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EXHIBIT 4.3
EXECUTION COPY
THIS WARRANT WAS ORIGINALLY ISSUED ON MAY 15, 2001
AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS
THEREUNDER OR THE PROVISIONS OF THIS WARRANT. THIS
WARRANT IS ALSO SUBJECT TO (A) AN UNSECURED SENIOR
NOTE AND WARRANT PURCHASE AGREEMENT DATED AS OF MAY
15, 2001 BY AND BETWEEN SLEEPMASTER HOLDINGS L.L.C.
(THE "COMPANY"), THE ORIGINAL HOLDER HEREOF AND
CERTAIN OTHER PARTIES THERETO (THE "PURCHASE
AGREEMENT") AND (B) AN AMENDED AND RESTATED
SECURITYHOLDERS AGREEMENT DATED AS OF MARCH 3, 1998
BY AND AMONG THE COMPANY, CERTAIN SECURITYHOLDERS OF
THE COMPANY, AND THE ORIGINAL HOLDER HEREOF (THE
"SECURITYHOLDERS AGREEMENT"), IN EACH CASE AS
AMENDED FROM TIME TO TIME. A COPY OF THE PURCHASE
AGREEMENT AND THE SECURITYHOLDERS AGREEMENT WILL BE
FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE
HOLDER HEREOF UPON REQUEST.
UNIT PURCHASE WARRANT
Date of Issuance: May 15, 2001 Certificate No. W-3
For value received, SLEEPMASTER HOLDINGS L.L.C., a New Jersey
limited liability company (the "Company"), hereby grants to PMI MEZZANINE FUND,
L.P., a Delaware limited partnership ("PMI"), or its transferees and assigns,
the right to purchase from the Company a total of 1,498.43 Warrant Interests (as
defined herein) at a price per unit of $0.01 (the "Initial Exercise Price").
This Warrant is one of the warrants (collectively, the "Warrants") issued
pursuant to the terms of the Unsecured Senior Note and Warrant Purchase
Agreement, dated as of the date hereof, between the Company, PMI and certain
other parties thereto (the "Purchase Agreement"). The Initial Exercise Price and
number of Warrant Interests (and the amount and kind of other securities) for
which this Warrant is exercisable shall be subject to adjustment as provided
herein. Certain capitalized terms used herein are defined in Section 4 hereof.
This Warrant is subject to the following provisions:
SECTION 1. Exercise of Warrant.
1A. Exercise Period. The purchase rights represented by this
Warrant may be exercised, in whole or in part, at any time after the date hereof
and before 5:00 p.m., New York time,
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on May 15, 2011 or, if such day is not a Business Day, on the next preceding
Business Day (the "Exercise Period").
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised
when all of the following items have been delivered to the Company (the
"Exercise Time"):
(a) a completed Exercise Agreement, as described in
Section 1C below, executed by the Person exercising all or part of the
purchase rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if the Purchaser is not the Registered Holder,
an Assignment or Assignments in the form set forth in Exhibit II
attached hereto evidencing the assignment of this Warrant to the
Purchaser; and
(d) either (i) a check or wire transfer payable to
the Company in an amount equal to the product of the Exercise Price (as
such term is defined in Section 2) multiplied by the number of Warrant
Interests being purchased upon such exercise (the "Aggregate Exercise
Price"), (ii) the surrender to the Company of securities of the Company
or its subsidiaries having a value equal to the Aggregate Exercise
Price of the Warrant Interests being purchased upon such exercise
(which value in the case of debt securities shall be the principal
amount thereof and in the case of units of Common Membership Interests
shall be the Fair Market Value thereof), or (iii) the delivery of a
notice to the Company that the Purchaser is exercising the Warrant by
authorizing the Company to reduce the number of Warrant Interests
subject to the Warrant by the number of Warrant Interests having an
aggregate Fair Market Value equal to the Aggregate Exercise Price.
(ii) Certificates for Warrant Interests purchased upon
exercise of this Warrant shall be delivered by the Company to the Purchaser
within five days after the date of the Exercise Time together with any cash
payable in lieu of a fraction of a unit pursuant to the provisions of Section 13
hereof. Unless this Warrant has expired or all of the purchase rights
represented hereby have been exercised, the Company shall prepare a new Warrant,
substantially identical hereto, representing the rights formerly represented by
this Warrant which have not expired or been exercised and shall, within such
five-day period, deliver such new Warrant to the Person designated for delivery
in the Exercise Agreement.
(iii) The Warrant Interests issuable upon the exercise of
this Warrant shall be deemed to have been issued to the Purchaser at the
Exercise Time and the Purchaser shall be deemed for all purposes to have become
the Registered Holder of such Warrant Interests at the Exercise Time.
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(iv) The issuance of certificates for Warrant Interests
upon exercise of this Warrant shall be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or other cost
incurred by the Company in connection with such exercise and the related
issuance of Warrant Interests; provided, that the Company shall not be required
to pay any taxes in respect of the Warrant or Warrant Interests, with respect to
any transfer of the Warrants, which taxes shall be paid by the transferee prior
to the issuance of such Warrant Interests.
(v) The Company shall not close its books against the
transfer of this Warrant or of any Warrant Interests issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely exercise
of this Warrant.
(vi) The Company shall assist and cooperate with the
Registered Holder or any Purchaser required to make any governmental filings or
obtain any governmental approvals prior to or in connection with any exercise of
this Warrant.
(vii) Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection with a
public offering or a sale of the Company (pursuant to a merger, sale of stock,
or otherwise), such exercise may at the election of the Registered Holder be
conditioned upon the consummation of such transaction, in which case such
exercise shall not be deemed to be effective until immediately prior to the
consummation of such transaction.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued Common Membership Interests solely
for the purpose of issuance upon the exercise of this Warrant, the maximum
number of Warrant Interests issuable upon the exercise of this Warrant. All
Warrant Interests which are so issuable shall, when issued and upon the payment
of the applicable Exercise Price, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges except those created by
actions of the holder hereof. The Company shall take all such actions as may be
necessary to ensure that all such Warrant Interests may be so issued without
violation by the Company of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which units of Common
Membership Interests or other securities constituting Warrant Interests may be
listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance). The Company will use its
commercially reasonable efforts to cause the Warrant Interests, immediately upon
such exercise, to be listed on any domestic securities exchange, if any, upon
which securities constituting Warrant Interests are listed at the time of such
exercise.
(ix) If the Warrant Interests issuable by reason of
exercise of this Warrant are convertible into or exchangeable for any other
stock or securities of the Company, the Company shall, at the Purchaser's option
and upon surrender of this Warrant by such Purchaser as provided above together
with any notice, statement or payment required to effect such conversion or
exchange of Warrant Interests, deliver to such Purchaser (or as otherwise
specified by such Purchaser) a certificate or certificates representing the
stock or securities into which the Warrant Interests issuable by reason of such
conversion are convertible or exchangeable, registered in such name or names and
in such denomination or denominations as such Purchaser has specified.
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(x) The Company shall not, and shall not permit its
subsidiaries to, directly or indirectly, by any action (including, without
limitation, reincorporation in a jurisdiction other than New Jersey, amending
its Certificate of Formation or Operating Agreement, or through any Organic
Change (as defined in Section 2D), issuance or sale of securities or any other
voluntary action) avoid or seek to avoid the observance or performance of any of
terms of this Warrant or impair or diminish its value (except for any action
which ratably affects all Warrant Interests and units of Common Membership
Interests), but shall at all times in good faith assist in the carrying out of
all such terms of Warrant. Without limiting the generality of the foregoing, the
Company shall (a) use its reasonable best efforts to obtain all such
authorizations, exemptions, or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant, and (b) not undertake any reverse split,
combination, reorganization, or other reclassification of its membership
interests which would have the effect of making this Warrant exercisable for
less than one Common Membership Interest.
1C. Exercise Agreement. Upon any exercise of this Warrant, the
Purchaser shall deliver to the Company an Exercise Agreement in substantially
the form set forth as Exhibit I hereto, except that if the Warrant Interests are
not to be issued in the name of the Registered Holder, the Exercise Agreement
shall also state the name of the Person to whom the certificates for the Warrant
Interests are to be issued, and if the number of Warrant Interests to be issued
does not include all of the Warrant Interests purchasable hereunder, it shall
also state the name of the Person to whom a new Warrant for the unexercised
portion of the rights hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Warrant
Interests. In order to prevent dilution of the rights granted under this
Warrant, the Initial Exercise Price shall be subject to adjustment from time to
time as provided in this Section 2 (as so adjusted, the "Exercise Price"), and
the number of Warrant Interests obtainable upon exercise of this Warrant shall
be subject to adjustment from time to time, each as provided in this Section 2;
provided, however, that there shall be no adjustment to the Exercise Price or to
the number of Warrant Interests acquirable upon exercise of the Warrant, as
provided in this Section 2 (an "Adjustment"), unless and until such Adjustment,
together with any previous Adjustments to the Exercise Price or to the number of
Warrant Interests so acquirable which would otherwise have resulted in an
Adjustment were it not for this proviso, would require an increase or decrease
of at least 1% of the total number of Warrant Interests so acquirable at the
time of such Adjustment, in which event such Adjustment and all such previous
Adjustments shall immediately occur.
2A. Adjustment of Exercise Price and Number of Warrant Interests
upon Issuance of Common Membership Interests.
(i) If and when, on or after the date hereof, the Company
issues or sells, or in accordance with Section 2B is deemed to have issued or
sold (other than Purchase Rights (as defined in Section 4) or pursuant to a
Permitted Issuance or as described in Section 2C hereof) any units of Common
Membership Interests for a per unit consideration that is less than the per unit
Fair Market Value of the Common Membership Interests determined as of the date
of such issuance or sale, then immediately upon such issuance or sale, the
Exercise Price shall be reduced to equal the amount determined by multiplying
the Exercise Price in effect immediately prior to such issuance
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or sale by a fraction, the numerator of which will be the sum of (x) the number
of units of Common Interests Deemed Outstanding immediately prior to such
issuance or sale multiplied by the Fair Market Value of the Common Membership
Interests determined as of the date of such issuance or sale, and (y) the
consideration, if any, received by the Company upon such issuance or sale, and
the denominator of which will be the product derived by multiplying such Fair
Market Value of the Common Membership Interests by the number of units of Common
Interests Deemed Outstanding immediately after such issuance or sale.
(ii) Upon each such adjustment of the Exercise Price
hereunder, the number of Warrant Interests acquirable upon exercise of this
Warrant shall be adjusted to equal the number of units determined by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Interests acquirable upon exercise of this Warrant immediately prior
to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment. For the purposes of this Section 2, the
calculation of the number of units of Common Interests Deemed Outstanding shall
exclude the Warrant Interests.
2B. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 2A, the following
provisions shall be applicable:
(i) Issuance of Rights or Options. If the Company grants in
any manner any rights or options (other than Purchase Rights or a Permitted
Issuance) to subscribe for or to purchase Common Membership Interests or any
securities convertible into or exchangeable for Common Membership Interests
(such rights or options being herein called "Options" and such convertible or
exchangeable securities being herein called "Convertible Securities") and the
price per unit for which Common Membership Interests are issuable upon the
exercise of such Options or upon conversion or exchange of such Convertible
Securities is less than the Fair Market Value of the Common Membership Interests
in effect on the date such Options are granted, then the total maximum number of
units of Common Membership Interests issuable upon the exercise of such Options
or upon conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to be
outstanding and to have been issued and sold by the Company for such price per
unit. For purposes of this paragraph, the "price per unit for which Common
Membership Interests are issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities" is determined by dividing
(A) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the issuance or sale of such Convertible Securities
and the conversion or exchange thereof, by (B) the total maximum number of units
of Common Membership Interests issuable upon exercise of such Options or upon
the conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Options. No further adjustment of the Exercise Price shall be
made upon the actual issuance of such Common Membership Interests or of such
Convertible Securities upon the exercise of such Options or upon the actual
issuance of such Common Membership Interests upon conversion or exchange of such
Convertible Securities.
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(ii) Issuance of Convertible Securities. If the Company in
any manner issues or sells any Convertible Securities (other than Purchase
Rights or a Permitted Issuance) and the price per unit for which Common
Membership Interests are issuable upon the conversion or exchange of such
Convertible Securities is less than the per unit Fair Market Value of the Common
Membership Interests then in effect, then the maximum number of units of Common
Membership Interests issuable upon conversion or exchange of such Convertible
Securities shall be deemed to be outstanding and to have been issued and sold by
the Company for such price per unit. For the purposes of this paragraph, the
"price per unit for which Common Membership Interests are issuable upon such
conversion or exchange" is determined by dividing (A) the total amount received
or receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of units of Common Membership Interests
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Exercise Price shall be made upon the actual issue of
such Common Membership Interests upon conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustments of the Exercise Price have
been or are to be made pursuant to other provisions of this Section 2B, no
further adjustment of the Exercise Price shall be made by reason of such issue
or sale.
(iii) Change in Option Price or Conversion Rate. If either
the purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Membership Interests shall change at any time, the
Exercise Price in effect at the time of such change shall be adjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold and the number of Warrant
Interests shall be correspondingly readjusted.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Securities, in either case
without the exercise of such Option or right, the Exercise Price then in effect
and the number of Warrant Interests acquirable hereunder shall be adjusted to
the Exercise Price and the number of units which would have been in effect at
the time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) Calculation of Consideration Received. If any Common
Membership Interests, Options, or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received therefor
shall be deemed to be the net amount received by the Company therefor. In case
any Common Membership Interests, Options, or Convertible Securities are issued
or sold for a consideration other than cash, the amount of the consideration
other than cash received by the Company shall be the fair value of such
consideration, except where such consideration consists of marketable
securities, in which case the amount of consideration received by the Company
shall be the market price thereof as of the date of receipt. In case any Common
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Membership Interests, Options, or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger or other
business combination in which the Company is the surviving entity, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Membership Interests, Options or Convertible Securities, as the case
may be. The fair value of any consideration other than cash or marketable
securities shall be determined by the Company, unless such consideration is paid
by an Affiliate of the Company, in which case the fair value of such
consideration shall be determined jointly by the Company and the Required
Holders. If such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an appraiser jointly
selected by the Company and the Required Holders, whose determination shall be
final and binding on the Company and all Registered Holders of Warrants (as
defined in Section 8 below). The fees and expenses of such appraiser shall be
paid by the Company.
(vi) Integrated Transactions. Other than Permitted
Issuances, in case any Option is issued in connection with the issue or sale of
other securities of the Company, together comprising one integrated transaction
in which no specific consideration is allocated to such Options by the parties
thereto, the Option shall be deemed to have been issued for no consideration;
provided, that if such other securities are debt securities (such debt
securities so issued are herein referred to as the "Debt") of the Company or any
of its subsidiaries, the Option shall be deemed to have been issued for
consideration equal to the excess, if any, of (a) the aggregate face amount (the
"Estimated Face Amount") of debt securities with terms identical to the terms of
the Debt (other than the increase to face value described in this proviso) which
the Company or such subsidiary would have had to issue had no Options been
issued in connection therewith, given the prevailing market conditions at the
time of the issuance of the Debt, in order to receive the same aggregate net
proceeds as is actually received from the issuance of the Debt, over (b) the
aggregate face amount of the Debt. The Estimated Face Amount shall be as
mutually agreed between the Company and the Registered Holder or, if no such
mutual agreement is reached, as set forth in the written opinion, addressed to
the Registered Holder, of an investment bank of national recognition, retained
by the Company and reasonably acceptable to the Registered Holder; provided,
that if no such mutual agreement is reached or written opinion is received, the
Estimated Face Amount shall be deemed to be zero (0); provided, further, that
the fees and expenses of such investment bank shall be borne by the Company.
Example: If the Company issues $20 million aggregate principal
amount of 10% subordinated debentures with a 10-year
maturity (and receives aggregate net proceeds of $20
million), and in connection therewith issues warrants, and
in accordance with the provisions of Section 2B(vi), the
Company and the Registered Holder mutually agree or an
investment bank determines that the Estimated Face Amount
of the subordinated debentures (with terms otherwise
identical to the securities issued) would have been $21
million to the Company), had the warrants not been issued,
then such warrants would be deemed to have been issued for
$1 million.
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(vii) Treasury Units. The number of units of Common
Membership Interests outstanding at any given time does not include Interests
owned or held by or for the account of the Company or any subsidiary of the
Company and the disposition of any units so owned or held shall be considered an
issue or sale of Common Membership Interests.
(viii) Record Date. If the Company takes a record of the
holders of Common Membership Interests for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Membership Interests,
Options, or Convertible Securities or (B) to subscribe for or purchase Common
Membership Interests, Options, or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the units of Common
Membership Interests deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
2C. Subdivision or Combination of Common Membership Interests. If
the Company at any time subdivides (by any unit split, unit dividend,
recapitalization, or otherwise) the Common Membership Interests into a greater
number of units or pays a dividend or makes a distribution to holders of the
Common Membership Interests in the form of units of Common Membership Interests,
the Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Interests obtainable upon
exercise of this Warrant shall be proportionately increased. Subject to clause
(b) of Section 1B(x), if the Company at any time combines (by reverse unit split
or otherwise) the Common Membership Interests into a smaller number of units,
the Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of Warrant Interests obtainable upon
exercise of this Warrant shall be proportionately decreased.
2D. Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Membership Interests are entitled to receive (either directly
or upon subsequent liquidation) stock, securities, or assets with respect to or
in exchange for Common Membership Interests is referred to herein as an "Organic
Change". Subject to the provisions of the Securityholders Agreement, prior to
the consummation of any Organic Change, the Company shall make appropriate
provision to ensure that each Registered Holder of Warrants shall thereafter
have the right to acquire and receive upon exercise thereof, in lieu of or
addition to (as the case may be) the Warrant Interests immediately theretofore
acquirable and receivable upon exercise of such Registered Holder's Warrants,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for the number of Warrant Interests immediately
theretofore acquirable and receivable upon exercise of such Registered Holder's
Warrants had such Organic Change not taken place. In any such case, the Company
shall make appropriate provision with respect to such Registered Holder's rights
and interests to insure that the provisions hereof (including this Section 2)
shall thereafter be applicable to the Warrants (including, in the case of any
such Organic Change in which the successor entity or purchasing entity is other
than the Company, an immediate adjustment of the Exercise Price to the per unit
value for the Common Membership Interests reflected by the terms of such Organic
Change and a corresponding immediate adjustment in the number of Warrant
Interests acquirable and receivable upon exercise
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of the Warrants, if the per unit value so reflected is less than the Fair Market
Value of the Common Membership Interests in effect immediately prior to such
Organic Change). The Company shall not effect any such Organic Change unless,
prior to the consummation thereof, the successor entity (if other than the
Company) resulting from such Organic Change (including a purchaser of all or
substantially all the Company's assets) assumes by written instrument the
obligation to deliver to each Registered Holder of Warrants such shares or units
of stock, securities or assets as, in accordance with the foregoing provisions,
such Registered Holder may be entitled to acquire upon exercise of Warrants.
2E. Certain Events. If any event occurs of the type contemplated
by the provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features but excluding
any Permitted Issuance), then the Company's Board of Advisors shall make an
appropriate and equitable adjustment in the Exercise Price and the number of
Warrant Interests obtainable upon exercise of this Warrant so as to protect the
rights of the Registered Holder of this Warrant.
2F. Notices.
(i) Immediately upon any adjustment of the Exercise Price,
the Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the
Registered Holder at least thirty (30) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Membership Interests, (B) with respect to any pro
rata subscription offer to holders of Common Membership Interests, or (C) for
determining rights to vote with respect to any Organic Change, dissolution or
liquidation.
(iii) The Company shall also give written notice to the
Registered Holder at least thirty (30) days prior to the date on which any
Organic Change, dissolution, or liquidation shall take place.
SECTION 3. Purchase Rights. If at any time the Company grants,
issues, or sells any options, convertible securities, or rights to purchase
stock, warrants, securities, or other such property pro rata to the record
holders of the Common Membership Interests (the "Purchase Rights"), then the
Company shall grant, issue or sell (as the case may be) to the Registered Holder
the aggregate Purchase Rights which such Registered Holder would have acquired
if such Registered Holder had held the maximum number of Warrant Interests
acquirable upon complete exercise of this Warrant immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights
or, if no such record is taken, the date as of which the record holders of
Common Membership Interests are to be determined for the grant, issue, or sale
of such Purchase Rights.
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SECTION 4. Definitions. The following terms have the meanings set
forth below:
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly,
indirectly or beneficially, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities or by contract or otherwise.
"Business Day" means any day excluding Saturday, Sunday and any
day which is a legal holiday under the laws of the State of New York or is a day
on which banking institutions located in such state are authorized or required
by law or other governmental action to close.
"Class A Units" means the Company's Class A Common Membership
Interests and any securities into which such Class A Common Membership Interests
is hereafter converted or exchanged.
"Class B Units" means the Company's Class B Common Membership
Interests and any securities into which such Class B Common Membership Interests
is hereafter converted or exchanged.
"Class C Units" means the Company's Class C Common Membership
Interests and any securities into which such Class C Common Membership Interests
is hereafter converted or exchanged.
"Common Membership Interests" means, collectively, the Class A
Units, the Class B Units, and the Class C Units and any securities into which
such Class A Units, Class B Units or Class C Units are hereafter converted or
exchanged.
"Common Interests Deemed Outstanding" means, at any given time,
the number of units of Common Membership Interests actually outstanding at such
time, plus the number of units of Common Membership Interests deemed to be
outstanding pursuant to Section 2B(i) or 2B(ii) hereof.
"Fair Market Value" means the price that would be paid per unit
for the entire common equity interest in the Company in an orderly sale
transaction between a willing buyer and a willing seller, taking into account
the appropriate lack of liquidity of the Company's securities, using valuation
techniques then prevailing in the securities industry and assuming full
disclosure of all relevant information and a reasonable period of time for
effectuating such sale. Fair Market Value shall be determined by the Company's
Board of Advisors in its good faith judgment. A majority of the Required Holders
shall have the right to require that an independent investment banking firm
mutually acceptable to the Company and the Required Holders determine Fair
Market Value, which firm shall submit to the Company and the Warrant holders a
written report setting forth
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such determination. The expenses of such firm will be borne by the Company, and
the determination of such firm will be final and binding upon all parties.
"Funded Debt" means, as of any date of determination, the sum of
(i) all outstanding Indebtedness of the Company and its subsidiaries as of such
date, plus (ii) the liquidation value of the Preferred Units outstanding as of
such date.
"Indebtedness" means all indebtedness of the Company or any of its
subsidiaries including, without limitation (i) all obligations for borrowed
money or evidenced by bonds, debentures, notes, letters of credit or other
similar instruments, (ii) obligations as lessee under capital leases, (iii)
obligations to pay the deferred purchase price of property or services, except
accounts payable arising in the ordinary course of business, (iv) all debt of
other Persons guaranteed or otherwise supported by the Company or any of its
subsidiaries, and (v) any interest, principal, prepayment penalty, fees or
expenses in respect of items listed in clauses (i) through (iv).
"Option Agreements" means those certain Option Agreements, dated
as of November 14, 1996, by and between the Company and each of Xxxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxx, Xxxxxxx Xxxxxx and Xxxxxxx XxXxxx, and one or more
option agreements entered into from time to time by and between the Company and
certain members of the management of the Company's subsidiaries.
"Permitted Issuance" means any issuance by the Company of units of
Common Membership Interests (a) on or prior to the date hereof; (b) upon
exercise of this Warrant or the Series B Warrants; (c) upon the conversion or
exchange of any units of any class of Common Membership Interests into another
class of Common Membership Interests; and (d) issued or issuable to members of
management of the Company and its subsidiaries pursuant to the Option Agreements
not to exceed Six Hundred Thirty-Nine (639) units of Common Membership
Interests, in aggregate.
"Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization or
government or department or agency thereof.
"Preferred Units" means the Company's Preferred Units.
"Registered Holder" means the holder of this Warrant as reflected
in the records of the Company maintained pursuant to the provisions of Section
12.
"Required Holders" means the holders of a majority of the purchase
rights represented by this Warrant as originally issued which remain outstanding
and unexercised.
"Securityholders Agreement" means the Amended and Restated
Securityholders Agreement, dated as of March 3, 1998, by and among the Company
and certain other securityholders of the Company, as may be amended or modified
from time to time in accordance with the terms thereof.
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"Series B Warrants" means the warrants issued pursuant to the
Securities Purchase Agreement, dated as of March 3, 1998, among the Company,
Xxxxxx & Co,. as nominee for PMI Mezzanine Fund, L.P. and Sleepmaster L.L.C.
"Warrant Interests" means units of the Company's Class C Units,
issuable upon exercise of the Warrant; provided, that if the securities issuable
upon exercise of the Warrants are issued by an entity other than the Company or
there is a change in the class of securities so issuable, then the term "Warrant
Interests" shall mean Interests of the security issuable upon exercise of the
Warrants if such security is issuable in Interests, or shall mean the equivalent
units in which such security is issuable if such security is not issuable in
Interests.
SECTION 5. No Voting Rights; Limitations of Liability. This
Warrant shall not entitle the Registered Holder hereof to any voting rights or
other rights as a securityholder of the Company. No provision hereof, in the
absence of affirmative action by the Registered Holder to purchase Warrant
Interests, and no enumeration herein of the rights or privileges of the
Registered Holder shall give rise to any liability of such Registered Holder for
the Exercise Price of Warrant Interests acquirable by exercise hereof or as a
securityholder of the Company.
SECTION 6. Transferability. Subject to the terms of the
Securityholders Agreement, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the Registered Holder, upon
surrender of this Warrant with a properly executed Assignment (in the form of
Exhibit II hereto) at the principal office of the Company. The Registered Holder
agrees that it will not sell, transfer, or otherwise dispose of any Warrant
Interests, in whole or in part, except in accordance with the terms of the
Securityholders Agreement. Each certificate evidencing the Warrant Interests
issued upon such transfer shall bear the restrictive legends required by the
Securityholders Agreement, to the extent required therein.
SECTION 7. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
shall represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. At the request of the Registered Holder
(pursuant to a transfer of Warrants or otherwise), this Warrant may be exchanged
for one or more Warrants to purchase Common Membership Interests. The date the
Company initially issues this Warrant shall be deemed to be the date of issuance
hereof regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly represented by this Warrant shall be
issued. All Warrants representing portions of the rights hereunder are referred
to herein as the "Warrants."
SECTION 8. Exchange. In the event that it becomes unlawful or, in
the reasonable judgment of any Registered Holder of this Warrant, unduly
burdensome by reason of a change in legal or regulatory considerations or the
interpretation thereof affecting the ability of financial institutions or their
affiliates to hold equity securities, or any material change (including a
reduction in the number of units of Common Membership Interests outstanding) in
the capital structure of the Company, to hold any or all of the Warrants or
Warrant Interests, the Registered Holder of this
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Warrant shall have the right to require all or part of such Registered Holder's
Warrants or Warrant Interests to be exchanged for nonvoting membership interests
or similar interests that convey equivalent economic benefits to such Warrants
or Warrant Interests and include, in the case of Warrants, equivalent
anti-dilution protection. Any such exchange shall occur as soon as practicable
but in any event within sixty (60) days after written notice by the Registered
Holder of this Warrant to the Company (or such earlier date if required to
comply with applicable law).
SECTION 9. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction, or mutilation
of any certificate evidencing this Warrant, and in the case of any such loss,
theft, or destruction, upon receipt of indemnity reasonably satisfactory to the
Company (provided, that if the Registered Holder is a financial institution or
other institutional investor its own Agreement shall be satisfactory), or, in
the case of any such mutilation upon surrender of such certificate, the Company
shall (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the same rights represented by such lost,
stolen, destroyed, or mutilated certificate and dated the date of such lost,
stolen, destroyed, or mutilated certificate.
SECTION 10. Notices. Except as otherwise expressly provided
herein, all notices and deliveries referred to in this Warrant shall be in
writing, shall be delivered personally, sent by registered or certified mail,
return receipt requested and postage prepaid or sent via nationally recognized
overnight courier or via facsimile, and shall be deemed to have been given when
so delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices, and (ii) to a Registered
Holder, at such Registered Holder's address as it appears in the records of the
Company (unless otherwise indicated by any such Registered Holder).
SECTION 11. Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
the Required Holders.
SECTION 12. Warrant Register. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Company may deem and treat the Registered Holder as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 13. Fractions of Units. The Company may, but shall not be
required to, issue a fraction of a Warrant Interest upon the exercise of this
Warrant in whole or in part. As to any fraction of a unit which the Company
elects not to issue, the Company shall make a cash payment in respect of such
fraction in an amount equal to the same fraction of the Fair Market Value of a
Warrant Interest on the date of such exercise.
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SECTION 14. Put Right.
14A. Put Option. As soon as practicable and in any event not later
than ninety (90) days after the end of each such fiscal year, the Company shall
deliver to the Registered Holder copies of the audited consolidated financial
statements of the Company and its subsidiaries (the "Financial Statements") for
the fiscal years of the Company ending on or after December 31, 2002 and on or
before November 14, 2009. The Registered Holder, during any Put Window (as
defined below) in effect during the period commencing November 14, 2003 and
ending November 14, 2009, shall have the right (the "Put Option"), upon delivery
to the Company of an irrevocable notice (the "Put Notice"), to require the
Company to purchase, at the price determined pursuant to Section 14A(i), (x) all
of the Warrant Interests, if any, then owned by the Registered Holder hereof,
and (y) this Warrant (collectively, the "Equity Rights"); provided, however,
that the obligation of the Company to purchase such Equity Rights shall be
subject to (A) the availability of financing (on terms and conditions reasonably
satisfactory to the Company in its good faith business judgment) with respect to
such purchase price and (B) the approval of the Senior Agent (as defined in the
Purchase Agreement) if such approval is then required under the Credit Documents
(as defined in the Purchase Agreement); provided further, that the Company shall
use its commercially reasonable efforts to obtain such financing and any such
approval and, with respect to such financing, commercially reasonable efforts
shall not include the issuance of equity and, with respect to any refinancing or
extension of financing, shall not be on terms more onerous than that which is
being refinanced or extended; provided further, that the Put Option shall
terminate upon (x) an Approved Sale (as defined in the Securityholders
Agreement) or (y) the consummation of an underwritten public offering of units
of Common Membership Interests. In the event that either clause (A) or clause
(B) above are not satisfied, the Company shall have no obligation to purchase
the Warrants Interests and the Warrant subject to the Put Notice. For purposes
of this Section 14, "Put Window" means, with respect to any fiscal year of the
Company, the period commencing on the earlier of (x) the date of delivery to the
Registered Holder of the Financial Statements with respect to such fiscal year
or (y) ninety (90) days after the end of such fiscal year, and ending ninety
(90) days after the date of delivery to the Registered Holder of the Financial
Statements with respect to such fiscal year.
(i) The Company shall pay for the Equity Rights, in cash,
on a per-Warrant Interest basis (net of the Exercise Price for each Warrant
Interest purchasable on exercise of the Warrant if the Warrant is to be
purchased), an amount equal to (i) the value of the Company divided by (ii) the
number of outstanding units of Common Membership Interests (on a fully diluted,
as converted basis), with the value of the Company being the greater of:
(a) 7.0 times Actual EBITDA (as the term "Actual
EBITDA" is defined in the Option Agreements) of the Company and its
Subsidiaries for the twelve (12)-month period ending on the last day of
the most recently ended fiscal year prior to the date of the Put
Notice, to which product is to be added cash and cash equivalents of
the Company and its subsidiaries as of the date of the Put Notice, from
which sum is to be subtracted Funded Debt (as defined in Section 4)
outstanding as of the date of Put Notice; or
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(b) the aggregate Fair Market Value, as of the date
of Put Notice, of the outstanding units of Common Membership Interests
(on a fully-diluted, as if converted basis).
14B. Put Notice.
(i) The Put Notice shall expressly state: (i) the election
of the Holder to exercise the Put Option and (ii) the date of exercise of such
Put Option (which date of exercise shall not be less than ninety (90) days after
the date of the Put Notice). Subject to Section 14B(iii), the closing shall take
place on or before the date of exercise set forth in the Put Notice, and at the
time and place set forth in a written notice of the Company to the Registered
Holder not less than ten (10) days prior to such date of exercise. Subject to
Section 14B(iii), the Company shall use its commercially reasonable efforts to
effectuate the exercise of the Registered Holder's Put Option prior to, but in
no event later than, the date of exercise specified by the Registered Holder for
such exercise. Subject to Section 14B(iii), at such closing, Company shall
deliver to such Registered Holder, in cash, the price for the Equity Rights
surrendered by the Holder.
(ii) Upon receipt by the Company of such Put Notice, the
Company shall promptly provide all other Holders of Warrants written notice of:
(i) the intent of the Registered Holder to exercise the Put Option; and (ii) the
date of exercise set forth in the Put Notice.
(iii) In the event that the Company shall determine, in its
good faith business judgment, that the conditions set forth clauses (a) and (b)
of Section 14A(i) will not be satisfied, as soon as practicable thereafter, the
Company shall give written notice of such determination to all Holders of
Warrants.
SECTION 15. Descriptive Headings; Governing Law. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF DELAWARE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
* * * * *
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officers under its corporate seal and
to be dated as of the date hereof.
SLEEPMASTER HOLDINGS L.L.C.
By: /s/ Xxxxx X. Xxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President
Attest:
/s/ Xxxxxxx Xxxxxxxxxx
----------------------------
Name: Xxxxxxx Xxxxxxxxxx
17
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. W-____), hereby agrees to subscribe for the
purchase of ______ Warrant Interests covered by such Warrant and makes payment
herewith in full therefor at the price per unit provided by such Warrant.
Signature _____________________
Address ______________________
Exhibit I, Page 1
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EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (Certificate No. W-_____) with respect to the number of the Warrant
Interests covered thereby set forth below, unto:
Names of Assignee Address No. of Interests
----------------- ------- ----------------
Dated: Signature
-----------------------
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Witness
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Exhibit II, Page 1
