Document:

Exhibit 4.7

FORM OF

STOCK OPTION AGREEMENT

 

 

THIS AGREEMENT, dated as of
______ __, 200_ (the “Grant Date”) is made by and between Sealy
Corporation, a Delaware corporation (hereinafter referred to as the “Company”),
and the individual whose name is set forth on the signature page hereof, who is  an employee of the Company or a Subsidiary
or Affiliate of the Company, hereinafter referred to as the “Optionee”.  Any capitalized terms herein not otherwise
defined in Article I shall have the meaning set forth in the Plan (as
hereinafter defined).

WHEREAS, the Company wishes
to carry out the Plan, the terms of which are hereby incorporated by reference
and made a part of this Agreement; and

WHEREAS, the Committee,
appointed to administer the Plan, has determined that it would be to the
advantage and best interest of the Company and its shareholders to grant the
Option provided for herein to the Optionee as an incentive for increased
efforts during his term of office with the Company or its Subsidiaries or
Affiliates, and has advised the Company thereof and instructed the undersigned
officers to issue said Option;

NOW, THEREFORE, in
consideration of the mutual covenants herein contained and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto do hereby agree as follows:

ARTICLE I

DEFINITIONS

 

Whenever the following terms
are used in this Agreement, they shall have the meaning specified below unless
the context clearly indicates to the contrary.

Section 1.1.    — Cause

 

“Cause” shall mean “Cause”
as such term may be defined in any employment agreement between the Optionee
and the Company or any of its Subsidiaries or Affiliates, or, if there is no
such employment agreement, “Cause” shall mean: (a) the Optionee’s willful
and continued failure to perform his or her material duties with respect to the
Company or it Subsidiaries which continues beyond 10 days after a written
demand for substantial performance is delivered to the Optionee by the Company
(the “Cure Period”), (b) the willful or intentional engaging by the
Optionee in conduct that causes material and demonstrable injury, monetarily or
otherwise, to the Company and its Affiliates, (c) the Optionee’s commission of
any indictable offense which carries a maximum penalty of imprisonment, or (d)
a material breach of the Optionee’s Management Stockholder’s Agreement or other
agreements, if any, including, without limitation, engaging in any action in
breach of the restrictive covenants as set forth therein, which continues beyond
the Cure Period (to the extent that, in the Board’s reasonable judgment, such
breach can be cured).

 

 

Section
1.2.    — Change in Control

“Change in Control” means
(i) the sale of all or substantially all of the assets of the Company to an
Unaffiliated Person; (ii) a sale by the Company, the Investor or any of their
respective affiliates resulting in more than 50% of the voting stock of the
Company being held by a person or group (as such terms are used in the
Securities Exchange Act of 1934, as amended) that does not include the Investor
or any of their respective affiliates; (iii) a merger, consolidation,
recapitalization or reorganization of the Company with or into an Unaffiliated
Person; if and only if any such
event listed in clauses (i) through (iii) above results in the inability of
KKR, the Investor, or any member or members of the Investor, to designate or
elect a majority of the Board (or the board of directors of the resulting
entity or its parent company).  For
purposes of this definition, the term “Unaffiliated Person” means any
Person or Group who is not (x) KKR, the Investor or any member of the Investor,
(y) an Affiliate of KKR, the Investor or any member of the Investor, or (z) an
entity in which KKR, the Investor, or any member of the Investor holds,
directly or indirectly, a majority of the economic interests in such entity.

Section
1.3.    — Committee

“Committee” shall
mean the Human Resources Committee of the Board of Directors of the Company.

Section
1.4.    — Fiscal Year

“Fiscal Year” shall mean
each fiscal year of the Company (which, for the avoidance of doubt, ends on or
about November 30 of any given calendar year).

Section 1.5.    —
Investor

“Investor” means Sealy
Holding LLC.

Section
1.6.    — KKR

“KKR” means the KKR Millennium
Fund L.P.

Section
1.7.    — Management
Stockholder’s Agreement

“Management Stockholder’s
Agreement” shall mean that certain Management Stockholder’s Agreement dated as
of _______ [__], 200_ between the Optionee and the Company.

Section
1.8.    — Option

“Option” shall mean the
aggregate of the Time Option and the Performance Option granted under Section
2.1 of this Agreement.

 

2

 

Section 1.9.    — Permanent
Disability

“Permanent Disability” shall
mean the Optionee becomes physically or mentally incapacitated and is therefore
unable for a period of six (6) consecutive months to perform substantially all
of the material elements of the Optionee's duties with the Company or any
Subsidiary or Affiliate thereof.  Any question
as to the existence of the Permanent Disability of the Optionee as to which the
Optionee and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to the Optionee and the
Company.  If the Optionee and the
Company cannot agree as to a qualified independent physician, each shall
appoint such a physician and those two physicians shall select a third who
shall make such determination in writing. 
The determination of Permanent Disability made in writing to the Company
and the Optionee shall be final and conclusive for all purposes of this
Agreement (such inability is hereinafter referred to as “Permanent Disability”
or being “Permanently Disabled”).

Section 1.10.    — Performance Option

“Performance Option” shall
mean the right and option to purchase, on the terms and conditions set forth
herein, all or any part of an aggregate of the number of shares of Common Stock
set forth on the signature page hereof opposite the term Performance Option.

Section 1.11.    —
Plan

“Plan” shall mean the 2004
Stock Option Plan for Key Employees of Sealy Corporation and Its Subsidiaries.

Section 1.12.    — Qualified
Retirement

Qualified
Retirement shall mean a retirement from the Company meeting all of the
following criteria: (a) the Optionee has been continually employed by the
Company from the date hereof through May 1, 2006, (b) the Optionee has notified
the Company of such retirement at least one year prior to such retirement, (c)
the Optionee is at least 58 years of age and (d) the Optionee has reached
a total combined years of age and service (since such Optionee’s most recent
hire date) which totals at least 74 (calculated on a monthly basis).

Section
1.13.    — Secretary

“Secretary”
shall mean the Secretary of the Company.

Section 1.14.    — Time
Option

“Time Option” shall mean the
right and option to purchase, on the terms and conditions set forth herein, all
or any part of an aggregate of the number of shares of Common Stock set forth
on the signature page hereof opposite the term Time Option.

 

 

3

 

ARTICLE II

GRANT OF
OPTIONS

Section 2.1.    — Grant
of Options

For good and valuable
consideration, on and as of the date hereof the Company irrevocably grants to
the Optionee (i) a Time Option to purchase any part or all of an aggregate of
the number of shares set forth on the signature page hereof of its Common Stock
upon the terms and conditions set forth in this Agreement and (ii) a
Performance Option to purchase any part or all of an aggregate of the number of
shares set forth on the signature page hereof of its Common Stock upon the
terms and conditions set forth in this Agreement.  The Option shall consist of a Time Option and a Performance
Option.

Section 2.2.    — Exercise
Price

Subject to Section 2.4, the
exercise price of the shares of Common Stock covered by the Option shall be
$5.00 per share (the “Base Price”) without commission or other charge
(which is the Fair Market Value per share of the Common Stock on the Grant
Date).

Section 2.3.    —
No Guarantee of Employment

Nothing in this Agreement or
in the Plan shall confer upon the Optionee any right to continue in the employ
of the Company or any Subsidiary or Affiliate or shall interfere with or
restrict in any way the rights of the Company and its Subsidiaries or
Affiliates, which are hereby expressly reserved, to terminate the employment of
the Optionee at any time for any reason whatsoever, with or without cause,
subject to the applicable provisions of, if any, the Optionee’s employment
agreement with the Company or offer letter provided by the Company to the
Optionee.

Section 2.4.    — Adjustments
to Option

Subject
to Sections 8 and 9 of the Plan, in the event that the outstanding shares of
the stock subject to the Option, are, from time to time, changed into or
exchanged for a different number or kind of shares of the Company or other
securities by reason of a merger, consolidation, recapitalization,
reclassification, stock split, spin-off, stock dividend, combination of shares,
or other corporate event, the Committee shall make, as appropriate and
equitable, an adjustment in the number and kind of shares and/or the amount of
consideration as to which or for which, as the case may be, such Option, or
portions thereof then unexercised, shall be exercisable, and the Committee may,
as it deems appropriate and equitable, pay to the Optionee an amount in respect
of the shares of Common Stock subject to the Option, with such conditions or
limitations as the Committee may deem reasonable and necessary to preserve the
economic value of the Option.  Any such
adjustment made by the Committee shall be final and binding upon the Optionee,
the Company and all other interested persons.

4

 

ARTICLE III

PERIOD OF EXERCISABILITY

 

Section 3.1.    —
Commencement of Exercisability

(a)           So long as the Optionee continues to be employed by the
Company or any of its Subsidiaries or Affiliates, the Option shall become
exercisable pursuant to the following schedules:

(i)            Time Option.  The Time Option shall become vested and
exercisable ratably on a monthly basis for the five-year period, beginning on
the Grant Date.

(ii)           Performance Option.  The Performance Option shall become vested
and exercisable as to 100% of the shares subject to such option on the eighth
anniversary of the Grant Date; provided, however, that the
exercisability of the Performance Option will be accelerated as to 20% of the
shares of Common Stock subject to such Option at the end of each of the first
five Fiscal Years occurring after the Grant Date, if and only if the Company achieves the EBITDA performance
targets set forth on Schedule A attached hereto (each, an “Annual
Performance Target”).  In the event
that an Annual Performance Target is not achieved in a particular Fiscal Year,
the vesting of the Performance Option shall accelerate if the subsequent Annual
Performance Target(s) are achieved, such that the Performance Option shall vest
as if all prior Annual Performance Targets had been met.

(b)           Notwithstanding the foregoing, (i) the Time Option shall
become immediately exercisable as to 100% of the shares of Common Stock subject
to such option immediately prior to a Change in Control (but only to the extent
such option has not otherwise terminated or become exercisable) and (ii) the
Performance Option shall become immediately exercisable as to 100% of the
shares of Common Stock subject to such option immediately prior to a Change in
Control (but only to the extent such option has not otherwise terminated or
become exercisable) if (x) the Annual Performance Targets have been achieved
for each of the prior Fiscal Years or on a “catch-up” basis or (y) as a result
of the Change in Control, (A) the Investor achieves a gross internal rate of
return of not less than 22.5% (on a fully diluted basis, assuming the inclusion
of all shares of Common Stock underlying all Options as determined in the sole
discretion of the Company) as determined by the Investor and (B) the Investor
earns at least 2.75 times the Base Price for each share of Common Stock held
(directly or indirectly) by it.  If a
Change in Control occurs during a Fiscal Year, the board of directors of the
Company will determine in good faith what percentage will become vested based
upon quarterly performance targets measuring EBITDA over the trailing twelve
month period.

(c)           Notwithstanding the foregoing, in the event of a
termination of the Optionee’s employment by reason of death or Permanent
Disability, all unvested Options will become immediately exercisable.

(d)           Notwithstanding the foregoing, no Option shall become
exercisable as to any additional shares of Common Stock (which does not
otherwise become exercisable in accordance with Section 3.1(a), (b) or (c)
above) following the termination of employment of the

 

5

 

 Optionee for
any reason and any Option, which is unexercisable as of the Optionee’s
termination of employment, shall be immediately cancelled without payment
therefor.

Section 3.2.    —
Expiration of Option

Except as otherwise provided
in Section 5 or 6 of the Management Stockholder’s Agreement, the Optionee may
not exercise the Option to any extent after the first to occur of the following
events:

(a)           The tenth anniversary of the Grant Date; or

(b)           The first anniversary of the date of the Optionee’s
termination of employment, if the Optionee’s employment is terminated by reason
of death or Permanent Disability (unless earlier terminated as provided in
Section 3.2(e) below); or

(c)           Immediately upon the date of the Optionee’s termination of
employment by the Company or its Subsidiaries or Affiliates for Cause; or

(d)           Thirty (30) days after the date of an Optionee’s
termination of employment by the Company or any of its Subsidiaries or
Affiliates without Cause (for any reason other than as set forth in Section
3.2(b)); or

(e)           The date the Option is terminated pursuant to Section 5 or
6 of the Management Stockholder’s Agreement; or

(f)            Thirty (30) days after the date of an Optionee’s
termination of employment by the Optionee; or

(g)           One Hundred and Eighty (180) days after the date of an
Optionee’s Qualified Retirement from the Company or any of its Subsidiaries; or

(h)           At the discretion of the Company, if
the Committee so determines pursuant to Section 9 of the Plan, the effective
date of either the merger or consolidation of the Company into another Person,
or the exchange or acquisition by another Person of all or substantially all of
the Company’s assets or 80% or more of its then outstanding voting stock, or
the recapitalization, reclassification, liquidation, dissolution or other
corporate event of the Company after (x) ten (10) days prior written notice to
the Optionee that the Company intends to exercise such discretion and an
opportunity for the Optionee to exercise his Options, (y) payment to the
Optionee in respect of the termination of his Options, or (z) an opportunity
for the Executive to rollover his Options into new stock options, in connection
with such transaction.

ARTICLE IV

EXERCISE OF OPTION

 

Section 4.1.    — Person
Eligible to Exercise

 

6

 

Except as otherwise provided
in the Management Stockholder’s Agreement, during the lifetime of the Optionee,
only he may exercise an Option or any portion thereof.  After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when an Option becomes
unexercisable under Section 3.2, be exercised by his personal representative or
by any person empowered to do so under the Optionee’s will or under the then
applicable laws of descent and distribution.

Section 4.2.    —
Partial Exercise

Any exercisable portion of
an Option or the entire Option, if then wholly exercisable, may be exercised in
whole or in part at any time prior to the time when the Option or portion
thereof becomes unexercisable under Section 3.2; provided, however,
that any partial exercise shall be for whole shares of Common Stock only.

Section 4.3.    —
Manner of Exercise

An Option, or any
exercisable portion thereof, may be exercised solely by delivering to the
Secretary or his office all of the following prior to the time when the Option
or such portion becomes unexercisable under Section 3.2:

(a)           Notice in writing signed by the Optionee or the other
person then entitled to exercise the Option or portion thereof, stating that
the Option or portion thereof is thereby exercised, such notice complying with
all applicable rules established by the Committee;

(b)           Full payment (in cash or by check or by a combination
thereof) for the shares with respect to which such Option or portion thereof is
exercised;

(c)           A bona fide written representation and agreement, in a
form satisfactory to the Committee, signed by the Optionee or other person then
entitled to exercise such Option or portion thereof, stating that the shares of
Common Stock are being acquired for his own account, for investment and without
any present intention of distributing or reselling said shares or any of them
except as may be permitted under the Securities Act of 1933, as amended (the “Act”),
and then applicable rules and regulations thereunder, and that the Optionee or
other person then entitled to exercise such Option or portion thereof will
indemnify the Company against and hold it free and harmless from any loss,
damage, expense or liability resulting to the Company if any sale or
distribution of the shares by such person is contrary to the representation and
agreement referred to above; provided, however, that the
Committee may, in its reasonable discretion, take whatever additional actions
it deems reasonably necessary to ensure the observance and performance of such
representation and agreement and to effect compliance with the Act and any
other federal or state securities laws or regulations;

(d)           Full payment to the Company of all amounts which, under
federal, state or local law, it is required to withhold upon exercise of the
Option; and

(e)           In the event the Option or portion thereof shall be
exercised pursuant to Section 4.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the option.

 

7

 

Without limiting the
generality of the foregoing, the Committee may require an opinion of counsel
acceptable to it to the effect that any subsequent transfer of shares acquired
on exercise of an Option does not violate the Act, and may issue stop-transfer
orders covering such shares.  Share
certificates evidencing stock issued on exercise of this Option shall bear an
appropriate legend referring to the provisions of subsection (c) above and the
agreements herein. The written representation and agreement referred to in
subsection (c) above shall, however, not be required if the shares to be issued
pursuant to such exercise have been registered under the Act, and such
registration is then effective in respect of such shares.

Section 4.4.    —
Conditions to Issuance of Stock Certificates

The shares of stock
deliverable upon the exercise of an Option, or any portion thereof, may be
either previously authorized but unissued shares or issued shares, which have
then been reacquired by the Company. 
Such shares shall be fully paid and nonassessable.  The Company shall not be required to issue
or deliver any certificate or certificates for shares of stock purchased upon
the exercise of an Option or portion thereof prior to fulfillment of all of the
following conditions:

(a)           The obtaining of approval or other clearance from any
state or federal governmental agency which the Committee shall, in its reasonable
and good faith discretion, determine to be necessary or advisable; and

(b)           The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience or as may otherwise be required by
applicable law.

Section 4.5.    —
Rights as Stockholder

Except
as otherwise provided in Section 2.4 of this Agreement, the holder of an Option
shall not be, nor have any of the rights or privileges of, a stockholder of the
Company in respect of any shares purchasable upon the exercise of the Option or
any portion thereof unless and until certificates representing such shares
shall have been issued by the Company to such holder.

ARTICLE V

MISCELLANEOUS

 

Section 5.1.    — Administration

The Committee shall have the
power to interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules.  All actions taken and all interpretations and determinations made
by the Committee shall be final and binding upon the Optionee, the Company and
all other interested persons.  No member
of the Committee shall be personally liable for any action, determination or interpretation
made in good faith with respect

 

8

 

 to the Plan or the Option. 
In its absolute discretion, the Board may at any time and from time to
time exercise any and all rights and duties of the Committee under the Plan and
this Agreement.

Section 5.2.    —
Option Not Transferable

Except as provided in the
Management Stockholder’s Agreement, neither the Option nor any interest or
right therein or part thereof shall be liable for the debts, contracts or engagements
of the Optionee or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect;
provided, however, that this Section 5.2 shall not prevent transfers by will or
by the applicable laws of descent and distribution.

Section 5.3.    —
Notices

Any notice to be given under
the terms of this Agreement to the Company shall be addressed to the Company in
care of its Secretary, and any notice to be given to the Optionee shall be
addressed to him at the address given beneath his signature hereto.  By a notice given pursuant to this Section
5.3, either party may hereafter designate a different address for notices to be
given to him.  Any notice, which is
required to be given to the Optionee, shall, if the Optionee is then deceased,
be given to the Optionee’s personal representative if such representative has
previously informed the Company of his status and address by written notice
under this Section 5.3.  Any notice
shall have been deemed duly given when enclosed in a properly sealed envelope
or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service.

Section 5.4.    — Titles;
Pronouns

Titles are provided herein
for convenience only and are not to serve as a basis for interpretation or
construction of this Agreement.  The
masculine pronoun shall include the feminine and neuter, and the singular the
plural, where the context so indicates.

Section 5.5.    —
Applicability of Plan and Management Stockholder’s Agreement

The Option and the shares of
Common Stock issued to the Optionee upon exercise of the Option shall be
subject to all of the terms and provisions of the Plan and the Management
Stockholder’s Agreement, to the extent applicable to the Option and such
shares.  In the event of any conflict
between this Agreement and the Plan, the terms of the Plan shall control.  In the event of any conflict between this
Agreement or the Plan and the Management Stockholder’s Agreement, the terms of
the Management Stockholder’s Agreement shall control.

Section 5.6.    —
Amendment

This Agreement may be
amended only by a writing executed by the parties hereto, which specifically
states that it is amending this Agreement.

 

9

 

Section 5.7.    — Governing
Law

The
laws of the State of Delaware shall govern the interpretation, validity and
performance of the terms of this Agreement regardless of the law that might be
applied under principles of conflicts of laws.

Section 5.8.    — Arbitration

In
the event of any controversy among the parties hereto arising out of, or
relating to, this Agreement which cannot be settled amicably by the parties,
such controversy shall be finally, exclusively and conclusively settled by
mandatory arbitration conducted expeditiously in accordance with the American
Arbitration Association rules, by a single independent arbitrator.  Such arbitration process shall take place
within 100 miles of the New York City metropolitan area.  The decision of the arbitrator shall be
final and binding upon all parties hereto and shall be rendered pursuant to a
written decision, which contains a detailed recital of the arbitrator’s
reasoning.  Judgment upon the award
rendered may be entered in any court having jurisdiction thereof.  Each party shall bear its own legal fees and
expenses, unless otherwise determined by the arbitrator.

[Signatures on next page.]

 

 

10

 

IN WITNESS WHEREOF, this Agreement has been
executed and delivered by the parties hereto.

 

 

 

	
   

  	
  SEALY CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  

 

11

 

	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIELD 1

  
	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  
	
   

  	
   

  

 

 

	
   

  	
   

  	
   

  
	
  Aggregate number of shares of Common Stock

  	
   

  	
   

  
	
  for which the Time Option
  granted hereunder is

  	
   

  	
   

  
	
  exercisable (100% of number of shares):

  	
   

  	
  FIELD 2

  
	
   

  	
   

  	
   

  
	
  Aggregate number of shares of Common Stock

  	
   

  	
   

  
	
  for which the Performance Option
  granted

  	
   

  	
   

  
	
  hereunder is exercisable (100% of number of

  	
   

  	
   

  
	
  shares):

  	
   

  	
  FIELD 3

  
	
   

  	
   

  	
   

  
	
  Base Price:

  	
   

  	
  $5.00 per share

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
  _______ __, 200_

  

 

12Exhibit
4.8

FORM
OF

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS
AGREEMENT, dated as of April__, 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 _________ 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
registration under Section 3 hereof), in a manner which would permit
registration of Registrable 

1

 

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 under the Securities Act of all or part of such Demand Party’s
Registrable Securities and 

 

3

 

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.

(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 

 

4

 

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, provided,
however, that the Company may discontinue any registration of its
securities 

 

 

5

 

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 statements therein not misleading in the light of the
circumstances then existing, and at 

 

 

6

 

 

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 prospectus
shall have been filed, (B) of the receipt of any comments from the SEC, (C) of

 

 

7

 

 

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.

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, 

 

8

 

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 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 

 

 

9

 

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 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 

 

 

10

 

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 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 

 

 

11

 

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 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 

 

12

 

 

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:

  (which shall not

  constitute notice)

  	
   

  	
  Simpson Thacher & Bartlett LLP

  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

  

 

 

13

 

	
  with copies to:

  (which shall not

  constitute notice)

  	
   

  	
  Simpson Thacher & Bartlett LLP

  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:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SEALY
  HOLDING LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

15

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