EXHIBIT 10.30
EXECUTION COPY
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made as of December 19,
2003 (the "Effective Date"), among THL BEDDING HOLDING COMPANY, A Delaware
corporation ("Holdings"), XXXXXXX COMPANY, a Delaware corporation (the
"Company"), and XXXXXXX X. XXXXXXXXX, an individual resident of the State of
Georgia (the "Executive").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Holdings, through its indirect wholly
owned subsidiary, is acquiring all of the outstanding capital stock of the
Company (the "Transaction");
WHEREAS, Executive is the Executive Vice President and Chief Financial
Officer of the Company, and the Executive desires to continue his employment
with the Company in such capacities after the consummation of the Transaction;
WHEREAS, the Company and Holdings desire that the Executive continue to
serve in the capacities of Executive Vice President and Chief Financial Officer
of the Company after the Effective Date; and
WHEREAS, Holdings, the Company and the Executive, each desire to enter
into this Agreement and set forth in writing the terms and conditions of the
Executive's continued employment with the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
SECTION 1. EMPLOYMENT.
1.1. Agreement. The Company hereby agrees to continue to employ the
Executive after the Effective Date as its Executive Vice President and Chief
Financial Officer, and the Executive hereby agrees to continue to serve the
Company in such capacities, in each case subject to the terms and conditions set
forth herein.
1.2. Term. The period of the Executive's employment under this
Agreement shall Commence on the Effective Date, and shall continue thereafter
for a continuously (on a daily basis) renewing, two (2) year term, without any
further action by either the Company or the Executive, unless either the
Executive or the Company shall provide written notice to the other parties
hereto not to renew such term, specifying in such notice the date of such
non-renewal, in which case this Agreement shall expire on the date that is two
(2) years after the date specified in such non-renewal notice. Notwithstanding
the foregoing, this Agreement may be earlier terminated by the Company or the
Executive in accordance with the terms of Section 8 below. The date on which
termination or expiration of this Agreement is effective pursuant to the
provisions of this Section 1.2 or of Section 8 shall be referred to herein as
the "Termination Date". For all purposes of this Agreement, references to the
"Term" of the Executive's
employment hereunder shall mean the period commencing on the Effective Date and
ending on the Termination Date.
SECTION 2. POSITION AND DUTIES. The Executive shall serve as Executive
Vice President and Chief Financial Officer of the Company, and shall be
accountable to, and shall have such powers, duties and responsibilities as may
from time to time be prescribed by, the Chairman of the Board of Directors of
the Company (the "Company Board") and Chief Executive Officer, the Company Board
or the Board of Directors of Holdings (the "Holdings Board"). The Executive
shall perform and discharge, faithfully, diligently, competently and in good
faith, such duties and responsibilities. The Executive (a) shall devote all of
his business time and attention and his best efforts and ability to the business
and affairs of the Company and its Subsidiaries and (b) shall not engage in
other business activities whether or not compensated during the Term without the
prior written consent of the Holdings Board (other than serving on the Business
Advisory Council of Xxxxxx College of Business at Appalachian State University,
devoting a reasonable amount of time and attention to the management of his
personal affairs and investments or serving as a director or officer of any
charitable, religious, civic, educational or trade organizations, so long as
such activities, individually or in the aggregate, do not interfere with the
performance of the Executive's duties and responsibilities under this
Agreement). The services of the Executive shall be based at the offices of the
Company in the Metropolitan Area; provided, however, that the Executive
acknowledges that substantial travel will be required because the Company
conducts operations and maintains facilities throughout the United States and
elsewhere around the world.
SECTION 3. COMPENSATION. Subject to all of the terms and conditions
hereof and to the performance by the Executive of his duties and obligations to
the Company:
3.1. Salary. As compensation for services performed during the Term,
the Company shall pay the Executive a salary at a rate of $370,000 per annum or
such other amount as may from time to time be established by the Holdings Board
(such annual rate of salary in effect from time to time referred to as the
"Salary"), payable at regular intervals in accordance with the Company's normal
payroll practices now or hereafter in effect. The Holdings Board may consider
and declare from time to time increases in the salary it pays the Executive and
thereby increase the Salary. Any and all increases in the Executive's Salary
pursuant to this Section 3.1 shall cause the level of the Executive's Salary
hereunder to be increased by the amount of each such increase for all purposes
of this Agreement, and the increased level of Salary as provided in this Section
3.1 shall become the level of the Executive's Salary for the remainder of the
Term unless and until there is a further increase in Salary as provided herein.
Except as otherwise provided in this Agreement, the Salary shall be prorated for
any period of less than a full fiscal year.
3.2. Annual Bonus. As additional compensation for services hereunder,
the Executive shall be eligible for a bonus for each Bonus Year commencing on
the first day of each fiscal year and ending on or prior to the last day of the
Term. The amount of any such bonus shall be determined based upon the
achievement of specified levels of operating performance by the Company for such
Bonus Year measured by the business plan approved by the Board for such fiscal
year (the "EBITDA Performance"). The target bonus payable for any Bonus Year
with respect to the EBITDA Performance shall equal 60% of the Salary. The actual
bonus payable for
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any Bonus Year with respect to the EBITDA Performance shall be computed as set
forth on Exhibit A attached hereto and incorporated herein by this reference.
Any bonus payable under this Section 3.2 is referred to herein as an "Annual
Bonus". For the sole purpose of calculating Executive's Annual Bonus for fiscal
year 2003 pursuant to this Section 3.2, the Executive will be presumed to have
commenced employment with the Company as of the first day of fiscal year 2003;
provided, that the target bonus payable with respect to 2003 shall equal 60% of
Executive's actual salary for such year, rather than the Salary described in
Section 3.1 above. The Annual Bonus for 2003 referenced hereunder is in lieu of,
and not in addition to, any bonus payable to the Executive pursuant to the
Former Agreement (as defined in Section 17) or the 2003 Management Bonus Plan.
3.3. Restricted Stock Agreement; Class A Stock. (a) The Executive shall
be included as a participant in Holdings' Equity Incentive Plan (the
"Plan"), pursuant to which the Executive will purchase One Hundred Fourteen
Thousand Seven Hundred and Six (114,706) shares of the Class B Common Stock of
Holdings for $0.01 per share, subject to vesting as provided in the Restricted
Stock Agreement by and between the Executive and Holdings of even date herewith
(the "Restricted Stock Agreement").
(b) The Executive will be required to invest in Holdings
$3,238,275 (the "Deferred Amount") of the proceeds received by him from the
cancellation of certain options in connection with the Transaction by deferring
the Deferred Amount into a deemed investment of shares of Holdings' Class A
Common Stock under Holdings' Deferred Compensation Plan (a copy of which has
been previously provided to the Executive).
3.4. Business Expenses. During the Term, the Executive shall be
entitled to receive prompt reimbursement by the Company for all reasonable
business expenses incurred by him on behalf of the Company or any of its
Subsidiaries or Affiliates (in accordance with the policies and procedures
established by the Board from time to time for the Company's executive officers)
in performing services hereunder; provided, however, that the Executive shall
properly account therefor in accordance with requirements for federal income tax
deductibility and the Company's policies and procedures.
3.5. Fringe Benefits. At the election of the Executive and during the
Term, the Executive shall be entitled to participate in or receive benefits
under any life insurance, health and accident plans, retirement plans and other
similar fringe benefit arrangements made generally available by the Company to
its executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. The Company acknowledges and agrees that the Executive will
continue to participate in and receive benefits under (at the current level) the
employee benefit plans which the Executive is currently participating (except
for the stock option plans which are being cancelled in connection with the
Transaction), subject to changes in such plans applicable to all other employees
similarly situated. Notwithstanding any other arrangements that the Company may
make available from time to time to its other executives or key management
employees, the Salary, the bonuses payable under this Agreement and
participation in the Plan as provided in Section 3.3 of this Agreement shall be
in lieu of the Executive's participation in any other bonus, equity incentive or
equity-type incentive plans established by the Company, except that the
Executive shall be entitled to participate in any supplemental executive
retirement plans, "401(k) plans" and profit sharing plans.
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3.6. Vacations. During the Term, the Executive shall be entitled to
twenty (20) paid working days as vacation in each year and shall also be
entitled to all paid holidays given by the Company to its employees. The paid
vacation days shall be prorated for any period of service hereunder less than a
full year. The Executive shall not be entitled to cash compensation for any
vacation time not taken during the Term and shall not be entitled to accrue
unused vacation.
3.7. Transportation Stipend. During the Term, the Executive shall be
entitled to a stipend of $750.00 each month to cover expenses associated with
transportation, including leasing or owning an automobile; provided, however,
that the Executive shall properly account therefor on his federal and applicable
state tax returns and related documentation in accordance with the requirements
for federal income tax deductibility and the Company's policies and procedures.
3.8. Residence Support. Executive is obligated to the Company under
separate documents regarding an interest free line of credit secured by a junior
mortgage on his former residence in North Carolina. Executive agrees that the
line of credit obligation will be repaid upon the earlier of (i) one week
following the closing of the Transaction or (ii) the sale of the residence. For
a period of up to twelve (12) months from the date hereof, the Company will
reimburse Executive for the costs of carrying the residence for such period,
including real property taxes, mortgage payments, utilities and maintenance
costs. Additionally, if the residence is sold within twelve months from the date
hereof, then, upon such sale, the Company will reimburse the Executive for a
loss incurred in the sale of his house in an amount equal to the difference, if
positive, between his cost basis in the property ($1,200,000) and the greater of
(i) the net sale proceeds and (ii) $1,000,000.
SECTION 4. OFFICES; SUBSIDIARIES AND AFFILIATES; INDEMNIFICATION.
4.1. Generally. The Executive agrees to serve during the Term, if
elected or appointed thereto, in one or more positions as an officer or director
of the Company or any of its Subsidiaries or Affiliates, or as an officer,
trustee, director or other fiduciary of any pension or other employee benefit
plan of the Company or any of its Subsidiaries or Affiliates. Service in such
additional positions will be without additional compensation except for
reimbursement of reasonably related business expenses on the same terms as
provided elsewhere in this Agreement.
4.2. Indemnification. The Company agrees that in connection with the
Executive's service in additional positions as provided under Section 4.1, the
Executive shall be entitled to the benefit of any indemnification provisions in
the charter and by-laws of the Company and any of its Subsidiaries and
Affiliates for which the Executive serves in such an additional position and any
director and officer liability insurance coverage carried by the Company and any
of its Subsidiaries and Affiliates for which the Executive serves as an officer
or director; provided, however, that this Section 4.2 shall not impose on the
Company or any of its Subsidiaries or Affiliates any obligation to include any
such indemnification provisions in its charter or by-laws or to maintain any
such insurance coverage.
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SECTION 5. UNAUTHORIZED DISCLOSURE; INVENTIONS.
5.1. Confidential Information. The Executive acknowledges that the
Company and its Subsidiaries and Affiliates continually develop Confidential
Information, that the Executive may develop Confidential Information for the
Company or its Subsidiaries or Affiliates and that the Executive may learn of
Confidential Information during the course of employment. The Executive will
comply with the policies and procedures of the Company and its Subsidiaries and
Affiliates for protecting Confidential Information and agrees not to disclose to
any Person (except as required by applicable law or for the proper performance
of his duties and responsibilities to the Company and its Subsidiaries and
Affiliates), or use for his own benefit or gain, any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company or any of its Subsidiaries or Affiliates. The Executive understands
that this restriction shall continue to apply for a period of five (5) years
after his employment terminates, regardless of the reason for such termination;
provided that, for any Confidential Information that constitutes Trade Secrets
under applicable law, the restrictions shall continue for as long as such
information remains a Trade Secret.
5.2. Protection of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company or its Subsidiaries or Affiliates and any copies, in
whole or in part, thereof (the "Documents"), whether or not prepared by the
Executive, shall be the sole and exclusive property of the Company or its
Subsidiaries or Affiliates. The Executive shall safeguard all Documents and
shall surrender to the Company at the time his employment terminates, or at such
earlier time or times as the Board or its designee may specify, all Documents
then in the Executive's possession or control.
5.3. Proprietary Rights. Any and all inventions, discoveries,
developments, methods, processes, compositions, works, supplier and customer
lists (including information relating to the generation and updating thereof),
concepts and ideas (whether or not patentable or copyrightable) conceived, made,
developed, created or reduced to practice by the Executive (whether at the
request or suggestion of the Company or otherwise, whether alone or in
conjunction with others, and whether during regular hours of work or otherwise)
prior to or during the Term, which may be directly or indirectly useful in, or
related to, the business, ventures or other activities of or products
manufactured or sold by the Company or any of its Subsidiaries or Affiliates or
any business or products contemplated by the Company or any of its Subsidiaries
or Affiliates while the Executive was or is an employee, officer or director of
the Company (collectively, "Proprietary Rights"), shall be promptly and fully
disclosed by the Executive to the Board and shall be the exclusive property of
the Company as against the Executive and his successors, heirs, devisees,
legatees and assigns, and the Executive hereby assigns to the Company his entire
right, title and interest therein and shall promptly deliver to the Company all
papers, drawings, models, data and other material relating to any of the
foregoing Proprietary Rights conceived, made, developed, created or reduced to
practice by him as aforesaid. All copyrightable Proprietary Rights shall be
considered "works made for hire." The Executive shall, upon the Company's
request and at its expense, execute any documents necessary or advisable in the
opinion of the Company's counsel to assign, and confirm the Company's title in
the foregoing Proprietary Rights and to direct issuance of patents or copyrights
to the Company with respect to such Proprietary Rights as are the Company's
exclusive property as against the Executive and his successors, heirs, devisees,
legatees and
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assigns under this Section 5.3 or to vest in the Company title to such
Proprietary Rights as against the Executive and his successors, heirs, devisees,
legatees and assigns, the expense of securing any such patent or copyright,
however, to be borne by the Company.
SECTION 6. RESTRICTED ACTIVITIES.
(A) Executive acknowledges that (1) the Company has separately
bargained and paid additional consideration for the restrictive covenants
herein; and (2) the Company will provide certain benefits to Executive hereunder
in reliance on such covenants in view of the unique and essential nature of the
services Executive will perform on behalf of the Company and its Subsidiaries
and Affiliates and the irreparable injury that would befall the Company, its
Subsidiaries and Affiliates should Executive breach such covenants.
(B) Executive further acknowledges that his services are of a special,
unique and extraordinary character and that his position with the Company will
place him in a position of confidence and trust with employees of the Company
and its Subsidiaries and Affiliates and with the Company's other constituencies
and will allow him access to Trade Secrets and Confidential Information
concerning the Company and its Subsidiaries and Affiliates.
(C) Executive further acknowledges that the type and periods of
restrictions imposed by the covenants in this Section 6 are fair and reasonable
and that such restrictions will not prevent Executive from earning a livelihood.
(D) Having acknowledged the foregoing, Executive covenants and agrees
with Employer as follows:
6.1. Non-Competition. While the Executive is employed by the Company
and for a period of two (2) years immediately following termination of his
employment (the "Non-Competition Period"), the Executive shall not, directly or
indirectly, in a senior executive or similar capacity, whether as owner,
partner, investor, consultant, agent, employee or co-venturer, compete within
the United States with the Company or any of its Subsidiaries or Affiliates in
any Competitive Business or undertake any planning for any Competitive Business.
6.2. Non-Solicitation of Customers. Without limiting the generality of
the foregoing, during the Non-Competition Period, the Executive will not solicit
or encourage any Person who has been a customer of the Company or any of its
Subsidiaries or Affiliates, and with whom the Executive had business related
contact in connection with Executive's employment during the Term or at any time
in the two years immediately preceding Executive's termination of employment, to
terminate its relationship with any of them.
6.3. Outside Activities. The Executive agrees that, during his
employment with the Company, he will not undertake any outside activity (except
as explicitly allowed pursuant to Section 2), whether or not competitive with
the business of the Company or any of its Subsidiaries or Affiliates, that could
reasonably give rise to a conflict of interest with his duties and obligations
to the Company or any of its Subsidiaries or Affiliates.
6.4. Non-Solicitation of Employees. Acknowledging the strong interest
of the Company in an undisrupted workplace, the Executive further agrees that
while he is employed
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by the Company and for the Non-Competition Period, the Executive will not (a)
solicit, directly or indirectly, any employee holding a position of Vice
President, Director or any position with greater authority or responsibility
with the Company or any of its Subsidiaries or Affiliates for employment by any
other Person, or seek to persuade any employee of the Company or any of its
Subsidiaries or Affiliates to discontinue employment with the Company or any of
its Subsidiaries or Affiliates, or (b) solicit or encourage any independent
contractor providing services to the Company or any of its Subsidiaries or
Affiliates to terminate or diminish its relationship with the Company or any of
its Subsidiaries or Affiliates.
6.5. Ownership of Securities. Notwithstanding the provisions of this
Section 6, the Executive shall have the right to (a) invest in or acquire any
class of securities issued by any Person not engaged in a Competitive Business,
or (b) acquire as a passive investor (with no involvement in the operations or
management of the business) up to 1% of any class of securities which is (i)
issued by any Person engaged in a Competitive Business, and (ii) publicly traded
on a national securities exchange or over-the-counter market.
6.6 No Disparagement. Each of the parties hereto covenants and agrees
that during the Term and during the Non-Competition Period, such party will not,
directly or indirectly, either in writing or by any other medium, make any
disparaging, derogatory or negative statement, comment or remark about the other
parties hereto, or any of them, or Xxxxxx X. Xxx Partners, or any of their
respective officers, directors, employees, Affiliates, Subsidiaries, successors
and assigns, as the case may be; provided, however, that this Section 6.6 shall
not be construed to require any Person to provide other than truthful testimony
when compelled to testify.
SECTION 7. ENFORCEMENT OF COVENANTS. The Executive acknowledges that
he has carefully read and considered all the terms and conditions of this
Agreement, including the restraints imposed upon him pursuant to Sections 5 and
6 of this Agreement. The Executive agrees that such restraints are necessary for
the reasonable and proper protection of the Company and its Subsidiaries and
Affiliates and that each and every one of such restraints is reasonable in
respect to subject matter, length of time and geographic area. The Executive
further acknowledges that, were he to breach any of the covenants contained in
Section 5 or 6 of this Agreement, the damage to the Company would be
irreparable. The Executive therefore agrees that the Company, in addition to any
other remedies available to it, shall be entitled to preliminary and permanent
injunctive relief against any breach or threatened breach by the Executive of
any of such covenants, without having to post bond. The parties further agree
that, in the event that any provision of Section 5 or 6 shall be determined by
any court of competent jurisdiction to be unenforceable by reason of its being
extended over too great a time, too large a geographic area or too great a range
of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.
SECTION 8. TERMINATION. Subject to the respective continuing
obligations of the parties hereto, including those set forth in Sections 5 and
6, the Executive's employment by the Company hereunder may be terminated prior
to the expiration of the Term as follows:
8.1. Death. The Executive's employment hereunder shall terminate upon
his death.
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8.2. Incapacity. If the Executive shall have been unable to perform his
duties hereunder by reason of any physical or mental illness, injury or other
incapacity (a) for any period of sixty (60) consecutive days or (b) for a total
of one hundred twenty (120) days in any period of twelve (12) consecutive
calendar months, in the reasonable judgment of the Holdings Board, after
consultation with such experts, if any, as the Holdings Board may deem necessary
or advisable, the Company may terminate the Executive's employment hereunder by
written notice to the Executive.
8.3. Cause. The Company may terminate the Executive's employment
hereunder for Cause at any time upon written notice to the Executive. For
purposes of this Agreement, the Company shall have "Cause" to terminate the
Executive's employment hereunder upon: (a) the Executive's breach of any of his
obligations set forth in this Agreement, which breach is not cured within
fifteen (15) days after receipt by the Executive of written notice from the
Holdings Board of such breach; (b) the Executive's breach of his fiduciary
duties as an officer or director of the Company or any of its Subsidiaries or
Affiliates, or as an officer, trustee, director or other fiduciary of any
pension or employee benefit plan of the Company or any of its Subsidiaries or
Affiliates; or (c) the Executive's commission of a felony involving fraud,
personal dishonesty or moral turpitude (whether or not in connection with his
employment).
8.4. Other than for Cause. The Company may terminate the Executive's
employment hereunder other than for Cause at any time upon written notice to the
Executive.
8.5. Good Reason. The Executive may terminate the Executive's
employment hereunder for Good Reason at any time upon sixty (60) days' prior
written notice to the Company. In the event of termination of the Executive
pursuant to this Section 8.5, the Holdings Board or the Company Board may elect
to waive the period of notice or any portion thereof. For the purposes of this
Agreement, the Executive shall have "Good Reason" to terminate the Executive's
employment hereunder upon: (a) material diminution in the nature or scope of
Executive's responsibilities, duties or authority, in each case except in the
event of termination of the Executive's employment pursuant to Section 8.1, 8.2,
8.3 or 8.6; provided, however, that the Company's failure to continue
Executive's appointment or election as a director or officer of any of its
Affiliates and any diminution of the business of the Company or any of its
Affiliates, including without limitation the sale or transfer of any or all of
the assets of the Company or any of its Affiliates, shall not constitute "Good
Reason", or (b) material failure of the Company to provide Executive the Salary
and benefits in accordance with the terms of Section 3 hereof.
8.6. Other than for Good Reason. The Executive may terminate his
employment hereunder at any time upon sixty (60) days prior written notice to
the Company. In the event of termination of the Executive pursuant to this
Section 8.6, the Holdings Board may elect to waive the period of notice, or any
portion thereof.
SECTION 9. COMPENSATION UPON TERMINATION.
9.1. Death. In the event of the Executive's death during the Term, (a)
the Company shall pay or transfer, as the case may be, to the Executive's
designated beneficiary or, if no beneficiary has been designated by the
Executive, to his estate, (1) his Salary that is earned and unpaid at the date
of death and (2) on the earlier of (i) the date of the release of the audited
financial statements of the Company for the Bonus Year during which death occurs
or (ii) the date which is one hundred twenty (120) days after the end of such
Bonus Year, an amount equal
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to the product of (x) the Annual Bonus that the Executive would otherwise have
earned for such Bonus Year if death had not occurred, multiplied by (y) a
fraction, the numerator of which is the number of days from the beginning of
such Bonus Year until the date of death and the denominator of which is 365; and
(b) (1) Holdings shall have the right to repurchase the Executive's vested and
unvested shares of the Class B Common Stock of Holdings pursuant to the terms of
the Restricted Stock Agreement; and (2)Holdings shall have the right to
repurchase the Executive's shares of the Class A Common Stock of Holdings
pursuant to the terms of the Securityholders' Agreement among Holdings, the
Executive and the other stockholders of Holdings (the "Securityholders'
Agreement").
9.2. Incapacity. If the Executive's employment shall be terminated by
reason of his incapacity pursuant to Section 8.2, then (a) the Company shall (1)
continue to pay the Executive his Salary, and the Executive shall continue to
participate in the employee benefit, retirement, compensation plans and other
perquisites as provided in Section 3, through the Termination Date, and (2) pay
the Executive on the earlier of (i) the date of the release of the audited
financial statements of the Company for the Bonus Year during which termination
pursuant to Section 8.2 occurs or (ii) the date which is one hundred twenty
(120) days after the end of such Bonus Year, an amount equal to the product of
(x) the Annual Bonus that the Executive would otherwise have earned for such
Bonus Year if termination pursuant to Section 8.2 had not occurred, multiplied
by (y) a fraction, the numerator of which is the number of days from the
beginning of such Bonus Year until the date of termination pursuant to Section
8.2 and the denominator of which is 365; and (b) (1) Holdings shall have the
right to repurchase the Executive's vested and unvested shares of the Class B
Common Stock of Holdings pursuant to the terms of the Restricted Stock
Agreement; and (2) Holdings shall have the right to repurchase the Executive's
shares of the Class A Common Stock of Holdings pursuant to the terms of the
Securityholders' Agreement.
9.3 Cause or Without Good Reason. If the Company shall terminate the
Executive's employment hereunder for Cause pursuant to Section 8.3, or the
Executive shall terminate the Executive's employment hereunder without Good
Reason pursuant to Section 8.6, the Company shall have no further obligations to
the Executive under this Agreement other than the payment of his Salary through
the Termination Date.
9.4. Other than for Cause: Good Reason. If the Company shall terminate
the Executive's employment hereunder without Cause pursuant to Section 8.4 or
the Executive shall terminate his employment hereunder for Good Reason pursuant
to Section 8.5, then (a) the Company shall pay to the Executive:
(1) as soon as reasonably practicable after the Termination Date,
his Salary through the Termination Date;
(2) as soon as reasonably practicable following the last day of
the month in which the Termination Date occurs, his Annual Bonus as
described in Section 3.2, subject to the following sentence. For
purposes of computing the percentage of Targeted EBITDA which has been
achieved pursuant to Exhibit A (the "Applicable Percentage"), the
Company shall compare (i) the actual EBITDA achieved from the beginning
of the fiscal year in which the Termination Date occurs through the
last day of the month in which the Termination Date occurs to (ii) the
budgeted EBITDA from the beginning of the fiscal
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year in which the Termination Date occurs through the last day of the
month in which the Termination Date occurs. The amount of the Annual
Bonus payable to the Executive under this Section 9.4(2) shall be equal
to (x) the applicable percentage of Salary set forth opposite the
Applicable Percentage on Exhibit A, multiplied by (y) the Executive's
Salary paid or payable from the beginning of the fiscal year in which
the Termination Date occurs through the Termination Date; and
(3) until the second anniversary of the Termination Date,
severance at a rate equal to 100% of his Salary in effect at the time
notice of termination is given, such severance to be paid on a monthly
basis or such other time increment as the Executive and the Company
mutually agree; and
(b)(I) Holdings shall have the right to repurchase the Executive's vested and
unvested shares of the Class B Common Stock of Holdings pursuant to the terms of
the Restricted Stock Agreement, and (2) Holdings shall have the right to
repurchase, and the Executive shall have the right to require Holdings to
repurchase, the Executive's shares of the Class A Common Stock of Holdings, in
each case pursuant to the terms of the Securityholders' Agreement.
With respect to any termination of employment to which this Section 9.4 applies,
until the earlier to occur of (1) the second anniversary of the Termination Date
or (2) the date on which the Executive commences other employment in connection
with which the Executive receives medical and dental benefits substantially
comparable to those made available by the Company (including self- employment or
engaging in an enterprise as a sole proprietor or partner) (the "Benefits
Termination Date"), the Company shall, if the Executive was participating in
any Company medical and dental insurance plans pursuant to Section 3.5
immediately prior to the effectiveness of his termination of employment and
subject to any employee contribution applicable to the Executive immediately
prior to such effectiveness, continue to contribute to the cost of the
Executive's participation in such medical and dental insurance plans so long as
the Executive is entitled to continue such participation under applicable law
and plan terms. The obligations of the Company to the Executive under this
Section 9.4 (other than clause (a) of the first sentence of this Section 9.4)
are conditioned upon the Executive's signing a release of claims in the form of
Exhibit B (the "Release") within twenty eight (28) days of the date on which
notice of termination is given and upon such Release remaining in full force and
effect thereafter. All severance payments under this Section 9.4 will be in the
form of salary continuation, payable in accordance with the normal payroll
practices of the Company and will begin at the Company's next regular payroll
period following the effective date of the Release, but shall be retroactive to
the Termination Date.
9.5. Early Termination of Severance Benefits. If the Executive's
employment hereunder is terminated by the Company without Cause pursuant to
Section 8.4 or the Executive shall terminate his employment hereunder for Good
Reason pursuant to Section 8.5, and Executive subsequently engages in the
activities prohibited by Section 6, then the Company may thereafter immediately
terminate and shall not be required to continue on behalf of the Executive or
his dependents and beneficiaries any compensation provided for in Section 9.4
other than those benefits that the Company may be required to maintain for the
Executive under applicable law.
9.6. Continuation of COBRA Coverage. Upon the expiration of the
Company's obligation pursuant to this Section 9 to provide the Executive and his
spouse with the benefits
10
and other perquisites to which he is entitled under the Company's employee
benefit, retirement and compensation plans and this Agreement, the Company shall
continue to offer the coverage required by the Consolidated Omnibus Budget
Reconciliation Act to the Executive and to his spouse, at the Executive's or his
spouse's expense, for the remainder of their natural lives.
9.7. Post-Termination Obligations Generally. Except as expressly set
forth in this Section 9, in the Purchase Agreement and the documents ancillary
thereto and in the Plan, the Restricted Stock Agreement and the Securityholders'
Agreement, the Company and Holdings shall have no further obligations to the
Executive following expiration of the Term, and performance by the Company
and/or Holdings of any obligation specifically provided in this Section 9 shall
constitute full settlement of any claim that the Executive may have on account
of such termination against the Company and/or Holdings or their respective
Subsidiaries and Affiliates and all of their respective past and present
officers, directors, stockholders, controlling Persons, employees, agents,
representatives, successors and assigns and all other others connected with any
of them, both individually and in their official capacities.
9.8. Payments after Death. Should the Executive die after the
termination of his employment with the Company while any amounts are payable to
him hereunder, this Agreement shall inure to the benefit of and be enforceable
by Executive's executors, administrators, heirs, distributees, devisees and
legatees, and all amounts payable hereunder shall be paid in accordance with the
terms of this Agreement to Executive's devisee, legatee or other designee or, if
there is no such designee, to his estate.
SECTION 10. CONFLICTING AGREEMENTS. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of the
Executive's obligations hereunder will not breach or be in conflict with any
other agreement to which the Executive is a party or by which the Executive is
bound and that the Executive is not now subject to any covenants against
competition, non-solicitation or similar covenants that would affect the
performance of the Executive's obligations hereunder or would restrict the
Company in its operations, including hiring any additional executives. The
Executive has provided the Company with true and correct copies of all
agreements that remain binding between the Executive and the Executive's former
employer or employers and any similar agreements governing the Executive's
rights and obligations relating to any former employer. The Executive will not
disclose to or use on behalf of Holdings or the Company any confidential or
proprietary information of a third party without such party's consent.
SECTION 11. WITHHOLDING. All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Company under any applicable law or legal requirement.
SECTION 12. NOTICES. All notices, requests and demands to or upon the
parties hereto to be effective shall be in writing, by facsimile, by overnight
courier or by registered or certified mail, postage prepaid and return receipt
requested, and shall be deemed to have been duly given or made upon: (a)
delivery by hand, (b) one business day after being sent by nationally recognized
overnight courier; or (c) in the case of transmission by facsimile, when
confirmation of receipt is obtained. Such communications shall be addressed and
directed to the
11
parties as follows (or to such other address as either party shall designate by
giving like notice of such change to the other party):
If to the Executive:
Xxxxxxx X. Xxxxxxxxx
0000 Xxxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
If to the Company:
Xxxxxxx Company
Xxx Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx, 00000
Attention: Chief Executive Officer,
General Counsel and Executive Vice
President - Human Resources
Facsimile: (000) 000-0000
with copies to:
Xxxxxx X. Xxx Partners, L.P.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Xxxx X. Xxxxxxxx
Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
and
Weil, Gotshal & Xxxxxx, LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, ESQ.
Facsimile: (000) 000-0000
SECTION 13. DEFINITIONS; CERTAIN RULES OF CONSTRUCTION, Certain
capitalized terms are used in this Agreement with the specific meanings defined
below in this Section 13. Except as otherwise explicitly specified to the
contrary or unless the context clearly requires otherwise, (a) the capitalized
term "Section" refers to sections of this Agreement, (b) the capitalized term
"Exhibit" refers to exhibits to this Agreement, (c) references to a particular
Section include all subsections thereof, (d) the word "including" shall be
construed as "including, without limitation", and (e) references to "$" mean
United States dollars.
13.1. "AAA" is defined in Section 19.
13.2. "Affiliate" shall mean (a) any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with the
Company (or other specified
12
Person), (b) any other Person which, together with its Affiliates (as defined in
clause (a) above), shall, directly or indirectly, own beneficially or control
the voting of at least 10% of the ownership interest in the Company (or other
specified Person) and (c) any other Person of which the Company (or other
specified Person) and its Affiliates (as defined in clauses (a) and (b) above)
shall, directly or indirectly, own beneficially or control the voting of at
least 10% of any class of outstanding capital stock or other evidence of
beneficial interest or of any interest as a general partner or joint venturer.
13.3. "Agreement" is defined in the Preamble to this Agreement.
13.4. "Annual Bonus" is defined in Section 3.2.2.
13.5. "Benefits Termination Date" is defined in Section 9.4.
13.6. "Bonus Year" means fiscal year of the Company, provided, however,
that in the event the fiscal year of the Company is changed, any calculations
made under Section 3.2 and Exhibit A hereto shall be proportionately adjusted as
the Board, in its sole and absolute discretion, shall deem appropriate.
13.7. "Cause" is defined in Section 8.3.
13.8. "Common Stock" means the common stock, $.01 par value, of
Holdings.
13.9. "Company" is defined in the preamble to this Agreement.
13.10. "Company Board" is defined in Section 2.
13.11. "Competitive Business" means any business engaged in selling,
marketing, designing or manufacturing mattresses and mattress-related products.
13.12. "Confidential Information" means any and all information of the
Company and its Subsidiaries and Affiliates embodied in a writing or other
tangible form whether or not constituting a "Trade Secret" (as such term is
defined in Section 10-1-761 of the Official Code of Georgia Annotated) which is
or has been disclosed to Executive or of which Executive became aware as a
consequence of or through Executive's relationship to the Company and its
Subsidiaries and Affiliates and which has value to the Company and its
Subsidiaries and Affiliates and is not generally known to its competitors.
Without limiting the foregoing, "Confidential Information" shall include: (a)
all items of information that could be classified as a Trade Secret; (b) the
names, addresses and special needs or requirements of the customers of the
Company and its Subsidiaries and Affiliates and the nature and amount of
business done with such customers; (c) the names and addresses of employees and
other business contacts of the Company and its Subsidiaries and Affiliates; (d)
the particular names, methods and procedures utilized by the Company and its
Subsidiaries and Affiliates in the conduct and advertising of their business;
(e) application, operating system, communication and other computer software and
derivatives thereof, including, without limitation, sources and object codes,
flow charts, coding sheets, routines, subrouting and related documentation and
manuals of the Company and its Subsidiaries and Affiliates or its subsidiaries;
and (f) marketing techniques, purchasing information, pricing policies, quoting
procedures, financial information, customer data and other
13
materials or information relating to the Company and its Subsidiaries and
Affiliates' manner of doing business. Confidential Information shall not include
any data or information that has been voluntarily disclosed to the public by the
Company and its Subsidiaries and Affiliates (except where such public disclosure
has been made by Executive without authorization) or that has been independently
developed and disclosed by others, or that otherwise enters the public domain
through lawful means.
13.13. "Documents" is defined in Section 5.2.
13.14. "$" is defined in the introductory paragraph to this Section
13.
13.15. "EBITDA Performance" is defined in Section 3.2.
13.16. "Effective Date" is defined in the preamble.
13.17. "Executive" is defined in the preamble.
13.18. "Exhibit" is defined in the introductory paragraph to this
Section 13.
13.19. "Good Reason" is defined in Section 8.5.
13.20. "including" is defined in the introductory paragraph to this
Section 13.
13.21. "Holdings" means THL Bedding Holding Company, a Delaware
corporation.
13.22. "Holdings Board" is defined in Section 2.
13.23. "Metropolitan Area" means the Atlanta, Georgia metropolitan
area.
13.24. Non-Competition Period" is defined in Section 6.1.
13.25. "Person" means any individual, partnership, corporation,
association, trust, joint venture, limited liability company, unincorporated
organization or entity, and any government, governmental department or agency or
political subdivision thereof.
13.26. "Plan defined in Section 3.3.
13.27. "Products" means all products planned, researched, developed,
tested, manufactured, sold, licensed, leased or otherwise distributed or put
into use by the Company or any of its Subsidiaries or Affiliates, together with
all services provided or planned by the Company or any of its Subsidiaries or
Affiliates, during the Executive's employment.
13.28. "Proprietary Rights" is defined in Section 5.3.
13.29. "Purchase Agreement" is defined in the Preamble to this
Agreement.
13.30. "Release" is defined in Section 9.4.
13.31. "Restricted Stock Agreement" is defined in Section 3.3.
14
13.32. "Salary" is defined in Section 3.1.
13.33. "Section" is defined in the introductory paragraph to this
Section 13.
13.34. Securityholders Agreement" is defined in Section 9.1.
13.35. "Subsidiary" means any Person of which the Company (or other
specified Person) shall, directly or indirectly, own beneficially or control the
voting of at least a majority of the outstanding capital stock (or other shares
of beneficial interest) entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, or in which the Company (or
other specified Person) or a Subsidiary thereof shall be a general partner or
joint venturer without limited liability.
13.36. "Term" is defined in Section 1.2.
13.37. "Termination Date" is defined in Section 1.2.
13.38. "Trade Secret" is defined in Section 13.12.
13.39. "Transaction" is defined in the Preamble to this Agreement.
SECTION 14. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
approved by the Board and agreed to in writing by the Executive and such officer
as may be specifically authorized by the Board in connection with such approval.
No waiver by either party hereto at any time of compliance with or of any breach
by the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement and the legal relations created
thereby shall be governed by the domestic substantive laws of the State of
Georgia, without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction. The Executive acknowledges and agrees that, because the
Company's legal remedies may be inadequate in the event of a breach of, or other
failure to perform, any of the covenants and agreements set forth in Section 5
or 6 by the Executive, the Company may, in addition to obtaining any other
remedy or relief available to it (including damages at law), enforce the
provisions of Sections 5 and 6 by injunction and other equitable relief.
SECTION 15. SEVERABILITY. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
15
SECTION 16. COUNTERPARTS. This Agreement may be executed in any one or
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument. Executed
counterparts may be delivered by facsimile transmission.
SECTION 17. ENTIRE AGREEMENT. This Agreement (together with the
Purchase Agreement, the Plan, the Securityholders Agreement and the documents
and agreements ancillary thereto) constitute the entire agreement between the
parties hereto, and supersede any and all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment with the Company. This Agreement supercedes that certain
Employment Agreement dated as of April 1, 2000 among the Company, the Executive
and Xxxxxxx Holdings, Inc. (the "Former Agreement"), the terms and conditions of
which shall have no further force or effect after the Effective Date.
SECTION 18. ASSIGNMENT. This Agreement shall inure to the benefit of
and be binding upon (a) the Executive, his personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees and (b) the Company, Holdings and their respective successors
(including by means of reorganization, merger, consolidation or liquidation) and
permitted assigns. The Company or Holdings may assign this Agreement to any of
its Subsidiaries or to any successor of the Company or Holdings by
reorganization, merger, consolidation or liquidation and any transferee of all
or substantially all of the business or assets of the Company or Holdings or of
any division or line of business of the Company or Holdings with which the
Executive is at any time associated. The Company requires the personal services
of the Executive hereunder and the Executive may not assign this Agreement.
SECTION 19. ARBITRATION. With the exception of Sections 5 and 6, any
unresolved dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted by a single
arbitrator in Atlanta, Georgia in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
("AAA") then in effect; provided, however, that the parties may agree to use an
arbitrator other than those provided by the AAA. The arbitrator shall not have
the authority to add to, detract from, or modify, any provision hereof nor to
award punitive damages to any injured party. The arbitrator shall have the
authority to order back-pay, severance compensation, reimbursement of costs
(including those incurred to enforce this Agreement), together with interest
thereon. A decision by the arbitrator shall be final and binding. Judgment may
be entered on the arbitrator's award in any court having competent jurisdiction.
Responsibility for bearing the cost of the arbitration shall be determined by
the arbitrator and shall be proportional to the arbitrator's decision on the
merits.
SECTION 20. EXPENSES. The Company agrees to pay all the costs and
expenses of Xxxxxx & Xxxxxx, legal counsel for the Executive, associated with
this Agreement and the Transaction.
[SIGNATURES NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, or caused this Agreement to be executed and delivered by its duly
authorized officer, as the case may be, all as of the date first above written.
THL BEDDING HOLDING COMPANY
By: /s/ XXXXXXX X. XXXXX
-----------------------------------
Its: __________________________________
XXXXXXX COMPANY
By: /s/ XXXXXXX X. XXXXX
-----------------------------------
Its: CEO
/s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------------
XXXXXXX X. XXXXXXXXX
17
EXHIBIT A
COMPUTATION OF EBITDA PERFORMANCE
% OF BUDGETED EBITDA
TARGET(1) % OF ANNUAL BONUS % OF SALARY
--------- ----------------- -----------
<90(2) 0 0
90 9.09 5.45
91 18.18 10.91
92 27.27 16.37
93 36.36 21.82
94 45.45 27.27
95 54.55 32.73
96 63.64 38.19
97 72.73 43.64
98 81.82 49.10
99 90.91 54.55
100(2) 100 60
----------
(1) The budgeted EBITDA target will be reset each year. The Board will approve
the budgeted EBITDA target for any fiscal year on or prior to the later of
(a) the date which is 45 days after the end of such fiscal year or (b) the
date which is 15 days after the date of release of the audited financial
statements of the Company for the immediately preceding fiscal year.
(2) Upon attaining 100% of budgeted EBITDA target, the amount of the Annual
Bonus will be increased thereafter by 2% of Salary for each 1% increase in
EBITDA in excess of 100% of the Target. The Annual Bonus is not capped.
18
