Exhibit 9.1
EXECUTION COPY
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT is dated as of August 6, 1999, by and
among Mattress Discounters Holding Corporation, a Virginia corporation (the
"Company"); Mattress Discounters Holding L.L.C., a Delaware limited liability
company ("Holdings"); ▇▇▇▇▇▇-▇▇▇▇▇▇ Company, a Virginia corporation ("▇▇▇▇▇▇");
and certain other stockholders of the Company who are from time to time party
hereto (Holdings, ▇▇▇▇▇▇ and such other stockholders together with their
respective Permitted Transferees, collectively, the "Stockholders" and
individually a "Stockholder").
On May 28, 1999, the Company, MD Acquisition Corporation, a
transitory Virginia merger corporation ("MD Acquisition"), and ▇▇▇▇▇▇ entered
into a Transaction Agreement pursuant to which, simultaneous with the execution
of this Agreement, MD Acquisition merged with and into the Company (such merger,
the "Merger") with the Company as the surviving corporation.
Immediately prior to the execution of this Agreement, Holdings
purchased a number of shares of MD Acquisition's common stock ("MD Acquisition
Shares"). In connection with the Merger (i) the shares of the Company's common
stock owned by ▇▇▇▇▇▇ have been converted into a Junior Subordinated Promissory
Note, the right to receive cash, and a number of retained shares of the
Company's Common Stock and (ii) the MD Acquisition Shares have been converted
into a number of new shares of the Company's Common Stock.
The Company and the Stockholders desire to enter into this Agreement
for the purposes, among others, of (i) establishing the composition of the Board
(as defined below), (ii) assuring continuity in the management and ownership of
the Company and (iii) limiting the manner and terms by which the Stockholder
Shares (as defined below) may be transferred.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings:
"Affiliate" means, when used with reference to a specified Person,
any Person that directly or indirectly controls or is controlled by or is under
common control with the specified Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or
partnership or other ownership interests, by contract or otherwise). With
respect to any Person who is an individual, "Affiliates" shall also include,
without limitation, any member of such individual's Family Group. With respect
to any Person who is a partnership, "Affiliates" shall also include, without
limitation, each general partner and limited partner of such Person.
Notwithstanding the foregoing, for purposes of this Agreement, any Person who is
an administrative member of a limited liability company and who owns less than
10% of such limited liability company's membership interests shall not be deemed
to be an Affiliate of such limited liability company.
"Bain Entities" means, collectively, ▇▇▇▇ Capital Fund VI, L.P.
("Bain Fund VI"), BCIP Associates II, BCIP Associates II-B, BCIP Trust
Associates II and/or BCIP Trust Associates II-B or any of their respective
Affiliates.
"Bain Fund" means any of Bain Fund VI, BCIP Associates II, BCIP
Associates II-B, BCIP Trust Associates II, BCIP Trust Associates II-B, or
▇▇▇▇▇▇▇▇.
"Board" means the Company's board of directors.
"Chase" means Chase Equity Associates, L.P. and its Permitted
Transferees.
"Class A Common" means the Company's Class A Common Stock, par value
$.01 per share.
"Class B Common" means the Company's Class B Common Stock, par value
$.01 per share.
"Class L Common" means the Company's Class L Common Stock, par value
$.01 per share.
"Class M Common" means the Company's Class M Common Stock, par value
$.01 per share.
"Common Stock" means collectively Class A Common, Class B Common,
Class L Common, Class M Common and any other common stock authorized by the
Company.
"Family Group" means, with respect to any Person who is an
individual, (i) such Person's spouse, former spouse and descendants (whether
natural or adopted), parents and their descendants and any spouse of the
foregoing persons (collectively, "relatives") or (ii) the trustee, fiduciary or
personal representative of such Person, in such capacity, and any trust solely
for the benefit of such Person and/or such Person's relatives.
"Harvard" means Harvard Private Capital Holdings, Inc. or any of its
Permitted Transferees.
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"▇▇▇▇▇▇ Holder" means ▇▇▇▇▇▇ or any of its Permitted Transferees.
"▇▇▇▇▇▇ Shares" means all Stockholder Shares issued or issuable to
any ▇▇▇▇▇▇ Holder.
"Holdings Holder" means Holdings or any of its Permitted
Transferees.
"Holdings Shares" means all Stockholder Shares issued or issuable to
any Holdings Holder.
"Other Stockholders" means, with respect to a Stockholder, all
Stockholders other than such Stockholder.
"Permitted Transferee" has the meaning set forth in Section 4(d)(ii)
hereof.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"Public Offering" means an underwritten public offering and sale of
the Common Stock pursuant to an effective registration statement under the
Securities Act; provided that a Public Offering shall not include an offering
made in connection with a business acquisition or combination or an employee
benefit plan.
"Public Sale" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
pursuant to the provisions of Rule 144 (or any similar rule or rules then in
effect) under the Securities Act.
"Qualified Public Offering" means a Public Offering in which the
Company receives aggregate gross proceeds of at least $30 million.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Stockholder Shares" means (i) all shares of Common Stock held,
directly or indirectly, by the Stockholders, (ii) any warrants, options or other
rights to subscribe for or to acquire, directly or indirectly, any Common Stock,
purchased or otherwise acquired by any Stockholder, whether or not then
exercisable or convertible, (iii) any stock or other securities which are
convertible into or exchangeable for, directly or indirectly, Common Stock,
purchased or otherwise acquired by any Stockholder, whether or not then
convertible or exchangeable, and (iv) all equity securities issued or issuable
directly or indirectly with respect to any Common Stock
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referred to in clauses (i), (ii) and (iii) above by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular shares
constituting Stockholder Shares, such shares will cease to be Stockholder Shares
when they have been Transferred in a Public Sale or repurchased by the Company
or any of its Subsidiaries. References in this Agreement to a majority of, or a
certain percentage of, the Stockholder Shares shall be deemed to be references
to a majority of the Common Stock represented by the Stockholder Shares or a
certain percentage of the Common Stock represented by the Stockholder Shares,
calculated on a fully-diluted basis, as applicable.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, limited liability
company, association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes hereof, a Person or Persons shall
be deemed to have a majority ownership interest in a partnership, limited
liability company, association or other business entity if such Person or
Persons shall be allocated a majority of partnership, limited liability company,
association or other business entity gains or losses or shall be or control the
managing director, managing member, manager or a general partner of such
partnership, limited liability company, association or other business entity.
"Transfer" means any voluntary or involuntary, direct or indirect
sale, transfer, conveyance, assignment, pledge, hypothecation, gift, delivery or
other disposition. Notwithstanding the foregoing, the conversion by any
Stockholder of any shares of any class of Common Stock into any other class of
Common Stock shall not be deemed a "Transfer" for purposes of this Agreement,
provided that such Stockholder continues to own such converted shares
immediately after such conversion.
"Unaffiliated Third Party" means any Person who, immediately prior
to the contemplated transaction, (i) is not a Person who directly or indirectly
owns in excess of 5% of the outstanding shares of Common Stock on a
fully-diluted basis (a "5% Owner"), (ii) is not controlling, controlled by or
under common control with any such 5% Owner and (iii) is not the spouse or
descendent (by birth or adoption) of any such 5% Owner or a trust for the
benefit of such 5% Owner and/or such other Persons.
2. Board of Directors.
(a) To the extent permitted by law, each Stockholder shall vote all
voting securities of the Company over which such Stockholder has voting control,
and shall take all other necessary or desirable actions within such
Stockholder's control (whether in such Stockholder's
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capacity as a stockholder, director, member of a board committee or officer of
the Company or otherwise, and including, without limitation, attendance at
meetings in person or by proxy for purposes of obtaining a quorum and execution
of written consents in lieu of meetings), and the Company shall take all
necessary and desirable actions within its control (including, without
limitation, calling special board and shareholder meetings), so that:
(i) the authorized number of directors of the Board shall be five;
(ii) so long as the Bain Entities are a beneficial owner (directly
or indirectly) of Stockholder Shares, then the Bain Entities will
designate four representatives from time to time (each a "Bain Director")
(with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇.
▇▇▇▇▇▇▇▇ serving as the initial Bain Directors);
(iii) prior to the consummation of an initial Public Offering, so
long as Harvard and its Affiliates (and not any of their respective
assigns) is the beneficial owner (directly or indirectly) of at least 5%
of the outstanding shares of Common Stock, then Harvard and its Affiliates
who beneficially own Stockholder Shares (and not any of their respective
assigns) will designate one representative from time to time (the "Harvard
Director") (with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ serving as the initial Harvard
Director);
(iv) notwithstanding Section 9 of Bylaw III of the Company's
by-laws, any director designated pursuant to clause (ii) through (iii)
above shall be removed from the Board or any committee thereof (with or
without cause) at the written request of the Person or Persons which have
the right to designate such director hereunder, but only upon such written
request and under no other circumstances (in each case, determined on the
basis specified in clause (ii) or (iii) above, as the case may be);
(v) if any director designated hereunder for any reason ceases to
serve as a member of the Board or any committee thereof during such
director's term of office, the resulting vacancy on the Board or committee
shall be filled by a director designated by the Persons referred to in
clause (ii) or (iii) above, as the case may be, and each Stockholder
hereby agrees promptly to consent in writing or vote or cause to be voted
all Stockholder Shares owned or controlled by it to elect that individual
so designated to fill such vacancy and serve as a director;
(vi) at the Board's election, the composition of the board of
directors (or any similar governing body) of any of the Company's wholly
owned Subsidiaries (a "Sub Board") shall be the same as the Board or as
otherwise determined by the Board; and
(vii) no executive committee of the Board shall have the authority
to (1) declare dividends of the Company, (2) authorize the issuance of
capital stock of the Company (other than to directors, officers or
employees of the Company and its Subsidiaries pursuant to benefit plans),
(3) authorize the execution by the Company of any merger, consolidation or
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recapitalization agreement or any agreement to sell all or substantially
all of the assets of the Company, (4) authorize the refinancing of any of
the material indebtedness for borrowed money of the Company and its
Subsidiaries, (5) authorize any material acquisition of another Person or
substantially all of the assets of another Person, (6) authorize the
creation of any material Subsidiary of the Company which is not directly
or indirectly wholly-owned by the Company, or (7) authorize capital
expenditures individually or in the aggregate during any applicable period
$10 million in excess of the capital expenditures provided for in the
applicable budget or budgets of the Company and its Subsidiaries approved
by the Board. For purposes of this clause (vii), the terms "material" and
"materially" shall refer to an amount or a valuation in excess of $50
million.
(b) The Company shall reimburse or cause to be reimbursed the
directors of the Board or any Sub Board for all reasonable out-of-pocket
expenses borne by such directors in connection with the performance of their
duties as directors of the Company. In addition, the Company shall pay or cause
to be paid such additional compensation to the directors of the Company who are
not employees of the Company or any of its Subsidiaries or any Stockholder or
any Affiliate of any Stockholder as the Board so determines.
(c) If any party fails to designate in writing a representative to
fill a director position pursuant to the terms of this Section 2, the election
of a Person to such director position shall be accomplished in accordance with
the Company's Articles of Incorporation and by-laws and applicable law
(provided, that such party may subsequently remove and replace such person). If,
at any time, any provision of the Company's Articles of Incorporation or by-laws
is inconsistent with the requirements of any provision of this Section 2, the
Stockholders shall take such action as may be necessary to amend any such
provision in the Company's Articles of Incorporation or by-laws, as the case may
be, to conform with such requirements.
(d) Prior to the consummation of an initial Public Offering and so
long as (i) no Affiliate of Chase or employee of Chase or any of its Affiliates
is a director of the Company and (ii) Chase and its Affiliates (and not any of
their respective assigns) is the beneficial owner (directly or indirectly) of at
least 5% of the outstanding shares of Common Stock, the Company shall give Chase
written notice of each meeting of the Board (and any committees thereof), at the
same time and in the same manner as notice is given to the directors of the
Board and the Company shall permit a representative of Chase (the "Chase
Observer") to attend, as an observer, all such meetings unless attendance at
such meeting, in the Company's reasonable judgment, would create a conflict of
interest for Chase; provided, that in the case of telephonic meetings, Chase
need receive only actual notice thereof at the same time and in the same manner
as notice is given to the directors of the Board and the Chase Observer shall be
given the opportunity to listen to such telephonic meetings. The Chase Observer
shall be entitled to receive all written materials and other information
(including, without limitation, copies of meeting minutes) given to directors of
the Board in connection with such meetings at the same time such materials and
information are given to such directors unless receipt of such materials would
create, in the Company's reasonable judgment, a conflict of interest for Chase.
The Company shall give written notice of any action by written
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consent in lieu of a meeting of directors of the Company to Chase prior to the
effective date of such consent describing in reasonable detail the nature and
substance of such action.
3. Representations and Warranties; Conflicting Agreements. Each
Stockholder, severally and not jointly, represents and warrants that (a)
effective as of the date hereof such Stockholder is the record owner of the
number of Stockholder Shares set forth opposite its name on Schedule A attached
hereto, (b) this Agreement has been duly authorized, executed and delivered by
such Stockholder and constitutes the valid and binding obligation of such
Stockholder, enforceable in accordance with its terms, and (c) such Stockholder
has not granted and is not a party to any proxy, voting trust or other agreement
which is inconsistent with, violates or conflicts with the provisions of this
Agreement. No holder of Stockholder Shares shall grant any proxy or become party
to any voting trust or other agreement which is inconsistent with, violates or
conflicts with the provisions of this Agreement.
4. Restrictions on Transfer of Stockholder Shares.
(a) General Restrictions.
(i) Prior to the earlier of (x) the second anniversary of the date
hereof and (y) the first day after the period commencing on the date
hereof and ending on the day the Company's financial statements are filed
with the SEC for the first full fiscal quarter after the Company issues
any securities to the public pursuant to a filing with the SEC, subject to
Section 7 hereof, a ▇▇▇▇▇▇ Holder may Transfer Stockholder Shares only (A)
if such ▇▇▇▇▇▇ Holder is exercising a tag-along right granted to such
▇▇▇▇▇▇ Holder pursuant to Section 4(b), then to any Person, provided, that
such Person shall have complied with the requirements of Section 4(d)(ii),
or (B) pursuant to the terms of Section 5.
(ii) On or after the earlier of (x) the second anniversary of the
date hereof and (y) the first day after the period commencing on the date
hereof and ending on the day the Company's financial statements are filed
with the SEC for the first full fiscal quarter after the Company issues
any securities to the public pursuant to a filing with the SEC, subject to
Section 7 hereof, a ▇▇▇▇▇▇ Holder may Transfer Stockholder Shares only (A)
if such ▇▇▇▇▇▇ Holder has complied with the terms and requirements of
Section 4(c) or if such ▇▇▇▇▇▇ Holder is exercising a tag-along right
granted to such ▇▇▇▇▇▇ Holder pursuant to Section 4(b), then to any
Person, provided, that such Person shall have complied with the
requirements of Section 4(d)(ii), or (B) pursuant to the terms of Section
5; provided, further, that, prior to the date described in (y) above, a
▇▇▇▇▇▇ Holder may Transfer Stockholder Shares pursuant to subsection (A)
above prior to the fifth anniversary of the date hereof only if such
▇▇▇▇▇▇ Holder first confirms with the Company's outside accountants that
such Transfer would not pose a material risk to the recapitalization
accounting afforded to the transactions pursuant to which the initial
Stockholders acquired their Stockholder Shares.
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(iii) Subject to Section 7 hereof, a Holdings Holder may Transfer
Stockholder Shares only (A) if such Holdings Holder has complied with the
terms and requirements of Section 4(c), to the extent applicable, in
Public Sales, (B) if such Holdings Holder has complied with the terms and
requirements of Sections 4(b), 4(c) and 4(d), to the extent applicable, or
if such Holdings Holder is exercising a tag-along right granted to such
Holdings Holder pursuant to Section 4(b), then to any Person, provided,
that such Person shall have complied with the requirements of Section
4(d)(ii), or (C) pursuant to the terms of Section 5.
(b) Participation Rights. At least 10 business days prior to the
Transfer (or series of Transfers) by any Stockholder (a "Transferring
Stockholder") of Stockholder Shares representing more than 10% of the
outstanding Stockholder Shares held by such Stockholder (other than pursuant to
(i) a Public Sale or (ii) a Transfer under Section 4(c), Section 4(d) or Section
5), the Transferring Stockholder will deliver a written notice (the "Sale
Notice") to the Company and the Other Stockholders, specifying in reasonable
detail the identity of the prospective transferee(s), the Stockholder Shares to
be sold and the terms and conditions of the Transfer. If the Other Stockholders
hold shares of the class of Stockholder Shares to be transferred, they may elect
to participate in the contemplated Transfer by delivering written notice to the
Transferring Stockholder within 5 business days after delivery of the Sale
Notice.
If any Other Stockholders have elected to participate in such
Transfer ("Participating Stockholders"), the Transferring Stockholder and each
Participating Stockholder will be entitled to sell in the contemplated Transfer,
at the same price and on the same terms, a number of Stockholder Shares of such
class equal to the product of (i) the quotient determined by dividing the number
of Stockholder Shares of such class held by such Person by the aggregate number
of Stockholder Shares of such class owned by the Transferring Stockholder and
all Participating Stockholders and (ii) the aggregate number of Stockholder
Shares of such class to be sold in the contemplated Transfer; provided that for
purposes of the foregoing, (A) Stockholder Shares which have not vested (and
will not vest as a result of such transaction) or are subject to repurchase by
the Company for less than fair market value shall not be considered to be
Stockholder Shares and (B) all Stockholder Shares held by any Permitted
Transferee of any Other Stockholder shall be deemed held by such Other
Stockholder himself or itself; provided further that if the Transferring
Stockholder intends to Transfer a strip of two or more classes of Stockholder
Shares and any Other Stockholder (including his or its Permitted Transferees)
holds all such classes of Stockholder Shares, such Other Stockholder may only
participate in such Transfer if such Other Stockholder participates with respect
to all such classes of Stockholder Shares. The Transferring Stockholder shall
use its best efforts to obtain the agreement of the prospective transferee(s) to
the participation of the Participating Stockholders in any contemplated
Transfer, and the Transferring Stockholder shall not Transfer any of its
Stockholder Shares to the prospective transferee(s) unless (1) the prospective
transferee(s) agrees to allow the participation of the Participating
Stockholders or (2) the Transferring Stockholder agrees to purchase the number
of such class of Stockholder Shares from any Participating Stockholders which
the Participating Stockholders would have been entitled to sell pursuant to this
Section 4(b). Each Stockholder participating in any transaction pursuant to this
Section 4(b) shall
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be required to bear its pro rata share (based upon the number of shares sold) of
the expenses incurred by the Stockholders in connection with such transaction to
the extent such costs are incurred for the benefit of all such Stockholders and
are not otherwise paid by the Company or the acquiring party and each
Stockholder shall be obligated to join on a pro rata basis (based on the number
of shares sold) in any representations, warranties, indemnification provisions
or other obligations (including without limitation any escrow arrangements) that
the Transferring Stockholder agrees to provide in connection with such
transaction (other than any such obligations that relate specifically to a
particular Stockholder such as indemnification with respect to representations
and warranties given by a Stockholder regarding such Stockholder's title to and
ownership of Stockholder Shares).
(c) First Refusal Rights. At least 20 business days prior to any
Transfer of Stockholder Shares by any Stockholder which, together with its
Affiliates and Permitted Transferees, holds less than 25% of the Stockholder
Shares as of immediately prior to such Transfer (other than pursuant to (i) a
Transfer to the Company, or (ii) a Transfer under Section 4(b), Section 4(d) or
Section 5), the Stockholder making such Transfer (the "Minority Transferor")
shall deliver a written notice (the "Transfer Notice") to the Company and each
Stockholder which, together with its Affiliates and Permitted Transferees, holds
at least 25% of the Stockholder Shares as of immediately prior to such Transfer
(a "Significant Stockholder") that it desires to Transfer Stockholder Shares of
such class, specifying in reasonable detail the identity of the prospective
transferee(s), the number to be transferred and the terms and conditions of the
Transfer, including the proposed price per Stockholder Share of such class
(which price shall be payable solely in cash at the closing of the transaction
or in installments over time). The Company (or its designee) may elect to
purchase all or any portion of the Stockholder Shares to be transferred, upon
the same terms and conditions as those set forth in the Transfer Notice, by
delivering a written notice of such election to the Minority Transferor within 8
business days after the Transfer Notice has been given to the Company (the
"Company Exercise Period"). If for any reason the Company does not elect to
purchase (directly or through its designee) all of the Stockholder Shares to be
transferred, the Significant Stockholder(s) (or its designee) shall be entitled
to purchase the Stockholder Shares which the Company has not elected to purchase
(the "Available Shares"), upon the same terms and conditions as those set forth
in the Transfer Notice, by giving written notice of such election to the
Minority Transferor within 8 business days after the expiration of the Company
Exercise Period (the "Significant Stockholder Exercise Period"). If more than
one Significant Stockholder elects to purchase the Available Shares, the
Available Shares will be allocated among such electing stockholders pro rata
according to the number of Stockholder Shares owned by each such electing
Significant Stockholder. The closing of the purchase of any Stockholder Shares
pursuant to this Section 4(c) shall take place within 60 days after the
expiration of the Significant Stockholder Exercise Period, which, in any event,
shall be within 90 days after the Transfer Notice was delivered to the Company
and the Significant Stockholders. Notwithstanding the foregoing, if the Company
and the Significant Stockholder(s) (together with their respective designees) do
not elect to purchase, collectively, all of the Stockholder Shares of a class
specified in the Transfer Notice, then the Minority Transferor may transfer all
of the Stockholder Shares of such class specified in the Transfer Notice to the
transferee(s) identified in the Transfer Notice (i) for a price no less than the
price specified in the Transfer Notice and (ii) upon other terms no more
favorable to the transferee(s) thereof than specified in the Transfer Notice,
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during the 90-day period immediately following the date on which the Transfer
Notice has been given to the Company and the Significant Stockholder(s). Any
Stockholder Shares not transferred within such 90-day period will be subject to
the provisions of this Section 4(c) upon subsequent transfer.
(d) Permitted Transfers.
(i) The restrictions contained in Sections 4(a), 4(b) and 4(c) shall
not apply with respect to any Transfer of Stockholder Shares by any
Stockholder (A) in the case of an individual Stockholder, pursuant to
applicable laws of descent and distribution or to any member of such
Stockholder's Family Group, (B) in the case of a non-individual
Stockholder, to its Affiliates, (C) in the case of any Bain Fund, to its
partners in connection with a distribution of all the Stockholder Shares
held by each such Bain Fund, (D) in the case of Holdings, to its members
and (E) in the case of any Regulated Stockholder (as such term is defined
in Section 10) pursuant to Section 10(b)(i); provided, in each case, that
any such transferee shall have complied with the requirements of Section
4(d)(ii).
(ii) Prior to any proposed transferee's acquisition of Stockholder
Shares pursuant to a Transfer permitted by Section 4(a)(i)(A), 4(a)(ii)(A)
or 4(a)(iii)(A), or Section 4(d)(i), such proposed transferee must agree
to take such Stockholder Shares subject to and to be fully bound by the
terms of this Agreement applicable to such Stockholder Shares by executing
a joinder to this Agreement substantially in the form attached hereto as
Exhibit A and delivering such executed joinder to the Secretary of the
Company prior to the effectiveness of such Transfer (unless such Transfer
is pursuant to applicable laws of descent and distribution, in which case,
such executed joinder shall be delivered to the Secretary of the Company
as soon as reasonably possible after such Transfer). All transferees
acquiring Stockholder Shares and executing a joinder in compliance with
this Section 4(d)(ii) are collectively referred to herein as "Permitted
Transferees".
(e) If (i) any Transfer of a majority interest in the residual
equity securities of a Stockholder owning Stockholder Shares occurs, or (ii) any
Stockholder or Permitted Transferee Transfers Stockholder Shares to an Affiliate
and an event occurs which causes such Affiliate to cease to be an Affiliate of
such Stockholder or Permitted Transferee, such Transfer or event shall be deemed
a Transfer of Stockholder Shares subject to all of the restrictions on Transfers
of Stockholder Shares set forth in this Agreement, including without limitation,
Sections 4 and 5 hereof.
(f) The provisions of this Section 4 shall terminate upon the
consummation of a Qualified Public Offering.
5. Approved Sale.
(a) Subject to Section 5(c) below, if the Board recommends or
approves, and the holders of a majority of the Stockholder Shares then
outstanding (the "Approving Stockholders")
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approve, a sale of all or substantially all of the Company's assets determined
on a consolidated basis or a sale of all (or, for accounting, tax or other
reasons, substantially all) of the Company's outstanding capital stock (whether
by merger, recapitalization, consolidation, reorganization, combination or
otherwise) to an Unaffiliated Third Party or group of Unaffiliated Third Parties
(each such sale, an "Approved Sale"), then each holder of Stockholder Shares
will vote for and consent to such Approved Sale subject to the terms set forth
below. In connection with any Stockholders exercising their rights under this
Section 5(a), such Stockholders shall send a written notice to all Other
Stockholders setting forth the principal terms of the proposed Approved Sale. If
the Approved Sale is structured as (i) a merger or consolidation, each holder of
Stockholder Shares will waive any dissenters' rights, appraisal rights or
similar rights in connection with such merger or consolidation or (ii) a sale of
stock, each holder of Stockholder Shares will agree to sell all of its
Stockholder Shares and rights to acquire Stockholder Shares on the same terms
and conditions as applicable to all of the Stockholder Shares held by the
Approving Stockholders. Each Stockholder shall take all necessary or desirable
actions in connection with the consummation of the Approved Sale as reasonably
requested by the Approving Stockholders and/or the Company.
(b) Reorganization Prior to Public Offering. Subject to Section 5(c)
below, if the Board recommends or approves and the Approving Stockholders
approve a reorganization of the Company in connection with a proposed initial
Public Offering by the Company (the "Approved Reorganization"), each Stockholder
agrees to vote for and consent to the Approved Reorganization. If the Approved
Reorganization is structured as a (i) merger or consolidation, each Stockholder
shall waive any dissenters' rights, appraisal rights or similar rights in
connection with such merger or consolidation or (ii) sale of stock, each
Stockholder shall agree to sell all of its Stockholders Shares on the terms and
conditions approved by and applicable to the Approving Stockholders. Each
Stockholder shall take all necessary or desirable actions in connection with the
consummation of the Approved Reorganization as reasonably requested by the
Approving Stockholders and/or the Company.
(c) Obligations of Stockholders. In connection with an Approved Sale
or Approved Reorganization: (i) upon the consummation of the Approved Sale or
Approved Reorganization, all of the holders of each class of Stockholder Shares
shall receive the same form and amount of consideration per share of Stockholder
Shares as the other holders of such class, or if any holders of a class of
Stockholder Shares are given an option as to the form and amount of
consideration to be received, all holders of such class shall be given the same
option; and (ii) all holders of then currently exercisable rights to acquire
Stockholder Shares shall be given reasonable prior notice of such Approved Sale
or Approved Reorganization and a reasonable opportunity, at such holder's
election and except as otherwise provided for in any related stock option
agreement, to either (A) exercise such rights prior to the consummation of the
Approved Sale or Approved Reorganization and participate in such sale as holders
of Stockholder Shares or (B) upon the consummation of the Approved Sale or
Approved Reorganization, receive in exchange for such rights consideration equal
to the amount determined by multiplying (1) the same amount of consideration per
share of a class of Stockholder Shares received by holders of such class of
Stockholder Shares in connection with the Approved Sale less the exercise price
per share of such class of Stockholder Shares of such rights to acquire such
-11-
class of Stockholder Shares by (2) the number of shares of such class of
Stockholder Shares represented by such rights.
(d) Purchaser Representative. If any transaction undertaken pursuant
to this Section 5 involves entering into any negotiation or transaction for
which Rule 506 under the Securities Act (or any similar rule then in effect)
promulgated by SEC may be available with respect to such negotiation or
transaction (including a merger, consolidation or other reorganization), those
Stockholders involved in such transaction who are not "accredited investors" (as
such term is defined in Rule 501 under the Securities Act) (the "Unaccredited
Stockholders") shall, at the request of the Company or the Approving
Stockholders, appoint one "purchaser representative" (as such term is defined in
Rule 501 under the Securities Act (or any similar rule then in effect)) for all
such Unaccredited Stockholders reasonably acceptable to the Company. The Company
shall first propose a purchaser representative to the Unaccredited Stockholders.
If holders of a majority of the Stockholder Shares held by the Unaccredited
Stockholders do not approve the purchaser representative designated by the
Company, such holders shall appoint one purchaser representative to represent
all Unaccredited Stockholders, subject to the approval of the Company (which
approval shall not be unreasonably withheld). The Company shall be responsible
for the fees of the purchaser representative so appointed.
(e) Transaction Costs and Indemnity. Each holder of Stockholder
Shares will take all necessary or desirable actions in connection with the
consummation of the Approved Sale or Approved Reorganization, as the case may
be, as reasonably requested by the Approving Stockholders or the Company,
including without limitation executing the applicable purchase agreement;
provided, that, notwithstanding the foregoing, each Stockholder involved in any
transaction pursuant to this Section 5 shall be required to bear its pro rata
share (based upon the number of shares sold) of the expenses incurred by the
Stockholders in connection with such transaction to the extent such costs are
incurred for the benefit of all such Stockholders and are not otherwise paid by
the Company or the acquiring party and each Stockholder shall be obligated to
join on a pro rata basis (based on the number of shares sold) in any
representations, warranties, indemnification provisions or other obligations
(including without limitation any escrow arrangements) that the Approving
Stockholders agree to provide in connection with such transaction (other than
any such obligations that relate specifically to a particular Stockholder such
as indemnification with respect to representations and warranties given by a
Stockholder regarding such Stockholder's title to and ownership of Stockholder
Shares). Costs incurred by any such Stockholder on its own behalf shall not be
considered costs of the transaction hereunder.
(f) The provisions of this Section 5 shall terminate upon the
consummation of a Qualified Public Offering.
-12-
6. Financial Statements and Access to Information.
(a) Financial Statements. The Company shall deliver to each
Stockholder who holds more than 5% of the then outstanding shares of Common
Stock:
(i) within 60 days after the end of each quarterly
accounting period in each fiscal year of the Company, unaudited consolidated
statements of income and cash flows of the Company and its Subsidiaries for such
quarterly period and unaudited consolidated balance sheets of the Company and
its Subsidiaries as of the end of such quarterly period. Such financial
statements shall be prepared in accordance with generally accepted accounting
principles, consistently applied, subject to the absence of footnote disclosures
and to normal year-end adjustments; and
(ii) within 120 days after the end of each fiscal year
of the Company, audited consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and audited consolidated
balance sheets of the Company and its Subsidiaries as of the end of such fiscal
year. Such financial statements shall be prepared in accordance with generally
accepted accounting principles, consistently applied.
(b) Access to Information. The Company shall permit any
Stockholder who holds more than 5% of the then outstanding shares of Common
Stock, during normal business hours and such other times as any such holder may
reasonably request, to (i) visit and inspect any of the properties of the
Company and its Subsidiaries, (ii) examine the corporate and financial records
of the Company and its Subsidiaries and make copies thereof or extracts
therefrom and (iii) discuss the affairs, finances and accounts of any such
entities with any of the executive officers of the Company.
(c) Following the consummation of an initial Public Offering,
any Person who is a party to this Agreement or a member of Holdings and who
holds more than 5% of the then outstanding shares of Common Stock (whether such
Person holds such shares directly or indirectly through its membership interest
in Holdings) shall be entitled to the rights set forth above in Section 6(a) and
6(b).
7. Legend; Additional Restriction on Transfer.
(a) Each certificate or instrument evidencing Stockholder
Shares and each certificate or instrument issued in exchange for or upon the
Transfer of any Stockholder Shares (if such securities remain Stockholder
Shares, each as defined herein after such Transfer) shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE
-13-
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO A STOCKHOLDERS AGREEMENT DATED AS OF
AUGUST 6, 1999, BY AND AMONG THE ISSUER AND CERTAIN OF THE ISSUER'S
STOCKHOLDERS. A COPY OF SUCH STOCKHOLDERS AGREEMENT WILL BE
FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON
WRITTEN REQUEST."
The legend set forth above regarding the Stockholders Agreement shall be removed
from the certificates evidencing any securities which cease to be Stockholder
Shares. Upon the request of any holder of Stockholder Shares, the Company shall
remove the Securities Act legend set forth above from the certificate or
certificates for such Stockholder Shares; provided, that such Stockholder Shares
are eligible for sale pursuant to Rule 144(k) (or any similar rule or rules then
in effect) under the Securities Act.
(b) No Stockholder may Transfer any Stockholder Shares (except
pursuant to an effective registration statement under the Securities Act)
without first delivering to the Company an opinion of counsel reasonably
acceptable in form and substance to the Company (which counsel will be
reasonably acceptable to the Company) that registration under the Securities Act
is not required in connection with such Transfer. If such opinion of counsel
reasonably acceptable in form and substance to the Company further states that
no subsequent Transfer of such Stockholder Shares will require registration
under the Securities Act, the Company will promptly upon such Transfer deliver
new certificates for such securities which do not bear the Securities Act legend
set forth in Section 7(a).
(c) Notwithstanding the foregoing, for so long as this
Agreement is in effect, each certificate or instrument evidencing shares of
Common Stock shall be stamped or otherwise imprinted with a legend in
substantially the following form, only if it does not otherwise bear the legend
set forth in Section 7(a):
"FOR SO LONG AS THE STOCKHOLDERS AGREEMENT DATED AS OF AUGUST 6,
1999, BY AND AMONG THE ISSUER AND CERTAIN OF THE ISSUER'S
STOCKHOLDERS IS IN EFFECT, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY BE SUBJECT TO SUCH AGREEMENT. A COPY OF SUCH
STOCKHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE
ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
-14-
8. Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be null and void, and the Company shall not record such Transfer
on its books or treat any purported transferee of such Stockholder Shares as the
owner of such securities for any purpose.
9. Preemptive Rights.
(a) (i) If at any time on or prior to the consummation of a
Qualified Public Offering, the Company wishes to issue any equity securities
(whether preferred stock or Common Stock) or any options, warrants or other
rights to acquire equity securities or any notes or other securities convertible
or exchangeable into equity securities (all such equity securities and other
rights and securities, collectively, the "Equity Equivalents") to any
Stockholder, the Company shall promptly deliver a notice of intention to sell
(the "Issuance Notice") to each Other Stockholder setting forth a description
and the number of the Equity Equivalents proposed to be issued to such
Stockholder and the proposed purchase price and terms of sale. Upon receipt of
the Issuance Notice, each Other Stockholder shall have the right to elect to
purchase, at the price and on the terms stated in the Issuance Notice, a number
of the Equity Equivalents equal to the product of (A) such Other Stockholder's
proportionate ownership (expressed as a fraction) of the aggregate Stockholder
Shares held by all Stockholders multiplied by (B) the number of Equity
Equivalents proposed to be issued to such Stockholder (as described in the
applicable Issuance Notice). Such election shall be made by the electing Other
Stockholder by written notice to the Company within ten (10) business days after
receipt by such Other Stockholder of the Issuance Notice (the "Issuance
Acceptance Period").
(ii) If an Other Stockholder does not make an effective
election to purchase pursuant to paragraph (a)(i) above in respect of the Equity
Equivalents proposed to be issued to such Stockholder pursuant to the applicable
Issuance Notice, the Company may, at its election, during a period of ninety
(90) days following the expiration of the applicable Issuance Acceptance Period,
issue and sell the remaining Equity Equivalents to be issued and sold to such
Stockholder at a price and upon terms not more favorable to such Stockholder
than those stated in the applicable Issuance Notice (provided that the number of
Equity Equivalents to be issued to such Stockholder in compliance with the
foregoing shall not exceed the number of Equity Equivalents proposed to be
issued to such Stockholder (as described in the applicable Issuance Notice) less
the number of Equity Equivalents to be issued to Other Shareholders pursuant to
an effective election to purchase by such Other Stockholders hereunder). If the
Company has not sold any Equity Equivalents covered by an Issuance Notice to
such Stockholder, or entered into a binding agreement to sell such Equity
Equivalents to such Stockholder, within such ninety (90) day period, the Company
shall not thereafter issue or sell such Equity Equivalents to such Stockholder
without first offering such Equity Equivalents to the Other Stockholders in the
manner provided in paragraph (a)(i) above.
(b) If an Other Stockholder gives the Company notice, pursuant to
the provisions of this Section 9, that such Other Stockholder desires to
purchase Equity Equivalents offered by the Company, payment therefor shall be
made by check or wire transfer of immediately available funds,
-15-
against delivery of the securities (which securities shall be registered in the
name of such Other Stockholder and shall be issued free and clear of any liens
or encumbrances) at the executive offices of the Company at the closing date
fixed by the Company for the sale of all such Equity Equivalents (including to
such Stockholder). If the proposed sale is for consideration other than cash,
the Other Stockholders may pay cash in lieu of all (but not part) of such other
consideration, in the amount determined reasonably and in good faith by the
Board to represent the fair value of such consideration other than cash.
(c) The preemptive rights contained in this Section 9 shall not
apply to (i) the issuance of shares of Equity Equivalents as a stock dividend or
upon any subdivision, split or combination of the outstanding shares of Common
Stock; (ii) the issuance of Equity Equivalents upon conversion, exchange or
redemption of any outstanding convertible or exchangeable securities; (iii) the
issuance of Equity Equivalents upon exercise of any outstanding options or
warrants; (iv) the issuance of Equity Equivalents pursuant to an offering
registered under the Securities Act; or (v) the issuance of shares of Equity
Equivalents in connection with a business acquisition or combination.
10. Regulatory Compliance Cooperation.
(a) Definitions. For purposes of this Section 10, the
following terms have the following meanings:
"Applicable Law," with respect to any Person, means all provisions
of all laws, statutes, ordinances, rules, regulations, permits, certificates or
orders of any governmental authority applicable to such Person or any of its
assets or property or to which such Person or any of its assets or property is
subject, and all judgments, injunctions, orders and decrees of all courts and
arbitrators in proceedings or actions in which such Person is a party or by
which it or any of its assets or properties is or may be bound or subject.
"Regulated Stockholder" shall mean any Stockholder (i) that is
subject to the provisions of Regulation Y of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Part 225 (or any successor to such
Regulations) and (ii) that holds Stockholder Shares and (iii) that has provided
written notice to the Company of its status as a "Regulated Stockholder"
hereunder.
"Regulatory Problem" means any set of facts or circumstance wherein
it has been asserted by any governmental regulatory agency (or a Regulated
Stockholder reasonably believes that there is a risk of such assertion) that
such Regulated Stockholder is not entitled to acquire, own, hold or control, or
exercise any significant right (including the right to vote) with respect to,
any Stockholder Shares.
(b) Regulatory Matters Generally.
(i) If a Regulated Stockholder determines that it has a
Regulatory Problem, the Company agrees to take all such actions, subject to
Applicable Law, as are reasonably
-16-
requested by such Regulated Stockholder (1) to effectuate and facilitate any
Transfer by such Regulated Stockholder of any Stockholder Shares then held by
such Regulated Stockholder to any Affiliate of such Regulated Stockholder
designated by such Regulated Stockholder (provided such transferee complies with
the requirements of Section 4(d)(ii)), and (2) to permit such Regulated
Stockholder (or any Affiliate of such Regulated Stockholder) to exchange all or
any portion of the voting Stockholder Shares then held by such Person on a
share-for-share basis for shares of a class of nonvoting Stockholder Shares,
which nonvoting Stockholder Shares shall be identical in all respects to such
voting Stockholder Shares, except that such new Stockholder Shares shall be
nonvoting and shall be convertible into voting Stockholder Shares on such terms
as are reasonably requested by such Regulated Stockholder in light of regulatory
considerations then prevailing. Such actions may include, without limitation,
(x) entering into such additional agreements as are reasonably requested by such
Regulated Stockholder to permit any Person(s) designated by such Regulated
Stockholder to exercise any voting power which is relinquished by such Regulated
Stockholder upon any exchange of voting Stockholder Shares for nonvoting
Stockholder Shares, and (y) entering into such additional agreements, adopting
such amendment to the charter documents of the Company and taking such
additional actions as are reasonably requested by such Regulated Stockholder in
order to effectuate the intent of the foregoing.
(ii) If a Regulated Stockholder has the right or
opportunity to acquire any of the Stockholder Shares from the Company, any
Stockholder or any other Person (as the result of a preemptive offer, pro rata
offer or otherwise), at such Regulated Stockholder's request the Company will
offer to sell (or if the Company is not the seller, to cooperate with the seller
and such Regulated Stockholder to permit such seller to sell) non-voting
Stockholder Shares on the same terms as would have existed had such Regulated
Stockholder acquired the Stockholder Shares so offered and immediately requested
their exchange for non-voting Stockholder Shares pursuant to clause (i) above.
(iii) Each Stockholder agrees to cooperate with the
Company in complying with this Section 10, including without limitation, voting
to approve amending the Company's Articles of Incorporation in a manner
reasonably requested by the Regulated Stockholder requesting such amendment.
(iv) The Company agrees not to amend or waive the voting
or other provisions of this Agreement or the Company's Articles of Incorporation
if such proposed amendment or waiver would cause any Regulated Stockholder to
have a Regulatory Problem, provided that any such Regulated Stockholder notifies
the Company that it would have a Regulatory Problem promptly after it has notice
of such amendment or waiver.
11. Amendment and Waiver. No modification, amendment or waiver of
any provision of this Agreement shall be effective against the Company or the
Stockholders unless such modification, amendment or waiver is approved in
writing by, respectively, the Company or the holders of 75% of the Stockholder
Shares; provided, that no amendment shall be effective without the consent of a
Stockholder to the extent that such amendment would adversely affect the rights
or
-17-
obligations of such Stockholder hereunder in any material respect.
Notwithstanding the foregoing, if an amendment or modification of this Agreement
serves merely to add a party hereto, then such amendment or modification will be
effective against the Company and the holders of Stockholder Shares if such
amendment or modification is approved in writing by the Company, the holders of
at least a majority of the Stockholder Shares, and such new party hereto. The
failure of any party to enforce any of the provisions of this Agreement shall in
no way be construed as a waiver of such provisions and shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms. Each Stockholder shall remain a party to
this Agreement only so long as such person is the holder of record of
Stockholder Shares. In connection with the issuance of any additional equity
securities of the Company to any Person, the Company may permit such Person to
become a party to this Agreement and succeed to all of the rights and
obligations of a "Stockholder" under this Agreement by obtaining the consent of
the holders of a majority of the Stockholder Shares then outstanding and an
executed counterpart signature page to this Agreement, and, upon such execution,
such Person shall for all purposes be a "Stockholder" party to this Agreement.
12. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
13. Entire Agreement. Except as otherwise expressly set forth
herein, this document embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
14. Termination. This Agreement will automatically terminate and be
of no further force or effect immediately after the consummation of an Approved
Sale.
15. Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors, heirs and assigns
of each of them, so long as they hold Stockholder Shares.
16. Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
-18-
17. Remedies. The parties hereto shall be entitled to enforce their
rights under this Agreement specifically to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company and any Stockholder may in his, hers, or its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunc tive relief (without posting a bond or other
security) in order to enforce or prevent any violation of the provisions of this
Agreement.
18. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered if delivered
personally, sent via a nationally recognized overnight courier, or sent via
facsimile to the recipient, or if sent by certified or registered mail, return
receipt requested, will be deemed to have been given two business days
thereafter. Such notices, demands and other communications will be sent to the
address indicated below:
To the Company:
Mattress Discounters Holding Corporation
c/o Bain Capital, Inc.
Two ▇▇▇▇▇▇ Place
Boston, MA 02116
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy, which shall not constitute notice, to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Citicorp Center
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
To Holdings:
Mattress Discounters Holding L.L.C.
c/o Bain Capital, Inc.
Two ▇▇▇▇▇▇ Place
Boston, MA 02116
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
-19-
With a copy, which shall not constitute notice, to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Citicorp Center
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
To ▇▇▇▇▇▇:
▇▇▇▇▇▇-▇▇▇▇▇▇ Company
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy, which shall not constitute notice, to:
McGuire, Woods, Battle & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
19. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Virginia, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Virginia or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Virginia.
20. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
21. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
22. Third Party Beneficiaries. Each of the parties hereto
acknowledges and agrees that any Person who is granted rights hereunder and who
is not a party hereto (e.g. pursuant to
-20-
Section 2(a)(ii) through(iii)) shall have the rights granted to such Person as
intended hereby and for the purposes of exercising such rights shall be a third
party beneficiary hereof and entitled to enforce such rights whether or not such
Person or such Persons' transferor is then a party to this Agreement.
23. Transaction with Affiliates. The Company will not, and will not
permit any of its Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an "Affiliate Transaction"), unless such
Affiliate Transaction is on terms that are not, in the sole judgment of the
Board, materially less favorable to the Company or such Subsidiary than those
which would have been obtained in a comparable transaction with an Unaffiliated
Third Party.
* * * * *
- 20 -
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement as of the date first above written.
MATTRESS DISCOUNTERS HOLDING
CORPORATION
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
By:_____________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
MATTRESS DISCOUNTERS HOLDING L.L.C.
By: ▇▇▇▇ Capital Fund VI, L.P.
Its: Member
By: ▇▇▇▇ Capital Partners VI, L.P.
Its: General Partner
By: ▇▇▇▇ Capital Investors, Inc.
Its: General Partner
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
By:-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
▇▇▇▇▇▇-▇▇▇▇▇▇ COMPANY
/s/ ▇. ▇. ▇▇▇▇▇▇▇
By:-------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Finacial Officer
- 21 -
Schedule A
Shares of Class A Shares of Class B Shares of Class L Shares of Class M
Stockholder Common Stock Common Stock Common Stock Common Stock
----------- ------------ ------------ ------------ ------------
Mattress Discounters 11,423,250 0 1,269,250 0
Holding L.L.C.
▇▇▇▇▇▇-▇▇▇▇▇▇ Company 903,000 0 100,333 0
EXHIBIT A
FORM OF JOINDER TO
STOCKHOLDERS AGREEMENT
THIS JOINDER to the Stockholders Agreement dated as of August 6,
1999 by and among Mattress Discounters Holding Corporation, a Virginia
corporation (the "Company"), and certain stockholders of the Company (the
"Agreement"), is made and entered into as of _________ by and between the
Company and _________________ ("Holder"). Capitalized terms used herein but not
otherwise defined shall have the meanings set forth in the Agreement.
WHEREAS, Holder has acquired certain Stockholder Shares and the
Agreement and the Company require Holder, as a holder of such Stockholder
Shares, to become a party to the Agreement, and Holder agrees to do so in
accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Joinder hereby agree as
follows:
1. Agreement to be Bound. Holder hereby agrees that upon execution
of this Joinder, it shall become a party to the Agreement and shall be fully
bound by, and subject to, all of the covenants, terms and conditions of the
Agreement as though an original party thereto and shall be deemed a [Holdings
Holder/▇▇▇▇▇▇ Holder] and a Stockholder for all purposes thereof. In addition,
Holder hereby agrees that all Common Stock held by Holder shall be deemed
[Holdings/▇▇▇▇▇▇] Shares and Stockholder Shares for all purposes of the
Agreement.
2. Successors and Assigns. Except as otherwise provided herein, this
Joinder shall bind and inure to the benefit of and be enforceable by the Company
and its successors, heirs and assigns and Holder and any subsequent holders of
Stockholder Shares and the respective successors, heirs and assigns of each of
them, so long as they hold any Stockholder Shares.
3. Counterparts. This Joinder may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
4. Notices. For purposes of Section 18 of the Agreement, all
notices, demands or other communications to the Holder shall be directed to:
[Name]
[Address]
[Facsimile Number]
5. Governing Law. his Joinder shall be governed by and construed in
accordance with the domestic laws of the State of Virginia, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Virginia or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Virginia.
6. Descriptive Headings. The descriptive headings of this Joinder
are inserted for convenience only and do not constitute a part of this Joinder.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Joinder as
of the date first above written.
MATTRESS DISCOUNTERS HOLDING
CORPORATION
By:_____________________________________
Name:
Title:
[HOLDER]
By:_____________________________________
Name:
Title:
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