1
Exhibit 10.25
SEALY CORPORATION
STOCK OPTION AGREEMENT
THIS AGREEMENT, is made and entered into to be effective as of the 4th day of
March, 1996, by and between SEALY CORPORATION, a Delaware corporation, and ▇▇▇
▇. ▇▇▇▇▇ (the "Optionee").
W I T N E S S E T H:
l. DEFINITIONS.
-----------
a) "AGREEMENT" shall mean this stock option agreement.
b) "BOARD" shall mean the Board of Directors of the Corporation,
as constituted from time to time.
c) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
d) "COMMITTEE" shall mean the Human Resources Committee of the
Board of Directors.
e) "CORPORATION" shall mean Sealy Corporation, a Delaware
corporation.
f) "DATE OF GRANT" shall mean the date as of which this Agreement
is effective, which shall be the date on which the Committee
resolved to grant this Option.
g) "EMPLOYEE" shall mean an individual who is an employee (within
the meaning of Section 3401(c) of the Code and the regulations
thereunder) of the Corporation or of a Subsidiary.
h) "EMPLOYMENT TERMINATION" shall mean the termination of the
Optionee's status as an Employee for any reason.
i) "EXERCISE PRICE" shall mean the amount for which one Share may
be purchased upon exercise of this Option, as specified in
Paragraph 2 of this Agreement.
j) "NONSTATUTORY STOCK OPTION" shall mean an option not described
in Sections 422(b), 422A(b), 423(b), or 424(b) of the Code.
k) "OPTION" shall mean the option to purchase Shares granted by
this Agreement.
l) "OPTION PERIOD" shall mean the term of this Option, as
specified in Paragraph 4 of this Agreement.
m) "PARENT" shall mean any corporation which owns at least fifty
percent (50%) of the total combined voting power of all
1
2
classes of stock in the Corporation or in another Parent.
n) "PARTIAL EXERCISE" shall mean an exercise with respect to less
than all of the remaining Shares subject to this Option.
o) "PURCHASE PRICE" shall mean the Exercise Price multiplied by
the number of Shares with respect to which this Option is
exercised.
p) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
q) "SHARE" shall mean one (1) share of Stock as adjusted in
accordance with Paragraph 5 of this Agreement (if applicable).
r) "STOCK" shall mean the Class A Common Stock of the Corporation
with par value of $.01 per share.
s) "STOCKHOLDER AGREEMENT" shall mean the Stockholder Agreement
between the Optionee and the Corporation dated March 4, 1996.
t) "SUBSIDIARY" shall mean any corporation, if the Corporation
and/or one or more other Subsidiaries own at least fifty
percent (50%) of the total combined voting power of all
classes of outstanding stock in such corporation.
2. GRANT OF OPTION
---------------
On the terms and conditions stated below, the Corporation hereby grants
to the Optionee the option to purchase four hundred thousand (400,000)
Shares for the sum of ten dollars and sixty-three cents ($10.63) per
Share.
3. RIGHT TO EXERCISE
-----------------
Subject to the conditions set forth below and the exceptions set forth
in Paragraphs 4 and 5 of this Agreement, this Option shall become
exercisable pursuant to Schedule A attached hereto.
No Partial Exercise of this Option may be made for a number of Shares
other than ten (10) Shares or a multiple thereof (without regard to
adjustments).
4. TERM OF OPTION
--------------
This Option shall in any event expire ten (10) years after the Date of
Grant. In addition, this Option shall expire upon the termination of
the Optionee's service as an Employee, if such termination occurs
first, subject to the following provisions:
a) If the Employment Termination is caused by the Optionee's
death, then this Option (to the extent not previously
exercised) may be exercised within twelve (12) months after
the Optionee's death by the Optionee's executors or
administrators or by any person or persons who have acquired
2
3
this Option directly from the Optionee by bequest or
inheritance, but only to the extent that this Option was
exercisable (or would have been exercisable but for the
existence of an outstanding earlier granted Incentive Stock
Option) under Paragraph 3 of this Agreement on date of death.
b) If Employment Termination is caused by any reason other than
death, then this Option (to the extent not previously
exercised) may be exercised within a period of 90 days after
the termination, but only to the extent that this option was
exercisable (or would have been exercisable but for the
existence of an outstanding earlier granted Incentive Stock
Option). If the Optionee dies within such period, this Option
(to the extent not previously exercised) may be exercised
within twelve (12) months after the Optionee's death by the
Optionee's executors or administrators or by any person or
persons who have acquired this Option directly from the
Optionee by bequest or inheritance, but only to the extent
that this Option was exercisable (or would have been
exercisable but for the existence of an outstanding earlier
granted Incentive Stock Option) under Paragraph 3 of this
Agreement on the date of the termination.
Any other provision of this Agreement to the contrary notwithstanding,
this Option shall not be exercisable after the expiration date set
forth in the first sentence of this Paragraph 4.
For purposes of this Paragraph 4, the Employee relationship shall be
deemed to continue while the Optionee is on military leave, sick leave
or other bona fide leave of absence (to be determined in the sole
discretion of the Committee).
5. SHARES AND ADJUSTMENT
---------------------
The Corporation agrees that it will at all times during the Option
Period reserve and keep available sufficient authorized but unissued or
reacquired Stock to satisfy the requirements of this Agreement.
The Exercise Price in effect at any time and the number and kind of
securities purchasable upon exercise of this Option shall be subject to
adjustment from time to time upon the happening of certain events, as
follows:
a) In case the Corporation shall (i) pay a dividend in shares of
Stock or make a distribution in shares of Stock to its
Stockholders, (ii) subdivide its outstanding shares of Stock,
(iii) combine its outstanding shares of Stock into a smaller
number of shares of Stock or (iv) issue by reclassification of
its shares of Stock other securities of the Corporation
(including any such reclassification in connection with a
consolidation or merger in which the Corporation is the
continuing corporation), the number of Shares purchasable upon
exercise of this Option immediately prior thereto shall be
3
4
adjusted so that the Optionee shall be entitled to receive the
kind and number of Shares or other securities of the Company
which the Optionee would have owned or have been entitled to
receive after the happening of any of the events described
above, had this Option been exercised immediately prior to the
happening of such event or any record date with respect
thereto. An adjustment made pursuant to this Paragraph (a)
shall become effective immediately after the effective date of
such event retroactive to immediately after the record date,
if any, for such event.
b) In case the Corporation shall issue rights, options, or
warrants to all holders of its shares of Stock, without any
charge to such holders, entitling them (for a period expiring
within 45 days after the record date mentioned below in this
Paragraph (b) to subscribe for or purchase shares of Stock at
a price per share which is lower at the record date mentioned
below than the then Current Market Price per share of Stock
(as defined in Paragraph (d) below), the number of Shares
thereafter purchasable upon the exercise of this Option shall
be determined by multiplying the number of Shares theretofore
purchasable by a fraction, of which the numerator shall be the
number of shares of Stock outstanding on such record date plus
the number of additional shares of Stock offered for
subscription or purchase, and of which the denominator shall
be the number of shares of its Stock outstanding on such
record date plus the number of shares which the aggregate
offering price of the total number of shares of Stock so
offered would purchase at the then Current Market Price per
share of its Stock. Such adjustment shall be made whenever
such rights, options or warrants are issued, and shall become
effective retroactively immediately after the record date for
the determination of shareholders entitled to receive such
rights, options or warrants.
c) In case the Corporation shall distribute to all holders of its
share of Stock (i) shares of stock other than its Stock, (ii)
evidences of its indebtedness, (iii) assets or cash (excluding
ordinary cash dividends payable out of consolidated earnings
or retained earnings and dividends or distributions referred
to in Paragraph (a) above), or (iv) rights, options or
warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Stock
(excluding those referred to in Paragraph (b) above), then in
each case the number of Shares thereafter purchasable upon the
exercise of this Option shall be determined by multiplying the
number of Shares theretofore purchasable upon the exercise of
this Option, by a fraction, the numerator of which shall be
the Current Market Price per share of Stock on the record date
mentioned below in this Paragraph (c), and the denominator of
which shall be the Current Market Price per share of Stock on
such record date, less the then fair value of the portion of
the shares of stock other than its Stock or assets or
evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such
4
5
convertible or exchangeable securities applicable to one share
of its Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date
of distribution retroactive to immediately after the record
date for the determination of shareholders entitled to receive
such distribution.
d) For the purpose of any computation under Paragraphs (b) and
(c) of above, the Current Market Price per share of Stock at
any date shall be the average of the daily closing prices for
15 consecutive trading days commencing 20 trading days before
the date of such computation. The closing price for each day
shall be the last reported sale price or, in case no such
reported sale takes place on such day, the average of the
closing bid and asked prices for such day, in either case on
the principal national securities exchange on which the shares
are listed or admitted to trading, or if they are not listed
or admitted to trading, on any national securities exchange,
but are traded in the over the counter market, the closing
sale price of the Stock, or in case no sale is publicly
reported, the average of the representative closing bid and
asked quotations for the Stock on NASDAQ or any comparable
system, or if the Stock is not listed on NASDAQ or a
comparable system, the closing sale price of the Stock, or in
case no sale is publicly reported, the average of the closing
bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from
time to time by the Corporation for that purpose.
e) No adjustment in the number of Shares purchasable hereunder
shall be required unless such adjustment would require an
increase or decrease of at least 1% in the number of Shares
purchasable upon the exercise of this Option; PROVIDED,
HOWEVER, that any adjustments which by reason of this
Paragraph (e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment,
but not later than three years after the happening of the
specified event or events. All calculations shall be made to
the nearest one thousandth of a share. Anything in these
provisions to the contrary notwithstanding, the Corporation
shall be entitled, but shall not be required, to make such
changes in the number of Shares purchasable upon the exercise
of this Option, in addition to those required by this
Paragraph 5, as it in its discretion shall determine to be
advisable in order that any dividend or distribution in shares
of Stock, issuance of rights, warrants or options to purchase
Stock, or distribution of shares of stock other than its
Stock, evidences of indebtedness or assets or cash (other than
ordinary cash dividends out of consolidated earnings or
retained earnings) or convertible or exchangeable securities
hereafter made by the Corporation to the holders of its Stock
shall not result in any tax to the holders of its Stock or
securities convertible into Stock.
f) Whenever the number of Shares purchasable upon the exercise of
5
6
this Option is adjusted, as herein provided, the Exercise
Price payable upon exercise of this Option shall be adjusted
by multiplying such Exercise Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the
number of Shares purchasable upon the exercise of this Option
immediately prior to such adjustment, and of which the
denominator shall be the number of Shares so purchasable
immediately thereafter.
g) For the purpose of these provisions, the term "shares of
Stock" shall mean (i) the class of stock designated as the
Common Stock of the Corporation at the date of this Agreement
or (ii) any other class of stock resulting from successive
changes or reclassification of such shares consisting solely
of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to Paragraph
(a) above, the Optionee shall become entitled to purchase any
shares of capital stock of the Corporation other than shares
of Stock, thereafter the number of such other shares so
purchasable upon exercise of this Option and the Exercise
Price of such shares shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Shares
contained in Paragraphs (a) through (f), inclusive, above, and
Paragraphs (h) through (k), inclusive below, and the
provisions of this Agreement with respect to Shares shall
apply on like terms to such other shares.
h) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges, if any thereof shall not
have been exercised, the Exercise Price and the number of
shares of Stock purchasable upon the exercise of this Option
shall, upon such expiration, be readjusted and shall
thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (x) the only shares of
Stock so issued were the shares of Stock, if any, actually
issued or sold upon the exercise of such rights, options,
warrants or conversion or exchange rights and (y) such shares
of Stock, if any, were issued or sold for the consideration
actually received by the Corporation upon such exercise plus
the aggregate consideration, if any, actually received by the
Corporation for the issuance, sale or grant of all such
rights, options, warrants or conversion or exchange rights
whether or not exercised; PROVIDED, HOWEVER, that no such
readjustment shall have the effect of increasing the Exercise
Price by an amount in excess of the amount of adjustment
initially made in respect of the issuance, sale or grant of
such rights, options, warrants or conversion or exchange
rights.
i) Whenever the number of Shares purchasable upon the exercise of
this Option or the Exercise Price this Option is adjusted, as
herein provided, the Corporation shall promptly mail by first
class mail, postage prepaid, to the Optionee notice of such
6
7
adjustment or adjustments. The Corporation may retain a firm
of independent public accountants (who may be the regular
accountants employed by the Corporation) to make any
computation required by these provisions and shall cause such
accountants to prepare a certificate setting forth the number
of Shares purchasable upon the exercise of the Option and the
Exercise Price of such Shares after such adjustment, setting
forth a brief statement of the facts requiring such adjustment
and setting forth the computation by which such adjustment was
made. Such certificate shall be conclusive of the correctness
of such adjustment and the Optionee shall have the right to
inspect such certificate during reasonable business hours.
j) Except as provided in these provisions, no adjustment in
respect of any dividends shall be made during the term of this
Option or upon the exercise of this Option.
k) In case of any consolidation of the Corporation with or merger
of the Corporation with or into another corporation or in case
of any sale or conveyance to another corporation of the
property of the Corporation as an entirety or substantially as
an entirety, the Corporation or such successor or purchasing
corporation (or an affiliate of such successor or purchasing
corporation), as the case may be, agrees that the Optionee
shall have the right thereafter upon payment of the Exercise
Price in effect immediately prior to such action to purchase
upon exercise of this Option the kind and amount of shares
and other securities and property (including cash) which the
Optionee would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale or
conveyance had this Option been exercised immediately prior
to such action. The provisions of this Paragraph (k) shall
similarly apply to successive consolidations, mergers, sales
or conveyances.
6. EXERCISE OF OPTION
------------------
The Optionee or the Optionee's representative may exercise this Option
by giving written notice to the Secretary of the Corporation. The
notice shall specify the election to exercise the Option, the number of
Shares for which it is being exercised and, if Paragraph 16(b) of this
Agreement is applicable to this Option, the form of payment. The notice
shall be signed by the person or persons exercising this Option. In the
event that this Option is being exercised by the representative of the
Optionee, the notice shall be accompanied by proof satisfactory to the
Corporation of the representative's right to exercise this Option. The
Optionee or the Optionee's representative shall deliver to the
Secretary of the Corporation, at the time of giving the notice, payment
in the form which conforms to the applicable subparagraph of Paragraph
16 of this Agreement for the full amount of the Purchase Price.
The Corporation shall thereafter cause to be issued a certificate or
certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising the Option (or in the
names of such person and his or her spouse as
7
8
community property or as joint tenants with right of survivorship).
Except as otherwise provided in this Agreement, the Corporation shall
cause such certificate or certificates to be delivered to or upon the
order of the person exercising this Option.
Any shares issued pursuant to the exercise of this Option shall be
subject to the provisions of the Stockholder Agreement. In the event of
any conflict between the provisions of this Agreement and the
provisions of the Stockholder Agreement, the provisions which are most
beneficial to the Corporation, in the opinion of counsel to the
Corporation shall control.
7. WITHHOLDING TAXES
-----------------
In the event that the Corporation determines that it is required to
withhold Federal, state or local tax as a result of the exercise of
this Option, the Optionee, as a condition to the exercise of this
Option, shall make arrangements satisfactory to the Corporation to
enable it to satisfy such withholding requirements. The Optionee shall
also make arrangements satisfactory to the Corporation to enable it to
satisfy any withholding requirements that may arise in connection with
the lapse of the Right of Repurchase or in connection with the
disposition of Shares purchased by exercising this Option.
8. RIGHTS AS A SHAREHOLDER
-----------------------
Neither the Optionee nor the Optionee's representative shall have any
rights as a shareholder with respect to any shares subject to this
Option until the Option has been properly exercised and the Shares
subject to the Option have been issued in the name of the Optionee or
the Optionee's representative.
9. LEGALITY OF ISSUANCE
--------------------
No Shares shall be issued upon the exercise of this Option unless and
until the Corporation has determined that:
a) It and the Optionee have taken all actions required to
register the Shares under the Securities Act or to perfect an
exemption from the registration requirements thereof;
b) Any applicable listing requirement of any stock exchange on
which stock is listed has been satisfied; and
c) Any other applicable provision of state or Federal law has
been satisfied.
10. RESTRICTIONS ON TRANSFER OF SHARES
----------------------------------
Regardless of whether the offering and sale of Shares under the Plan
have been registered under the Securities Act or have been registered
or qualified under the securities laws of any state, the Corporation
may impose restrictions upon the sale, pledge or other transfer of such
Shares (including the placement of appropriate legends on stock
certificates) if, in the judgment of the
8
9
Corporation and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the
Securities Act, the securities laws of any state or any other law.
In the event that the sale of shares under the Plan is not registered
under the Securities Act but an exemption is available which requires
an investment representation or other representation, the Optionee
shall represent and agree that the Shares to be acquired pursuant to
the exercise of this Option are being acquired for investment, and not
with a view to the sale or distribution thereof, and shall make such
other representations as are deemed necessary or appropriate by the
Corporation and its counsel.
Stock certificates evidencing Shares acquired under this Agreement in
an unregistered transaction shall bear the following restrictive legend
(and
such other restrictive legends as are required or deemed advisable
under the provisions of any applicable law):
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 ('ACT'). ANY
TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A
REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH
TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH
REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO
COMPLY WITH THE ACT."
The Corporation shall also place legends on stock certificates
representing its Right of Repurchase (if applicable).
Any determination by the Corporation and its counsel in connection with
any of the matters set forth in this Paragraph 10 shall be conclusive
and binding on the Optionee and all other persons.
11. REGISTRATION OF SECURITIES
--------------------------
The Corporation may, but shall not be obligated to, register or qualify
the sale of Shares under the Securities Act or any other applicable
law. The Corporation shall not be obligated to take any affirmative
action in order to cause the sale of Shares acquired under this
Agreement to comply with any law.
12. REMOVAL OF LEGENDS
------------------
If, in the opinion of the Corporation and its counsel, any legend
placed on a stock certificate representing Shares sold under this
Agreement is no longer required, the holder of such certificate shall
be entitled to exchange such certificate for a certificate representing
the same number of Shares but lacking such legend.
9
10
13. NO TRANSFER OR ASSIGNMENT OF OPTION
-----------------------------------
Except as otherwise provided in Paragraph 4 this Agreement, this Option
and the rights and privileges conferred hereby shall not be
transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) and shall not be subject to sale under
execution, attachment or similar process. Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of this Option, or of
any right or privilege conferred hereby, contrary to the provisions
hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this
Option and the rights and privileges conferred hereby shall immediately
become null and void.
14. NO EMPLOYMENT RIGHTS
--------------------
Nothing in this Agreement shall be construed as giving the Optionee the
right to be retained as an Employee or as impairing the right of the
Corporation to terminate his or her service at any time, with or
without cause.
15. DESIGNATION OF OPTION
---------------------
The Committee hereby designates this Option as a Nonstatutory Stock
option.
16. PAYMENT FOR STOCK
-----------------
a) PAYMENT IN CASH
---------------
The entire Purchase Price may be paid in U.S. dollars.
b) SURRENDER OF STOCK
------------------
All or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have
been owned by the Optionee or the Optionee's representative
for three (3) months or more and must have a fair market value
(as determined by the Committee) on the date of exercise of
this Option which, together with any amount paid in a form
other than Shares, is equal to the Purchase Price.
17. CHANGES AND INTERPRETATION
--------------------------
This Agreement may be modified only in writing authorized by the
Committee and by either the Optionee to whom the modification is being
applied or by holders of a majority of options to purchase Stock issued
to Employees by the Corporation to whom the modification is being
applied. Notwithstanding the foregoing, the Committee shall have the
authority to interpret and administer the provisions of this Agreement
and such actions by the Committee shall be final and binding.
10
11
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on
its behalf by its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
SEALY CORPORATION,
a Delaware corporation OPTIONEE
By:/s/ Sealy Corporation
------------------------ -------------------------
Title:
11
12
SCHEDULE A
----------
1. 100,000 Shares shall become exercisable on March 4, 1997.
2. 100,000 Shares shall become exercisable on March 4, 1998.
3. 100,000 Shares shall become exercisable on March 4, 1999.
4. The remaining Shares shall become exercisable on March 4, 2000.
12