Exhibit 10.22
SEPARATION AGREEMENT
THIS AGREEMENT, dated as of February 20, 1997, is entered into by and between
Select Comfort Corporation, a Minnesota corporation (the "Company"), and Xxxx X.
xx Xxxxx, an individual presently residing in the State of Minnesota (the
"Employee").
RECITALS
A. The Company and the Employee have agreed to certain terms and conditions
relating to the remaining term of the Employee's employment with the
Company and the Employee's separation from the Company.
B. All of the terms and conditions relating to the Employee's employment with
the Company and the Employee's separation from the Company are set forth
herein and this Agreement supersedes and replaces in its entirety any
previous agreement or understanding relating thereto between the Company
and the Employee.
In consideration of the foregoing and the mutual agreements set forth below the
parties hereto agree as follows:
1. TERM OF SERVICE; SEPARATION FROM SERVICE. The Company agrees that the
Employee's employment with the Company will continue until the earlier of
(i) the date that the Employee's successor assumes the Employee's duties
and responsibilities, as determined by the Company, or (ii) April 30, 1997
(the "Separation Date"). The Employee agrees to continue performing
services as an employee of the Company as directed by the Board of
Directors through the Separation Date. On the Separation Date, the
Employee agrees to submit his resignation as an officer of the Company and
all of its subsidiaries. The Employee will continue to participate in all
employee benefit plans for which he is eligible through the Separation
Date. Any compensation or benefits due and owing to the Employee as of the
Separation Date will be paid as of the Separation Date, including accrued
vacation. From and after the Separation Date and for so long as the
Company is obligated to pay the severance compensation set forth in Section
2 below, the Company will pay the premiums for the Employee's family
coverage in the Company's health and dental plans and will continue to pay
the premiums on the existing term life insurance policy for the benefit of
the Employee. The Employee acknowledges that the Company is currently
engaged in a search for the Employee's successor, and the Employee agrees
to cooperate with the Company as reasonably requested by the Company in
connection with such search.
2. SEVERANCE COMPENSATION. Subject to reasonable compliance by the Employee
with the terms and conditions of this Agreement, and subject to the
execution and delivery by the Employee of the release in the form of
Exhibit A attached hereto (the "Release") and the effectiveness of the
Release following the passage of any applicable period of time during which
the Release may be revoked by the Employee, and in consideration for the
obligations of the Employee under Section 7 below, the Company agrees to
pay severance compensation to the Employee over a period of fifteen (15)
months commencing May 1, 1997 at the Employee's current rate of base
salary. Such severance will be paid in accordance with the Company's
standard payroll practices, including timing and manner of payment and the
Company will be entitled to deduct and withhold any amounts necessary to
satisfy any income or employment-related tax requirements.
3. ELIGIBILITY FOR BONUS FOR SECURING FUNDING. The Company further agrees to
pay to the Employee a cash bonus in the amount of $50,000 if the Employee
assists the Company in successfully obtaining "Funding" for the Company, as
defined below, of $5,000,000 or more by April 30, 1997. Such bonus will be
payable upon the closing of such Funding by the Company. The term
"Funding" as used in this Agreement shall mean equity or debt financing, or
any combination of equity or debt financing, and shall also include (i) a
strategic alliance that includes debt or equity financing, (ii) a sale of
all or substantially all of the assets of the Company approved by the Board
of Directors of the Company, (ii) the consummation of a merger involving
the Company after which the shareholders of the Company immediately prior
to the merger no longer control 50% or more of the outstanding shares of
capital stock of the Company, or (iii) the acquisition of 50% or more of
the outstanding shares of capital stock of the Company in a transaction
approved by the Board of Directors of the Company.
4. STOCK OPTIONS. All options to purchase shares of Common Stock of the
Company heretofore granted to the Employee and not previously exercised
will be deemed to be fully vested and will remain exercisable for a period
of up to three (3) months from the Separation Date. To the extent that any
options held by the Employee are not exercised within three (3) months from
the Separation Date, such options will terminate as of such date and will
no longer be exercisable. If requested by the Employee, the Company will
loan the Employee the amount necessary for the purchase of the shares
subject to such options. At the time of the loan, the Employee will
execute a promissory note and a pledge agreement in form and content
satisfactory to the Company providing that: (i) the loan balance will be
due in full upon the earlier of (A) six (6) months following the completion
by the Company of an initial public offering of its securities, or (B)
April 30, 1999; (ii) the loan will bear interest at the rate equal to the
Company's bank borrowing rate in effect at the time of the loan; (iii) the
loan will be secured by a pledge of 150,000 shares issued upon exercise of
such options, which will provide, among other things, that the Company
shall retain possession of such shares until the loan is paid in full. The
outstanding principal amount and accrued interest owing to the company from
the Company's previous loan to the Employee made as of February 28, 1994 in
the original principal amount of $50,000 shall be added to and become
payable in accordance with the terms set forth above and the promissory
note and pledge agreement made as of February 28, 1994 will be replaced and
superseded by the promissory note and pledge agreement delivered pursuant
to this Section 4. In the event that the Company consummates a Funding of
$10,000,000 or more between the date hereof and April 30, 1997, and has not
completed its initial public offering on or before March 31, 1998, the
Company agrees, upon the request of the Employee made at any time during
April of 1998, to extend a loan to the Employee in an amount not to exceed
one-half (1/2) of the Employee's marginal federal income tax liability for
the tax year 1997 resulting solely from the exercise by the Employee of the
stock options referred to above in this Section 4. Such loan will be upon
the same terms and conditions as are set forth above, including the pledge
by the Employee of 150,000 shares of Common Stock to secure the obligation
of the Employee to repay such loan.
5. OPPORTUNITY TO SELL SHARES. The Company agrees to use its good faith
efforts to enable the Employee to participate by selling up to 50,000
shares in any significant sale of equity to new investors in which there
may be opportunities for participation by selling shareholders, including
for example, in connection with: (i) a public offering in which selling
shareholders are able to participate in such a manner that does not
interfere with the successful marketing of shares to be sold by the
Company, as determined by the Company based on advice from the Company's
underwriters; or (ii) an investment by a strategic or financial partner in
the Company that is willing to acquire shares from one or more selling
shareholders. Notwithstanding the foregoing, the Employee understands and
acknowledges that: (i) the requirements of the Company to raise funds
through equity financing shall take precedence over the opportunities for
selling
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shareholders to liquidate shares; and (ii) the Company has granted
certain contractual registration rights to the holders of the Company's
preferred stock and may grant additional registration rights to other
holders of capital stock of the Company in the future, and nothing
contained in this Agreement shall be construed to interfere with or
supersede any such contractual rights or to require the Company to
violate, amend or modify any such contractual rights. The Company
further agrees that in the event that the Company consummates a Funding
of $10,000,000 or more on or before April 30, 1997, then subject to such
shareholder approval as may be necessary under the Company's Articles of
Incorporation or pursuant to contractual commitments to preferred
stockholders of the Company, which the Company agrees to use its
reasonable good faith efforts to obtain, the Company agrees, at the
Employee's option exercisable at any time within three (3) months after
closing of the Funding described above, to purchase up to 50,000 shares
of Common Stock from the Employee at the same effective price per share
of Common Stock as is paid in the Funding. In the event that the Funding
is in the form of debt financing from which an effective price per share
of Common Stock is not readily determinable, the Company and the
Employee agree that the valuation of the Common Stock shall be the fair
market value as may be agreed upon by the Company and the Employee based
on arms-length negotiations or based upon an agreed upon appraisal
methodology.
6. OUTPLACEMENT SERVICES. The Company will provide the Employee with
outplacement services or the establishment of office services for the
continuing career development of the Employee, as requested by the
Employee, for a period of up to one (1) year and in an amount not to exceed
$10,000.
7. NON-COMPETITION AND NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The
Employee agrees that from and after the date hereof and through a period of
one (1) year following the cessation of the severance payments provided for
in Section 2 above, the Employee will not alone or in any capacity with any
other person or entity:
A. directly or indirectly engage in any commercial activity that competes
with the Company's business anywhere in the world; or
B. in any way interfere or attempt to interfere with the Company's
relationships with any of its current or potential vendors, suppliers,
distributors or customers; or
C. employ or attempt to employ any of the Company's employees so long as
they remain employees of the Company.
The Employee further agrees that from and after the date hereof and for a
period of five (5) years following the cessation of the severance payments
provided for in Section 2 above, except as required in the performance of
the Employee's duties for and on behalf of the Company, the Employee will
not use or disclose to any party any of the Company's proprietary or
confidential information.
8. SERVICE ON BOARD OF DIRECTORS/BOARD OBSERVATION RIGHTS. The Company and
the Employee agree that he will continue to serve on the Board of Directors
of the Company until the earliest of (i) the date on which the Employee
voluntarily resigns from the Board of Directors; (ii) the date on which the
shareholders elect a successor to the Employee's position on the Board of
Directors; or (iii) the date on which the Board determines to nominate
another person to fill the Employee's position on the Board of Directors.
Thereafter the Company agrees that the Employee will be given notice of and
the right to attend as a non-voting observer all meetings of the full Board
of Directors of the Company until the earliest of: (i) the date that the
Company completes an initial
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public offering of its securities; or (ii) the date that the Employee
ceases to own or have the contractual right to acquire an aggregate of
five hundred thousand or more shares of the Company's Common Stock. The
Company also agrees to give the Employee the same information as is
provided to other Board observers so long as the Employee has rights to
attend Board meetings. Notwithstanding the foregoing, the Employee
acknowledges that there may be occasions during meetings of the Board of
Directors when observers are asked to leave the meeting to enable only
the full Board of Directors to meet in executive session, and the
Employee agrees to leave any meeting of the Board of Directors as and
when so requested.
9. NON-DISPARAGEMENT. The Employee agrees that he will not, at any time,
disparage, demean or criticize, or do or say anything to cause injury to,
the business, reputation, management, employees or products of the Company.
The Company agrees that it will not, at any time, disparage, demean or
criticize, or do or say anything to cause injury to the reputation or
career development of the Employee. In addition to any other damages or
remedies that may be available to a non-breaching party for any breach of
this Section 9, any breaching party shall further be obliged to the
non-breaching party for any reasonable attorneys fees and costs incurred by
the non-breaching party to enforce the provisions of this Section 9.
10. CONFIDENTIALITY AGREEMENT. The Company and the Employee each agree that
they will hold the facts and circumstances of this Agreement in strict
confidence and will not reveal the existence or the terms of this Agreement
to anyone except as may be required by law. Notwithstanding the foregoing,
each of the parties hereto will be entitled to advise their respective
professional advisors of the terms hereof, and the Employee will be
entitled to discuss the terms hereof with immediate family members.
11. NO OTHER COMPENSATION. The Employee agrees and understands that he is
entitled to no other compensation other than as expressly enumerated in
this Agreement and will not accrue or become entitled to any benefits other
than as expressly enumerated herein. The Employee also understands that
payments made pursuant to this Agreement may be subject to withholding of
applicable income and other employment-related taxes and consents to the
Company's right to withhold from such payments. Furthermore, the Employee
acknowledges that the benefits under this Agreement are more than he would
have received under normal policies in the absence of this Agreement and
the attached Release.
12. KNOWING AND WILLFUL AGREEMENT. The Employee hereby acknowledges he fully
understands and accepts the terms of this Agreement, that his signature is
freely, voluntarily and knowingly given, and that he has been provided a
full opportunity to review and reflect on the terms of this Agreement and
to obtain the advice of legal counsel of his choice, which advice the
Company has encouraged him to obtain.
13. RESCISSION PERIOD. After executing this Agreement, the Employee
understands that he may rescind this Agreement by delivering written notice
of such rescission within fifteen (15) days of this date of such execution
by certified mail, return receipt requested, to Select Comfort Corporation,
0000 Xxxxxxx Xxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, Attn.: Chairman of
the Board. The Employee understands that this Agreement will not become
effective until the end of such 15-day period and only if the Employee does
not rescind this Agreement.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all previous negotiations, representations and
agreements heretofore made by the parities with respect to the subject
matter hereof. No amendment waiver or discharge hereof shall be valid
unless in writing and executed by both parties hereto.
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15. GOVERNING LAW. The laws of the State of Minnesota will govern the
validity, construction and performance of this Agreement, without regard to
the conflict of law provisions of any jurisdictions. Any legal proceeding
related to this Agreement, will be brought in an appropriate Minnesota
court, and both the Company and the Employee hereby consent to the
exclusive jurisdiction of that court for this purpose.
16. SEVERABILITY. Whenever possible, each provision of this Agreement will be
interpreted so that it is valid under applicable law. If any provision of
the Agreement is to any extent rendered invalid under applicable law, that
provision will still be effective to the extent it remains valid. The
remainder of this Agreement also will continue to be valid, and the entire
Agreement will continue to be valid in other jurisdictions.
17. NO ASSIGNMENT. The Employee may not assign this Agreement to any third
party for whatever purpose without the express written consent of the
Company. The Company may not assign this Agreement to any third party,
except by operation of law through merger, consolidation, liquidation or
recapitalization, or by sale of all or substantially all of the assets of
the Company, without the express written consent of the Employee.
18. REMEDIES. The parties hereto agree that the rights granted by this
Agreement are both unique and special, and the parties contemplate that
enforcement of this Agreement may be had by recourse to the equitable
remedies available in courts of appropriate jurisdiction in addition to any
other remedies which may be or may become available at law.
19. BINDING EFFECT. This Agreement and the obligations of the respective
parties hereunder shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto. In furtherance of, and not
in limitation of, the foregoing, the Company agrees that the provisions of
this Agreement shall be binding upon any successor to the business and
assets of the Company and the provisions of this Agreement for the benefit
of the Employee shall inure to the benefit of the Employee's estate in the
event of the Employee's death.
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The parties have duly executed this Agreement as of the date set forth above.
SELECT COMFORT CORPORATION
By: /s/
-----------------------------------------
Its: Board Compensation Committee Chairman
XXXX X. XX XXXXX
/s/
---------------------------------------------
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EXHIBIT A
RELEASE
I, Xxxx X. xx Xxxxx, for good and valuable consideration, do hereby fully and
completely release and waive any and all claims, complaints, causes of action or
demands of whatever kind, which I have or may have against Select Comfort
Corporation. its predecessors, successors, subsidiaries and affiliates and all
of its past and present board members, officers, employees, consultants and
agents of those persons and companies for any actions, conduct, decisions,
behavior or events relating to or arising out of the terms, conditions, or
circumstances of my employment and separation from employment with Select
Comfort Corporation occurring up through the date of my signature on this
Release.
I understand and accept that I am giving up any claims, complaints, causes of
actions or demands which I have or may have against Select Comfort Corporation
relating in any way to the terms, conditions or circumstances of my employment
and my separation from employment including, but not limited to, claims for
employment discrimination prohibited under Title VII of the Federal Civil Rights
Act of 1964, as amended, the Civil Rights Act of 1991, the Age Discrimination in
Employment Act, the Americans With Disabilities Act and the Minnesota Human
Rights Act, any other state or federal statutes and all claims which I may have
based on statutory or common law claims for negligence or other breach of duty,
wrongful discharge, breach of express or implied contract, sexual harassment,
promissory estoppel, breach of any express or implied promise,
misrepresentation, fraud, retaliation, negligent or intentional infliction of
emotional distress, defamation, invasion of privacy, tortuous interference with
contract, negligent hiring, retention or supervision, retaliatory discharge
contrary to public policy and any other theory whether legal or equitable.
I acknowledge that I have been given 21 days to consider whether I should enter
into this Release and have been advised to consult with legal counsel of my
choice, which I have done.
By my signature below, I acknowledge that I freely, voluntarily and knowingly
accept the terms of this Release. I believe that the money and other
consideration I am receiving from Select Comfort Corporation is a full and fair
payment for this Release. I understand that I may rescind this Release if I do
so in writing delivered by certified mail, return receipt requested, to Select
Comfort Corporation in the care of the Chairman of the Board, 0000 Xxxxxxx Xxxx
Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 postmarked within fifteen days of the date
below. I further acknowledge that I have been given the full opportunity to
review and reflect on the terms of this Release and have consulted with legal
counsel.
/s/
----------------------------
Xxxx X. xx Xxxxx
Subscribed and sworn to
before me this 20 day
of February, 1997
/s/
--------------------------
Notary Public
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