EXHIBIT 10.14


 


REGISTRATION RIGHTS AGREEMENT


 


REGISTRATION RIGHTS AGREEMENT, dated as of April 6, 2004, among
Sealy Corporation, a Delaware corporation (the “Company”) and Sealy
Holding LLC, a Delaware limited liability company (the “Investor”).


 


RECITALS


 


As of the date hereof, the Investor is the holder of 24,971,355.1026
shares of Class A Common Stock of the Company. 
The Company desires to provide to the Investor and to each other Holder
(as defined below) rights to registration under the Securities Act (as defined
below) of Registrable Securities (as defined below), on the terms and subject
to the conditions set forth herein.


 


AGREEMENT


 


1.             Definitions.  As used in this Agreement, the following
capitalized terms shall have the following respective meanings:


 


“Common Stock”:  The shares of Class A Common Stock, par
value $.01 per share, of the Company and any stock into which such Common Stock
may thereafter be converted or exchanged.


 


“Demand Party”:  (a) The Investor or (b) any other Holder or
Holders, including, without limitation, any Person that may become an assignee
of the Investor’s rights hereunder; provided that to be a Demand Party
under this clause (b), a Holder or Holders must either individually or in
aggregate with all other Holders with whom it is acting together to demand
registration own at least 1% of the total number of Registrable Securities.


 


“Exchange Act”:  The Securities Exchange Act of 1934, as
amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to the
comparable section, if any, of any such similar federal statute.


 


“Holder”:  The Investor and any other holder of Registrable Securities
(including any direct or indirect transferee of the Investor who agrees in
writing to be bound by the provisions of this Agreement).


 


“Person”:  Any individual, partnership, joint venture, corporation, limited
liability company, trust, unincorporated organization, government or any
department or agency thereof or any other entity.


 


“Registrable Securities”:  Any Common Stock held by the Investor, and
any Common Stock which may be issued or distributed in respect thereof by way
of stock dividend or stock split or other distribution, recapitalization or
reclassification.  Any


 

















 


particular Registrable Securities that are issued shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale by the Holder of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) such securities shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (iii) such securities shall have been otherwise
transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or any state
securities or blue sky law then in force, or (iv) such securities shall have
ceased to be outstanding.


 


“Registration Expenses”:  Any and all expenses incident to performance
of or compliance with this Agreement, including, without limitation, (i) all
SEC and stock exchange or National Association of Securities Dealers, Inc. (the
“NASD”) registration and filing fees (including, if applicable, the fees
and expenses of any “qualified independent underwriter,” as such term is
defined in Schedule E to the By-laws of the NASD, and of its counsel),
(ii) all fees and expenses of complying with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) all fees and expenses incurred
in connection with the listing of the Registrable Securities on any securities
exchange pursuant to clause (viii) of Section 4 and all rating agency
fees, (v) the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
and/or “cold comfort” letters required by or incident to such performance and
compliance, (vi) the reasonable fees and disbursements of counsel selected
pursuant to Section 7 hereof by the Holders of the Registrable Securities
being registered to represent such Holders in connection with each such
registration, (vii) any fees and disbursements of underwriters customarily paid
by the issuers or sellers of securities, including liability insurance if the
Company so desires or if the underwriters so require, and the reasonable fees
and expenses of any special experts retained in connection with the requested
registration, but excluding underwriting discounts and commissions and transfer
taxes, if any, and (viii) other reasonable out-of-pocket expenses of Holders (provided
that such expenses shall not include expenses of counsel other than those
provided for in clause (vi) above).


 


“Securities Act”:  The Securities Act of 1933, as amended, or
any similar federal statute then in effect, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of any such similar federal statute.


 


“SEC”:  The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act.


 


2.             Incidental
Registrations.  (a)  Right to Include Registrable Securities.  If the Company at any time after the date
hereof proposes to register its Common Stock under the Securities Act (other
than a registration on Form S-4 or S-8, or any successor or other forms
promulgated for similar purposes), whether or not for sale for its own account
(but excluding in a


 


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registration under Section 3 hereof), in a manner which would
permit registration of Registrable Securities for sale to the public under the
Securities Act, it will, at each such time, give prompt written notice to all
Holders of Registrable Securities of its intention to do so and of such
Holders’ rights under this Section 2. 
Upon the written request of any such Holder made within 15 days after
the receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such Holder), the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Holders thereof, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered; provided that (i) if, at any
time after giving written notice of its intention to register any securities
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to proceed with the proposed registration of the securities to be sold by it,
the Company may, at its election, give written notice of such determination to
each Holder of Registrable Securities and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), and (ii) if such registration involves an underwritten
offering, all Holders of Registrable Securities requesting to be included in
the Company’s registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as apply
to the Company, with such differences, including any with respect to
indemnification and liability insurance, as may be customary or appropriate in
combined primary and secondary offerings. 
If a registration requested pursuant to this Section 2(a) involves
an underwritten public offering, any Holder of Registrable Securities
requesting to be included in such registration may elect, in writing prior to
the effective date of the registration statement filed in connection with such
registration, not to register such securities in connection with such
registration.


 


(b)           Expenses.  The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities.


 


(c)           Priority
in Incidental Registrations.  If a
registration pursuant to this Section 2 involves an underwritten offering
and the managing underwriter advises the Company in writing that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering, so as to be likely to
have an adverse effect on the price, timing or distribution of the securities
offered in such offering as contemplated by the Company (other than the
Registrable Securities), then the Company will include in such registration (i)
first, 100% of the securities the Company proposes to sell and (ii) second, to
the extent of the number of Registrable Securities requested to be included in
such registration pursuant to this Section 2 which, in the opinion of such
managing underwriter, can be sold without having the adverse effect referred to
above, the number of Registrable Securities which the Holders have requested to
be included in such registration, such amount to be allocated pro rata among
all requesting Holders on the basis of the relative number of shares of
Registrable Securities then held by each such Holder (provided that any shares
thereby allocated to any such Holder that exceed such Holder’s request will be
reallocated among the remaining requesting Holders in like manner).


 


3.             Registration
on Request.  (a)  Request by the Demand Party.  At any time, upon the written request of the
Demand Party requesting that the Company effect the registration


 


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under the Securities Act of all or part of such Demand Party’s
Registrable Securities and specifying the amount and intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all other Holders of such Registrable Securities, and
thereupon will, as expeditiously as possible, use its best efforts to effect
the registration under the Securities Act of:


 


(i)            such Registrable Securities which the
Company has been so requested to register by the Demand Party; and


 


(ii)           all other Registrable Securities of the same
class or series as are to be registered at the request of a Demand Party and
which the Company has been requested to register by any other Holder thereof by
written request given to the Company within 15 days after the giving of such
written notice by the Company (which request shall specify the amount and
intended method of disposition of such Registrable Securities),


 


all to the extent necessary to permit the disposition (in accordance
with the intended method thereof as aforesaid) of the Registrable Securities so
to be registered; provided that, unless Holders of a majority of the
shares of Registrable Securities held by Holders consent thereto in writing,
the Company shall not be obligated to file a registration statement relating to
any registration request under this Section 3(a) (x) within a period of
nine months after the effective date of any other registration statement
relating to any registration request under this Section 3(a) which was not
effected on Form S-3 (or any successor or similar short-form registration
statement) or relating to any registration effected under Section 2, or
(y) if, with respect thereto, the managing underwriter, the SEC, the Securities
Act or the rules and regulations thereunder, or the form on which the
registration statement is to be filed, would require the conduct of an audit
other than the regular audit conducted by the Company at the end of its fiscal
year, in which case the filing may be delayed until the completion of such
regular audit (unless the Holders of the Registrable Securities to be
registered agree to pay the expenses of the Company in connection with such an
audit other than the regular audit).


 


(b)           Registration
Statement Form.  If any registration
requested pursuant to this Section 3 which is proposed by the Company to
be effected by the filing of a registration statement on Form S-3 (or any
successor or similar short-form registration statement) shall be in connection
with an underwritten public offering, and if the managing underwriter shall
advise the Company in writing that, in its opinion, the use of another form of
registration statement is of material importance to the success of such
proposed offering, then such registration shall be effected on such other form.


 


(c)           Expenses.  The Company will pay all Registration
Expenses in connection with the first six (6) registrations of each class or
series of Registrable Securities pursuant to this Section 3 upon the
written request of any of the Holders. 
All Registration Expenses for any subsequent registrations of
Registrable Securities pursuant to this Section 3 shall be paid pro rata
by the Company and all other Persons (including the Holders) participating in
such registration on the basis of the relative number of shares of Common Stock
of each such person whose Registrable Securities are included in such
registration.


 


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(d)           Effective
Registration Statement.  A
registration requested pursuant to this Section 3 will not be deemed to
have been effected unless it has become effective; provided that if,
within 180 days after it has become effective, the offering of Registrable
Securities pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the SEC or other governmental
agency or court, such registration will be deemed not to have been effected.


 


(e)           Selection
of Underwriters.  If a requested
registration pursuant to this Section 3 involves an underwritten offering,
the Holders of a majority of the shares of Registrable Securities which are
held by Holders and which the Company has been requested to register shall have
the right to select the investment banker or bankers and managers to administer
the offering; provided, however, that such investment banker or
bankers and managers shall be reasonably satisfactory to the Company.


 


(f)            Priority
in Requested Registrations.  If a
requested registration pursuant to this Section 3 involves an underwritten
offering and the managing underwriter advises the Company in writing that, in
its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering, the Company
will include in such registration only the Registrable Securities of the
Holders requested to be included in such registration.  In the event that the number of Registrable
Securities of the Holders requested to be included in such registration exceeds
the number which, in the opinion of such managing underwriter, can be sold, the
number of such Registrable Securities to be included in such registration shall
be allocated pro rata among all such requesting Holders on the basis of the
relative number of shares of Registrable Securities then held by each such
Holder (provided that any shares thereby allocated to any such Holder
that exceed such Holder’s request shall be reallocated among the remaining
requesting Holders in like manner).  In
the event that the number of Registrable Securities requested to be included in
such registration is less than the number which, in the opinion of the managing
underwriter, can be sold, the Company may include in such registration the
securities the Company proposes to sell up to the number of securities that, in
the opinion of the underwriter, can be sold.


 


(g)           Additional
Rights.  If the Company at any time
grants to any other holders of Common Stock any rights to request the Company
to effect the registration under the Securities Act of any such shares of
Common Stock on terms more favorable to such holders than the terms set forth
in this Section 3, the terms of this Section 3 shall be deemed
amended or supplemented to the extent necessary to provide the Holders such
more favorable rights and benefits.


 


4.             Registration
Procedures.  If and whenever the
Company is required to use its best efforts to effect or cause the registration
of any Registrable Securities under the Securities Act as provided in this
Agreement, the Company will, as expeditiously as possible:


 


(i)            prepare and, in any event within 120 days
after the end of the period within which a request for registration may be
given to the Company pursuant to Section 2 or 3, file with the SEC a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective,


 


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provided, however, that the Company may
discontinue any registration of its securities which is being effected pursuant
to Section 2 at any time prior to the effective date of the registration
statement relating thereto;


 


(ii)           prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period not in excess of 270 days and to comply with
the provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC thereunder with respect to the disposition of all
securities covered by such registration statement during such period in accordance
with the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement; provided that before filing a
registration statement or prospectus, or any amendments or supplements thereto,
the Company will furnish to counsel selected pursuant to Section 7 hereof
by the Holders of the Registrable Securities covered by such registration
statement to represent such Holders, copies of all documents proposed to be
filed, which documents will be subject to the review of such counsel;


 


(iii)          furnish to each seller of such Registrable
Securities such number of copies of such registration statement and of each
amendment and supplement thereto (in each case including all exhibits filed
therewith, including any documents incorporated by reference), such number of
copies of the prospectus included in such registration statement (including
each preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities by such seller;


 


(iv)          use its best efforts to register or qualify
such Registrable Securities covered by such registration in such jurisdictions
as each seller shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this clause (iv), it would not
be obligated to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;


 


(v)           use its best efforts to cause such
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities;


 


(vi)          notify each seller of any such Registrable
Securities covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act within the appropriate period mentioned in clause (ii) of this
Section 4, of the Company’s becoming aware that the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the


 


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statements therein not misleading in the light of the circumstances
then existing, and at the request of any such seller, prepare and furnish to
such seller a reasonable number of copies of an amended or supplemental
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing;


 


(vii)         use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable (but not more than eighteen months)
after the effective date of the registration statement, an earnings statement
which shall satisfy the provisions of Section 11(a) of the Securities Act
and the rules and regulations promulgated thereunder;


 


(viii)        (A) use its best efforts to list such
Registrable Securities on any securities exchange on which the Common Stock is
then listed if such Registrable Securities are not already so listed and if
such listing is then permitted under the rules of such exchange; and (B) use
its best efforts to provide a transfer agent and registrar for such Registrable
Securities covered by such registration statement not later than the effective
date of such registration statement;


 


(ix)           enter into such customary agreements
(including an underwriting agreement in customary form), which may include
indemnification provisions in favor of underwriters and other persons in
addition to, or in substitution for the provisions of Section 5 hereof,
and take such other actions as sellers of a majority of shares of such
Registrable Securities or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities;


 


(x)            obtain a “cold comfort” letter or letters
from the Company’s independent public accounts in customary form and covering
matters of the type customarily covered by “cold comfort” letters as the seller
or sellers of a majority of shares of such Registrable Securities shall
reasonably request;


 


(xi)           make available for inspection by any seller
of such Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such seller or any such underwriter, all pertinent financial and other
records, pertinent corporate documents and properties of the Company, and cause
all of the Company’s officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;


 


(xii)          notify counsel (selected pursuant to
Section 7 hereof) for the Holders of Registrable Securities included in
such registration statement and the managing underwriter or agent, immediately,
and confirm the notice in writing (A) when the registration statement, or any
post-effective amendment to the registration statement, shall have become
effective, or any supplement to the prospectus or any amendment


 


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prospectus shall have been filed, (B) of the receipt of any comments
from the SEC, (C) of any request of the SEC to amend the registration statement
or amend or supplement the prospectus or for additional information, and (D) of
the issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
registration statement for offering or sale in any jurisdiction, or of the
institution or threatening of any proceedings for any of such purposes;


 


(xiii)         make every reasonable effort to prevent the
issuance of any stop order suspending the effectiveness of the registration
statement or of any order preventing or suspending the use of any preliminary
prospectus and, if any such order is issued, to obtain the withdrawal of any
such order at the earliest possible moment;


 


(xiv)        if requested by the managing underwriter or
agent or any Holder of Registrable Securities covered by the registration
statement, promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or agent or such Holder
reasonably requests to be included therein, including, without limitation, with
respect to the number of Registrable Securities being sold by such Holder to
such underwriter or agent, the purchase price being paid therefor by such
underwriter or agent and with respect to any other terms of the underwritten
offering of the Registrable Securities to be sold in such offering; and make
all required filings of such prospectus supplement or post-effective amendment
as soon as practicable after being notified of the matters incorporated in such
prospectus supplement or post-effective amendment;


 


(xv)         cooperate with the Holders of Registrable
Securities covered by the registration statement and the managing underwriter
or agent, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities to
be sold under the registration statement, and enable such securities to be in
such denominations and registered in such names as the managing underwriter or
agent, if any, or such Holders may request;


 


(xvi)        obtain for delivery to the Holders of
Registrable Securities being registered and to the underwriter or agent an
opinion or opinions from counsel for the Company in customary form and in form,
substance and scope reasonably satisfactory to such Holders, underwriters or
agents and their counsel; and


 


(xvii)       cooperate with each seller of Registrable
Securities and each underwriter or agent participating in the disposition of
such Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD.


 


The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such seller and pertinent to the disclosure requirements relating
to the registration and the distribution of such securities as the Company may
from time to time reasonably request in writing.


 


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Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (vi) of this Section 4, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder’s receipt of the copies
of the supplemented or amended prospectus contemplated by clause (vi) of this
Section 4, and, if so directed by the Company, such Holder will deliver to
the Company (at the Company’s expense) all copies, other than permanent file
copies then in such Holder’s possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.  In the event the Company shall give any such
notice, the period mentioned in clause (ii) of this Section 4 shall be
extended by the number of days during the period from and including the date of
the giving of such notice pursuant to clause (vi) of this Section 4 and
including the date when each seller of Registrable Securities covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus contemplated by clause (vi) of this Section 4.


 


5.             Indemnification.  (a)  Indemnification
by the Company.  In the event of any
registration of any securities of the Company under the Securities Act pursuant
to Section 2 or 3, the Company will, and it hereby does, indemnify and
hold harmless, to the extent permitted by law, the seller of any Registrable
Securities covered by such registration statement, each affiliate of such
seller and their respective directors and officers, members or general and
limited partners (including any director, officer, affiliate, employee, agent
and controlling Person of any of the foregoing), each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act (collectively, the “Indemnified
Parties”), against any and all losses, claims, damages or liabilities,
joint or several, and expenses (including reasonable attorney’s fees and
reasonable expenses of investigation) to which such Indemnified Party may
become subject under the Securities Act, common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof, whether or not such Indemnified Party is a party thereto) arise out of
or are based upon (a) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement thereto,
or (b) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
the case of a prospectus, in light of the circumstances under which they were
made) not misleading, and the Company will reimburse such Indemnified Party for
any legal or any other expenses reasonably incurred by it in connection with
investigating or defending against any such loss, claim, liability, action or
proceeding; provided that the Company shall not be liable to any
Indemnified Party in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement or
amendment or supplement thereto or in any such preliminary, final or summary
prospectus in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such seller
specifically stating that it is for use in the preparation thereof; and provided,
further, that the Company will not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, under the indemnity agreement in this
Section 5(a) with


 


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respect to any preliminary prospectus or the final prospectus or the
final prospectus as amended or supplemented, as the case may be, to the extent
that any such loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter sold Registrable
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented, whichever is most recent, if
the Company has previously furnished copies thereof to such underwriter.  For purposes of the last proviso to the
immediately preceding sentence, the term “prospectus” shall not be deemed to
include the documents, if any, incorporated therein by reference, and no Person
who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, shall be obligated to send or give any
supplement or amendment to any document incorporated by reference in any
preliminary prospectus or the final prospectus to any person other than a
person to whom such underwriter had delivered such incorporated document or
documents in response to a written request therefor.  Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such seller or any Indemnified
Party and shall survive the transfer of such securities by such seller.


 


(b)           Indemnification
by the Seller.  The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed in accordance with Section 4 herein, that the
Company shall have received an undertaking reasonably satisfactory to it from
the prospective seller of such Registrable Securities or any underwriter to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 5(a)) the Company and all other prospective sellers with
respect to any untrue statement or alleged untrue statement in or omission or
alleged omission from such registration statement, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement, if such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such seller or
underwriter specifically stating that it is for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment
or supplement, or a document incorporated by reference into any of the
foregoing.  Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of the Company or any of the prospective sellers, or any of their respective
affiliates, directors, officers or controlling Persons and shall survive the
transfer of such securities by such seller. 
In no event shall the liability of any selling Holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.


 


(c)           Notices
of Claims, Etc.  Promptly after
receipt by an Indemnified Party hereunder of written notice of the commencement
of any action or proceeding with respect to which a claim for indemnification
may be made pursuant to this Section 5, such Indemnified Party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; provided
that the failure of the Indemnified Party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under this
Section 5, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. 
In case any such action is brought against an Indemnified Party, unless
in such Indemnified Party’s reasonable judgment a conflict of interest


 


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between such
Indemnified Party and indemnifying parties may exist in respect of such claim,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified
to the extent that it may wish, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation.  No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not include, as an
unconditional term thereof, the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.


 


(d)           Contribution.  If the indemnification provided for in this
Section 5 from the indemnifying party is unavailable to an Indemnified
Party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and such Indemnified Party in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations.  The relative fault of
such indemnifying party and such Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or Indemnified Parties, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such action.  The amount paid or payable
by a party under this Section 5(d) as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.


 


The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph.  No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.


 


(e)           Other
Indemnification.  Indemnification
similar to that specified in the preceding provisions of this Section 5
(with appropriate modifications) shall be given by the Company and each seller
of Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or regulation or
governmental authority other than the Securities Act.


 


(f)            Non-Exclusivity.  The obligations of the parties under this
Section 5 shall be in addition to any liability which any party may
otherwise have to any other party.


 


6.             Rule
144.  The Company covenants that it
will file the reports required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations


 


11

















 


adopted by the SEC thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any Demand Party, make publicly
available such information), and it will take such further action as any Holder
of Registrable Securities (or, if the Company is not required to file reports
as provided above, any Demand Party) may reasonably request, all to the extent
required from time to time to enable such Holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the SEC.  Upon the
request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.  Notwithstanding anything
contained in this Section 6, the Company may deregister under Section 12
of the Exchange Act if it then is permitted to do so pursuant to the Exchange
Act and the rules and regulations thereunder.


 


7.             Selection
of Counsel.  In connection with any
registration of Registrable Securities pursuant to Section 2 or 3 hereof,
the Holders of a majority of the Registrable Securities covered by any such
registration may select one counsel to represent all Holders of Registrable
Securities covered by such registration; provided, however, that
in the event that the counsel selected as provided above is also acting as
counsel to the Company in connection with such registration, the remaining
Holders shall be entitled to select one additional counsel to represent all
such remaining Holders.


 


8.             Miscellaneous.  (a)  Other
Investors.  The Company may enter
into agreements with other purchasers or holders of Common Stock making them
parties hereto (and thereby giving them all, or a portion, of the rights,
preferences and privileges of an original party hereto) with respect to
additional shares of Common Stock (the “Supplemental Agreements”); provided,
however, that pursuant to any such Supplemental Agreement, such
purchaser expressly agrees to be bound by all of the terms, conditions and
obligations of this Agreement as if such purchaser were an original party
hereto.  All shares of Common Stock
issued or issuable pursuant to, or otherwise covered by, such Supplemental
Agreements shall be deemed to be Registrable Securities to the extent provided
therein.


 


(b)           Holdback
Agreement.  If any such registration
shall be in connection with an underwritten public offering, each Holder of
Registrable Securities agrees not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act, of any equity
securities of the Company, or of any security convertible into or exchangeable
or exercisable for any equity security of the Company (in each case, other than
as part of such underwritten public offering), within seven days before or such
period not to exceed 180 days as the underwriting agreement may require (or such
lesser period as the managing underwriters may permit) after the effective date
of such registration, and the Company hereby also so agrees and agrees to cause
each other holder of any equity security, or of any security convertible into
or exchangeable or exercisable for any equity security, of the Company
purchased from the Company (at any time other than in a public offering) to so
agree.


 


(c)           Amendments
and Waivers.  This Agreement 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
shall have obtained the written consent to such amendment, action or omission
to act, of the Holders of a majority of the Registrable Securities


 


12

















 


then
outstanding; provided, however, that no amendment, waiver or
consent to the departure from the terms and provisions of this Agreement that
is adverse to the Investor or any of its successors and assigns shall be
effective as against such Person for so long as such Person holds any
Registrable Securities unless consented to in writing by such Person.  Each Holder of any Registrable Securities at
the time or thereafter outstanding shall be bound by any consent authorized by this
Section 8(c), whether or not such Registrable Securities shall have been
marked to indicate such consent.


 


(d)           Successors,
Assigns and Transferees.  This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.  In addition, and whether or not any express assignment shall have
been made, the provisions of this Agreement which are for the benefit of the
parties hereto other than the Company shall also be for the benefit of and enforceable
by any subsequent Holder of any Registrable Securities, subject to the
provisions contained herein.  Without
limitation to the foregoing, in the event that the Investor or any of its
successors or assigns or any other subsequent Holder of any Registrable
Securities distributes or otherwise transfers any shares of the Registrable
Securities to any of its present or future shareholders, members, or general or
limited partners, the Company hereby acknowledges that the registration rights
granted pursuant to this Agreement shall be transferred to such shareholders,
members or general or limited partners on a pro rata basis, and that at or
after the time of any such distribution or transfer, any such shareholder,
member, general or limited partner or group of shareholders, members or general
or limited partners may designate a Person to act on its behalf in delivering
any notices or making any requests hereunder.


 


(e)           Notices.  All notices and other communications
provided for hereunder shall be in writing and shall be sent by first class
mail, telex, telecopier or hand delivery:


 


	
  If to the Company:

  	
   

  	
  Sealy Corporation

  
	
   

  	
   

  	
  One Office Parkway

  
	
   

  	
   

  	
  Trinity, North Carolina 27370

  
	
   

  	
   

  	
  Attention: Kenneth L. Walker

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Simpson Thacher & Bartlett LLP

  
	
  (which shall not

  constitute notice)

  	
   

  	
  425 Lexington Avenue

  New York, New York 10017

  
	
   

  	
   

  	
  Attention:

  	
  David J. Sorkin, Esq.

  
	
   

  	
   

  	
   

  	
  Sean D. Rodgers, Esq.

  
	
   

  	
   

  	
  Facsimile:

  	
  (212) 455-2502

  
	
   

  	
   

  	
   

  
	
  If to the Investor:

  	
   

  	
  Sealy Holding LLC

  
	
   

  	
   

  	
  c/o Kohlberg Kravis Roberts & Co. L.P.

  
	
   

  	
   

  	
  9 West 57th Street

  
	
   

  	
   

  	
  New York, New York 10019

  



 


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  with copies to:

  	
   

  	
  Simpson Thacher & Bartlett LLP

  
	
  (which shall not

  constitute notice)

  	
   

  	
  425 Lexington Avenue

  New York, New York 10017

  
	
   

  	
   

  	
  Attention:

  	
  David J. Sorkin, Esq.

  
	
   

  	
   

  	
   

  	
  Sean D. Rodgers, Esq.

  
	
   

  	
   

  	
  Facsimile:

  	
  (212) 455-2502

  



 


If to any other holder of Registrable Securities, to the address of
such other holder as shown in the stock record book of the Company, or to such
other address as any of the above shall have designated in writing to all of
the other above.


 


All such notices and communications shall be deemed to have been given
or made (A) when delivered by hand, (B) five business days after being
deposited in the mail, postage prepaid or (C) when telecopied, receipt
acknowledged.


 


(f)            Descriptive
Headings.  The headings in this
Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning of terms contained herein.


 


(g)           Severability.  In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions, paragraphs,
words, clauses, phrases or sentences hereof shall not be in any way impaired,
it being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.


 


(h)           Counterparts.  This Agreement may be executed in
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument.


 


(i)            Governing
Law; Submission to Jurisdiction. 
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York.  The parties to this Agreement hereby agree to submit to the
jurisdiction of the courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate courts
from any thereof in any action or proceeding arising out of or relating to this
Agreement.


 


(j)            Specific
Performance.  The parties hereto
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. 
Accordingly, it is agreed that they shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any
other remedy to which they may be entitled at law or in equity.


 


14

















 


IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
or caused this Agreement to be duly executed on its behalf as of the date first
written above.


 


	
   

  	
  SEALY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kenneth L. Walker

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  SEALY HOLDING LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian F. Carroll

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


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