,
him or her or any of his or her assets, except for such violations which could
not reasonably be expected to materially impair or delay his or her ability to
consummate the transactions contemplated hereby. No consent, approval, order or
authorization of, or registration, declaration or filing with, any government
agency or public or regulatory unit, agency, body or authority with respect to
him or her is required in connection with his or her execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby other than any of the foregoing, the failure of which to
receive or make, as the case may be, could not reasonably be expected to
materially impair or delay his or her ability to consummate the transactions
contemplated hereby.
8. REPRESENTATIONS AND WARRANTS OF THE COMPANY. As an
inducement to enter into this Agreement, the Company hereby represents and
warrants to each Executive as follows:
(a) The Company is a limited liability company validly
existing and in good standing under the laws of the State of New Jersey and is
qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify, except for such
jurisdictions in which the failure to so qualify, would not have a material
adverse effect on the Company.
(b) The execution, delivery and performance of this
Agreement have been duly authorized by the Company. This Agreement constitutes
a valid and binding obligation of the Company, enforceable in accordance with
its terms, except to the extent that the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general principles of equity.
9. MISCELLANEOUS.
(a) Rights of Executive. Nothing in this Agreement shall
interfere with or limit in any way the right of the Company or any Subsidiary
to terminate Executive's employment at any time (with or without Cause), or to
confer upon Executive any right to continue in the employ of the Company or any
Subsidiary for any period of time, or to continue to receive Executive's
current (or other) rate of compensation. Except as otherwise provided herein
(including, without limitation, as provided in Section 5), unless and until a
certificate or certificates representing the Option Units shall have been
issued to Executive, Executive shall not be a securityholder or have any of the
rights or privileges of a securityholder of the Company with respect to units
of Preferred Units acquired upon exercise of the Option.
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(b) Severability. Whenever possible, each provision of
this Agreement shall 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 shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
(c) Entire Agreement. Except as otherwise expressly set
forth herein and except for the Executive's rights under the Merger Agreement,
the Option and SAR Cancellation Agreement and the Employment Agreement, this
Agreement embodies the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof 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.
(d) Successors and Assigns. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns.
(e) Counterparts. This Agreement may be executed in
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
(f) Remedies. The parties hereto shall be entitled to
enforce their rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their 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 the Company and the Executive may in its
sole discretion apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief (without posting a bond or
other security) in order to enforce or prevent any violation of the provisions
of this Agreement.
(g) 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. Such notices, demands and
other communications will be sent to the address indicated below:
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If to the Executive:
(Executive)
x/x Xxxxxxxx Xxxxx Products Company
X.X. Xxx 0000
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
With a copy to (which shall not constitute notice to the
Executive):
Schell, Bray, Xxxxxx, Xxxx & Xxxxxxxxxx
000 Xxxxx Xxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxx, Esq.
Telecopy No.: (000) 000-0000
If to the Company, to:
c/o Sleepmaster L.L.C.
0000 Xxxxx Xxxx
Xxxxxx, XX 00000
Attention: President
Facsimile No.: (000) 000-0000
With a copy to (which shall not constitute notice to the
Company):
Xxxxxxxx & Xxxxx
Citigroup Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
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. The
Company further agrees to provide Executive with copies of all notices and
other communications that the Company is required to provide or otherwise
provide to holders of its Preferred Units in their capacity as such, whether or
not Executive actually holds any units of Preferred Units at the time any such
notice is given.
(h) Time of the Essence; Computation of Time. Time is of
the essence for each and every provision of this Agreement. Whenever the last
day for the exercise of any privilege or the discharge of any duty hereunder
shall fall upon a Saturday, Sunday, or any date on which banks in New York, New
York are authorized to be closed, the party having such privilege or duty may
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exercise such privilege or discharge such duty on the next succeeding day which
is a regular business day.
(i) Waiver of Jury Trial. Each of the parties hereto
waives any right it may have to trial by jury in respect of any litigation
based on, arising out of, under or in connection with this Agreement or any
course of conduct, course of dealing, verbal or written statement or action of
any party hereto.
(j) 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 LAW GOVERNING LIMITED LIABILITY COMPANIES SHALL
BE GOVERNED BY THE NEW JERSEY LIMITED LIABILITY COMPANY ACT.
(k) Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
* * * * *
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IN WITNESS WHEREOF, the Company and Executive have executed
this Preferred Unit Option Replacement ISO Agreement as of the date first above
written.
SLEEPMASTER HOLDINGS, L.L.C.
By: /S/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President
/S/ Xxxxxxx Xxxxxxx
-------------------------------------
Xxxxxxx Xxxxxxx
Address:
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EXHIBIT A
1. In connection with the acquisition of the Option Units, the
Executive represents and warrants to the Company that:
(a) The Option Units to be acquired by the Executive
pursuant to this Agreement will be acquired for the Executive'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 Option Units
will not be disposed of in contravention of the Securities Act or any
applicable state securities laws.
(b) No commission, fee or other remuneration is to be
paid or given, directly or indirectly, to any Person for soliciting the
Executive to purchase the Option Units.
(c) The Executive is an executive officer of the
Company, is sophisticated in financial matters and is able to evaluate the
risks and benefits of the investment in the Option Units and has determined
that such investment in the Option Units is suitable for the Executive, based
upon the Executive's financial situation and needs, as well as the Executive's
other securities holdings.
(d) The Executive qualifies an "accredited investor"
within the meaning of Rule 501(a) of Regulation D under the Securities Act.
(e) The Executive is able to bear the economic risk of
the Executive's investment in the Option Units for an indefinite period of time
and the Executive understands that the Option Units 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.
(f) The Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering of Option Units and has had full access to such other information
concerning Holdings as the Executive has requested. The Executive has reviewed,
or has had an opportunity to review, the following documents: (A) the
organization documents of Holdings; (B) the loan agreements, notes and related
documents with the lenders of the Company Group; and (C) all of the materials
provided by Holdings to any Person providing financing to Holdings, including,
but not limited to, Holdings' pro forma balance sheet, as well as financial
projections, estimates, forecasts, budgets, summaries, reports and other
related documents.
(g) This Agreement constitutes the legal, valid and
binding obligation of the Executive, enforceable in accordance with its terms,
and the execution, delivery and performance of this Agreement by the Executive
does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which the Executive is a party or any
judgment, order or decree to which the Executive is subject.
2. As an inducement to Holdings to issue the Option Units to the
Executive, and as a condition thereto, the Executive acknowledges and agrees
that neither the issuance of the Option Units to the Executive nor any
provision contained herein shall entitle the Executive to remain in the
Ex. A - Page 1
14
employment of the Company Group and its Subsidiaries or affect the right of the
Company Group and its Subsidiaries to terminate the Executive's employment at
any time for any reason.
Ex. A - Page 2
