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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 25th day of
August, 1997, by and between SEALY CORPORATION, a Delaware corporation (the
"Company"), and XXXXX X. XXXXXX (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company and the Employee (collectively "the Parties")
desire to enter into this Employment Agreement (the "Agreement") as hereinafter
set forth;
NOW, THEREFORE, the Company and Employee agree as follows:
1. EMPLOYMENT TERM.
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(a) During the period specified in Subsection l(b) hereof (the
"Employment Term"), the Company shall employ the Employee,
and the Employee shall serve the Company, as Vice President,
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R & D, based on the terms and subject to the conditions set
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forth herein.
(b) The Employment Term shall commence on the date of this
Agreement. Thereafter it shall end as follows:
(i) there shall be an initial period ending on the second
(2nd) anniversary of the date of this Agreement,
subject to the provision of Subsection 1(b)(ii) below;
(ii) after the first anniversary of the date of this
Agreement, the Employment Term shall be extended one
calendar day for each calendar day that the Employee is
employed by the Company after such first anniversary so
that the remaining Employment Term after such first
anniversary shall always be one (1) year; and
(iii) provided that the Employment Term may terminate prior
to the date specified above in this Subsection 1(b) as
provided in Section 4 hereof.
2. POSITION, DUTIES, AND RESPONSIBILITIES. At all times during the
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Employment Term, the Employee shall:
(a) Hold the position of Vice President, R & D reporting to
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the Chief Executive Officer of the Company (the "Chief
Executive
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Officer");
(b) Have those duties and responsibilities, and the authority,
customarily possessed by the Vice President, R & D of a
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major corporation and such additional duties as may be
assigned to the Employee from time to time by the Board of
Directors of the Company (the "Board") or the Chief Executive
Officer which are consistent with the position of
Vice President, R & D of a major corporation;
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(c) Adhere to such reasonable written policies and directives,
and such reasonable unwritten policies and directives as are
of common knowledge to executive officers of the Company, as
may be promulgated from time to time by the Board or the
Chief Executive Officer and which are applicable to executive
officers of the Company;
(d) Invest in the Company only in accordance with any xxxxxxx
xxxxxxx policy of the Company in effect at the time of the
investment; and
(e) Devote the Employee's entire business time, energy, and
talent to the business, and to the furtherance of the
purposes and objectives, of the Company, and neither directly
nor indirectly act as an employee of or render any business,
commercial, or professional services to any other person,
firm or organization for compensation, without the prior
written approval of the Board or the Chief Executive Officer.
Nothing in this Agreement shall preclude the Employee from devoting
reasonable periods of time to charitable and community activities or the
management of the Employee's investment assets, provided such activities do not
interfere with the performance by the Employee of the Employee's duties
hereunder.
3. SALARY, BONUS AND BENEFITS. For services rendered by the Employee
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on behalf of the Company during the Employment Term, the following salary, bonus
and benefits shall be provided to the Employee by the Company:
(a) The Company shall pay to the Employee, in equal installments,
according to the Company's then current practice for paying
its executive officers in effect from time to time during the
Employment Term, an annual base salary at the initial rate of
One Hundred Seventy-One Thousand Five Hundred Dollars
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($171,500.00). This salary shall be subject to annual review,
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in December of each year commencing in December 1997, by the
Human Resources Committee of the Board (the "Committee) and
may be increased, but not decreased, to the extent, if any,
that the Committee may
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determine.
(b) The Employee shall participate in the Sealy Corporation
Annual Bonus Plan (the "Bonus Plan") in accordance with the
provisions of that Plan as in effect as of the date of this
Agreement. The Employee's Target annual bonus, as established
by the Committee under the Bonus Plan as of the date of this
Agreement, is thirty-five percent (35%) (his "Target Annual
Bonus Percentage") of annual base salary, with a range of
zero percent (0%) to seventy percent (70%) of annual base
salary.
(c) The Employee shall be eligible for participation in such
other benefit plans, including, but not limited to, the
Company's Profit Sharing Plan and Trust, Executive Severance
Benefit Plan, Benefit Equalization Plan, Short-Term and Long
Term Disability Plans, Group Term Life Insurance Plan,
Medical Plan or PPO, Dental Plan, the 401(k) feature of the
Profit Sharing Plan, the 1996 Transitional Restricted Stock
Plan and the 1997 Stock Option Plan, as the Board may adopt
from time to time and in which the Company's executive
officers are eligible to participate. Such participation
shall be subject to the terms and conditions set forth in the
applicable plan documents. As is more fully set forth in
Section 7 hereof, the Employee shall not be entitled to
duplicative payments under this Agreement and the Executive
Severance Benefit Plan.
(d) Without limiting the generality of Subsection 3(c) above, for
so long as such coverage shall be available to the executive
officers of the Company, the Employee shall be eligible to
participate in the Company's Group Term Life Insurance Plan
with a death benefit to be provided at the level of one and
one half (1 1/2) times annual base salary at Company expense,
plus extended coverage with a death benefit to be provided of
at least the level in effect on the date of this Agreement
for the Employee under such Plan at the Employee's discretion
and expense.
(e) The Employee shall be entitled to take, during each one-year
period commencing with December 1, 1996, during the
Employment Term, vacation time equal to at least the greater
of (i) the amount of vacation time to which the Employee is
entitled per year as of the date of this Agreement, or (ii)
the amount of vacation time to which the Employee would have
become entitled if the Company's vacation policy in effect as
of the date of this Agreement and which is applicable to its
executive officers remained in effect throughout the
Employment Term.
(f) In addition, the Parties do hereby further confirm the
Employee's
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entitlement to a number of restricted shares of Class A
Common Stock of the Company ("Class A Shares"), as well as
options to purchase additional Class A Shares pursuant to
various benefit plans or agreements with the Company. The
Parties agree that (a) such restricted Class A Shares and
such options are in addition to, and not in lieu of, any
shares or options which may be granted under any other plan
or arrangement of the Company after the date of this
Agreement, and (b) the various restricted stock agreements
and stock option agreements, and any related Stockholder
Agreement (the "Stockholder Agreement") between the Parties
(such agreements being hereinafter referred to collectively
as the "Pre-existing Agreements"), all remain in full force
and effect except as otherwise provided herein.
Notwithstanding the foregoing, to the extent that any
provision contained herein is inconsistent with the terms of
any of the Pre-existing Agreements, the terms of this
Agreement shall be controlling.
4. TERMINATION OF EMPLOYMENT. As indicated in Subsection 1(b)(iii),
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the Employment Term may terminate prior to the date specified in Subsections
1(b)(i) and 1(b)(ii) as follows:
(a) The Employee's employment hereunder will terminate without
further notice upon the death of the Employee.
(b) The Company may terminate the Employee's employment hereunder
effective immediately upon giving written notice of such
termination for "Cause". For these purposes, "Cause" shall
mean the following:
(i) Commission by the Employee (evidenced by a conviction
or written, voluntary and freely given confession) of a
criminal act constituting a felony;
(ii) Commission by the Employee of a material breach or
material default of any of the Employee's agreements or
obligations under any provision of this Agreement,
including, without limitation, the Employee's
agreements and obligations under Subsections 2(a)
through 2(e) and Sections 9 and 10 of this Agreement,
which is not cured in all material respects within
thirty (30) days after the Chief Executive Officer or
the designee thereof gives written notice thereof to
the Employee; or
(iii) Commission by the Employee, when carrying out the
Employee's duties under this Agreement, of acts or the
omission of any act, which both: (A) constitutes gross
negligence or willful misconduct and (B) results in
material
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economic harm to the Company or has a materially
adverse effect on the Company's operations, properties
or business relationships.
(c) The Employee's employment hereunder may be terminated by the
Company upon the Employee's disability, if the Employee is
prevented from performing the Employee's duties hereunder by
reason of physical or mental incapacity for a period of one
hundred eighty (180) consecutive days in any period of two
consecutive fiscal years of the Company, but the Employee shall
be entitled to full compensation and benefits hereunder until the
close of such one hundred and eighty (180) day period.
(d) The Company may terminate the Employee's employment hereunder
without Cause at any time upon thirty (30) days written notice.
(e) The Employee may terminate employment hereunder effective
immediately upon giving written notice of such termination for
"Good Reason", as defined in Subsection 4(g) below.
(f) The Employee may terminate employment hereunder without Good
Reason at any time upon thirty (30) days written notice.
(g) For purposes of this Agreement, "Good Reason" means the
occurrence of (i) any reduction in either the annual base salary
of the Employee or the Target Annual Bonus Percentage or maximum
annual bonus percentage applicable to the Employee under the
Bonus Plan, (ii) any material reduction in the position,
authority or office of the Employee, (iii) any material reduction
in the Employee's responsibilities or duties for the Company,
(iv) any material adverse change or reduction in the aggregate
"Minimum Benefits," as hereinafter defined, provided to the
Employee as of the date of this Agreement (provided that any
material reduction in such aggregate Minimum Benefits that is
required by law or applies generally to all employees of the
Company shall not constitute "Good Reason" as defined hereunder),
(v) any relocation of the Employee's principal place of work with
the Company to a place more than twenty-five (25) miles from the
geographical center of Cleveland, Ohio, other than a relocation
to a location which is within twenty-five (25) miles from the
geographic center of Greensboro, North Carolina, or (vi) the
material breach or material default by the Company of any of its
agreements or obligations under any provision of this Agreement.
As used in this Subsection 4(g), an "adverse change or material
reduction" in the aggregate Minimum Benefits shall be deemed to
result from any reduction or any series of reductions which, in
the aggregate, exceeds five
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percent (5%) of the value of such aggregate Minimum Benefits
determined as of the date of this Agreement. As used in this
Subsection 4(g), Minimum Benefits are life insurance,
accidental death, long term disability, short term
disability, medical, dental, and vision benefits and the
Company's expense reimbursement policy. The Employee shall
give written notice to the Company on or before the date of
termination of employment for Good Reason stating that the
Employee is terminating employment with the Company and
specifying in detail the reasons for such termination. If the
Company does not object to such notice by notifying the
Employee in writing within five (5) days following the date
of the Company's receipt of the Employee's notice of
termination, the Company shall be deemed to have agreed that
such termination was for Good Reason. The parties agree that
"Good Reason" will not be deemed to have occurred merely
because the Company becomes a subsidiary or division of
another entity following a "Change of Control," as
hereinafter defined, provided the Employee continues to serve
as the Vice President, R & D of such subsidiary or
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division and such subsidiary or division is comparable in
size to the organization consisting of the Company and its
subsidiaries. The parties further agree that "Good Reason"
will be deemed to have occurred if the purchaser, in a Change
of Control transaction, does not assume this Agreement in
accordance with Section 12 hereof.
5. SEVERANCE COMPENSATION. If the Employee's employment is
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terminated, the following severance provisions will apply:
(a) If the Employee's employment is terminated by the Company
other than for Cause or is terminated by the Employee for
Good Reason, then, through the remaining Employment Term as
specified in Subsection 1(b) hereof, determined without
regard to Subsection 1(b)(iii) hereof, (such remaining
Employment Term calculated without regard to Subsection
1(b)(iii), and without regard to whether the Employee elects
accelerated payments of the Employee's annual base salary and
bonus in accordance with Subsection 5(a)(v), is hereinafter
referred to as the "Payment Term") the Company shall:
(i) continue to pay the Employee's annual base salary in
the then prevailing amount and at the times specified
in Subsection 3(a) hereof, or if such annual base
salary has decreased during the one year period ending
on the Employee's termination of employment, at the
highest rate in effect during such one year period;
(ii) continue the Employee's participation in the Bonus Plan
as
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provided in Subsection 3(b) hereof provided that the
Company will:
(A) pay the Employee a bonus under the Bonus Plan for
the partial year period ending on the date of the
Employee's termination of employment calculated as
if the Employee had continued to be employed for
the entire year except that the Employee's bonus
percentage (calculated at the time and in the
manner customary as of the date of this Agreement,
but disregarding the termination of employment of
the Employee) shall be applied to the Employee's
annual base salary payable in accordance with
Subsection 3(a) hereof for the partial year period
ending on the Employee's termination of
employment; and
(B) thereafter, during the remainder of the Payment
Term, a bonus equal to the Employee's Target
Annual Bonus Percentage, multiplied by the
Employee's annual base salary in the amount
specified in Subsection 5(a)(i) payable during the
year (or portion thereof) for which the bonus is
being calculated; with such amounts being payable
when bonuses under the Bonus Plan are customarily
payable, except that the final bonus shall be
payable with the final payment of the annual base
salary under Subsection 5(a)(i) hereof;
(iii) continue in effect the medical and dental coverage,
long and short-term disability protection, and any life
insurance protection (including life insurance
protection being paid for by the Employee), being
provided to the Employee immediately prior to the
Employee's termination of employment, or if any of such
benefits have decreased during the one year period
ending on the Employee's termination of employment, at
the highest level in effect during such one year
period;
(iv) pay for executive outplacement services for the
Employee from a nationally recognized executive
outplacement firm at the level provided for vice-
presidents of major corporations, provided that such
outplacement services will be provided for a one year
period commencing on the date of termination of
employment regardless of the Payment Term; and
(v) In lieu of the payments described in Subsections
5(a)(i) and
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5(a)(ii) hereof, at the Employee's request, submitted
in writing to the Company within five (5) business days
after the date of the Employee's termination of
employment:
(A) the Company will pay the total of the Employee's
annual base salary payments described in
Subsection 5(a)(i) in a single sum within thirty
(30) days following the Employee's termination of
employment; and
(B) his Bonus Plan payments described in Subsection
5(a)(ii) shall be made at the same time as the
Employee's payment under Subsection 5(a)(vi)(A)
but shall be calculated using the Employee's
Target Annual Bonus Percentage for all calculation
purposes.
(b) If the Employee's employment hereunder terminates due to the
Employee's death, disability, termination by the Company for
Cause or termination by the Employee other than for Good Reason,
then no further compensation or benefits will be provided to the
Employee by the Company under this Agreement following the date
of such termination of employment other than payment of
compensation earned to the date of termination of employment but
not yet paid. As more fully and generally provided in Section 16
hereof, this Subsection 5(b) shall not be interpreted to deny the
Employee any benefits to which he may be entitled under any plan
or arrangement of the Company applicable to the Employee.
Likewise, this Subsection 5(b) shall not be interpreted to
entitle the Employee to a bonus under the Bonus Plan following
his termination of employment except as provided in the Bonus
Plan which requires employment on the last day of the Company's
taxable year as a condition to receipt of a bonus thereunder for
such year except in the cases of death, disability or retirement
at or after either age 62 with ten years of service or age 65.
(c) Notwithstanding anything contained in this Agreement to the
contrary, other than Section 16 hereof, if the Employee breaches
any of the Employee's obligations under Section 9 or 10 hereof,
no further severance payments or other benefits will be payable
to the Employee under this Section 5.
6. CHANGE OF CONTROL.
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(a) In General. In the event of a Change of Control as defined in
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this Section 6, the Employee shall become entitled to certain
special benefits and shall have certain special protections so
that he may
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more fully focus on the issues related to such a Change of
Control, and to reward the Employee for the substantial
additional effort involved in a Change of Control. The special
benefits and protections are set forth in this Section 6.
(b) Transaction Bonus. In the event of a Change of Control, then
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subject to the requirements set forth in this Subsection 6(b),
the Employee will receive a cash transaction bonus (the
"Transaction Bonus") calculated and payable as follows:
(i) If the Employee is employed by the Company on the date of
the Change of Control, the total amount of the Transaction
Bonus shall be equal to one hundred and fifty percent
(150%) of his annual base salary in the then prevailing
amount specified in Subsection 3(a) hereof, or if such
annual base salary has decreased during the one year period
ending on his termination of employment, at the highest
rate in effect during such one year period; and
(ii) If the Employee is employed by the Company on the date of
the Change of Control and either is employed by the Company
on the first anniversary thereof or is not employed by the
Company on such first anniversary due to the Employee's
death or disability, the Transaction Bonus shall be payable
as follows:
(A) If the Employee is employed by the Company on the day
of the Change of Control, one-half (1/2) of the
Transaction Bonus shall be payable to the Employee on
such date; and
(B) If the Employee is employed by the Company on the
first anniversary of the Change of Control, the other
one-half (1/2) of the Transaction Bonus shall be
payable to the Employee on such date.
(C) Furthermore, if the Employee is employed by the
Company on the date of the Change of Control but, due
to the Employee's death or disability, the Employee is
no longer employed by the Company on the first
anniversary thereof, the Employee (or the Employee's
beneficiary in the event of the Employee's death)
shall nonetheless be entitled to the other one-half
(1/2) of the Transaction Bonus, which amount shall be
payable on such first anniversary.
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(iii) If the Employee is not employed by the Company on either or
both of the date of the Change of Control and the date of
the first anniversary thereof due to the Employee's
termination by the Company other than for Cause or due to
the Employee's termination of employment for Good Reason,
but if the Employee's Payment Term includes either or both
such dates, the Employee shall nonetheless be entitled to
the Transaction Bonus which would otherwise be payable on
the date or dates which are included in such Payment Term
even though the Employee is no longer then employed by the
Company. Any Transaction Bonus payable in accordance with
this Subsection 6(b)(iii) shall be in an amount, and shall
be payable on a date, determined in accordance with
Subsection 6(b)(iv) or 6(b)(v), whichever is applicable.
(iv) If the Employee is not employed by the Company on the date
of the Change of Control, but a Transaction Bonus is
payable to the Employee in accordance with Subsection
6(b)(iii) hereof, the following shall apply:
(A) The Transaction Bonus shall be in the amount
calculated in accordance with Subsection 6(b)(i);
(B) The Transaction Bonus shall be paid in full to the
Employee (or the Employee's beneficiary in the event
of the Employee's death) on the date of the Change of
Control; and
(C) On the date of the Change of Control, the Employee (or
the Employee's personal representative or beneficiary
in the event of the Employee's death) shall assign to
the Company the Employee's restricted Class A Shares
and the Employee's stock options for Class A Shares
and any other Class A Shares or equity interest in the
Company which the Employee may then own, regardless of
how the Employee may have acquired such restricted
stock, options, Class A Shares or equity interest. In
exchange therefore, the Company shall pay to the
Employee (or the Employee's beneficiary in the event
of the Employee's death), on such date, an amount
equal to the value of the Employee's restricted Class
A Shares and the Employee's stock options for Class A
Shares, to the extent such options are exercisable and
such restricted stock is vested, and any other Class A
Shares or equity interest in the Company
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which the Employee may then own. Such value shall be
calculated using the Class A Share Change of Control
Valuation as hereinafter defined. The value of the
exercisable stock options for this purpose shall be
the amount by which the value of the Class A Shares,
as so determined, exceeds the exercise price.
(v) If the Employee is employed by the Company on the date of
the Change of Control but not on the first anniversary
thereof, but a Transaction Bonus is payable to the
Employee in accordance with Subsection 6(b)(iii) hereof,
the following shall apply:
(A) The Transaction Bonus shall be in the amount
calculated in accordance with Subsection 6(b)(i); and
(B) The portion of the Transaction Bonus remaining unpaid
upon the Employee's termination of employment with
the Company shall be paid to the Employee (or the
Employee's beneficiary in the event of the Employee's
death) within ten (10) days following such
termination of employment.
(vi) Notwithstanding anything contained in this Agreement to
the contrary, if the Employee breaches any of the
Employee's obligations under Section 9 or 10 hereof, no
further Transaction Bonus payments will be payable to the
Employee.
(c) Equity Considerations. If the Employee is employed by the
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Company on the day of the Change of Control, the Employee shall
receive the following equity considerations:
(i) all restricted stock of the Company, owned by the Employee
on the date of the Change of Control, regardless of
whether acquired under the 1996 Transitional Restricted
Stock Plan or under an individual agreement with the
Company or otherwise, will become and remain one hundred
percent (100%) vested;
(ii) all stock options for Class A Shares of the Company, owned
by the Employee on the date of the Change of Control,
regardless of whether acquired under the 1989, 1992 or
1997 Stock Option Plan or under an individual agreement
with the Company or otherwise, will immediately become and
remain throughout the full remaining term of such
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options one hundred percent (100%) vested and fully
exercisable, and such exercise then and thereafter shall
be available on a cashless basis such that the Employee
may receive the net value of the Employee's options
(represented by the amount by which the fair market value
of the Class A Shares exceeds the exercise price) in cash
or Class A Shares as the Employee shall elect, without
outlay of cash but net of all applicable withholding
taxes, which taxes shall be remitted by the Company to the
proper taxing authorities;
(iii) upon any such Change of Control transaction, all
limitations, restrictions or conditions relating to the
Employee's rights to receive, vote, own and/or transfer
any Class A Shares contained in any of the Pre-existing
Agreements or contained in any other document, agreement
or plan shall terminate and shall be of no further force
and effect, except for any registration rights in effect;
and
(iv) if permitted by the purchaser in the Change of Control
transaction (the "Purchaser"), the Company will provide
for the Employee the opportunity to convert all or a
portion, as he shall elect, of the Employee's options to
purchase Class A Shares as well as Class A Shares then
owned by the Employee, into an equity investment in the
entity resulting from Purchaser's transaction (the
"Successor") on a tax favored basis. The amount available
for such investment shall be an amount calculated on the
basis of the per Share price paid in the Change of Control
transaction or series of transactions or implicit in the
valuation of the Change of Control transaction, including
all elements of consideration paid or payable (the "Change
of Control Valuation").
(v) If the Purchaser in the Change of Control transaction does
not permit the Employee to convert (or the Employee
chooses not to convert) all (or a portion) of the
Employee's options to purchase Class A Shares and Class A
Shares then owned by the Employee into equity in the
Successor, then the Employee shall exercise, at the time
of the Change of Control, all options the Employee holds
for Class A Shares (such exercise to provide cash rather
than Class A Shares to the Employee in accordance with the
exercise procedure described in Subsection 6(c)(ii)
hereof), and shall sell to the Company at the time of the
Change of Control all Class A Shares then owned by the
Employee, to the extent such options or Class A Shares are
not converted into equity
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in the Successor. Such exercise of options and sale of
Class A Shares shall yield an amount to the Employee
determined by the Class A Share Change of Control
Valuation.
(d) Change of Control. For purposes of this Agreement, the words
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"Change of Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended, as in effect on the
date of this Agreement (the "Exchange Act"), whether or not the
Company is then subject to such reporting requirements; provided,
that, without limitation, a Change of Control shall be deemed to
have occurred if:
(i) any "person" (as defined in Sections 13(d) and 14(d) of
the Exchange Act), other than Xxxx/Chilmark Fund, L.P., is
or becomes the "beneficial owner" (as defined in Rule 13d-
3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent
(20%) or more of the combined voting power of the
Company's then outstanding securities; provided that a
Change in Control shall not be deemed to occur under this
clause (i) by reason of (A) the acquisition of securities
by the Company or an employee benefit plan (or any trust
funding such a plan) maintained by the Company, or (B)
while Xxxx/Chilmark Fund, L.P. continues to beneficially
own more than fifty percent (50%) of the combined voting
power of the Company's then outstanding securities;
(ii) during any period of one (1) year there shall cease to be
a majority of the Board comprised of "Continuing
Directors" as hereinafter defined; or
(iii) the stockholders of the Company (A) approve a merger or
consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in
the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving entity) more than eighty
percent (80%) of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or
consolidation, or (B) approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of more than fifty percent
(50%) of the Company's assets.
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For purposes of this Subsection 6(d)(iii), a sale of more
than fifty percent (50%) of the Company's assets includes
a sale of more than fifty percent (50%) of the aggregate
value of the assets of the Company and its subsidiaries
or the sale of stock of one or more of the Company's
subsidiaries with an aggregate value in excess of fifty
percent (50%) of the aggregate value of the Company and
its subsidiaries or any combination of methods by which
more than fifty percent (50%) of the aggregate value of
the Company and its subsidiaries is sold.
(iv) For purposes of this Agreement, a "Change of Control"
will be deemed to occur:
(A) on the day on which a twenty percent (20%) or
greater ownership interest described in Subsection
6(d)(i) is acquired or, if later, the day on which
the Xxxx/Chilmark Fund, L.P. ceases to beneficially
own more than fifty percent (50%) of the combined
voting power of the Company's then outstanding
securities, provided that a subsequent increase in
such ownership interest after it first equals or
exceeds twenty percent (20%) shall not be deemed a
separate Change of Control;
(B) on the day on which "Continuing Directors," as
hereinafter defined, cease to be a majority of the
Board as described in Subsection 6(d)(ii);
(C) on the day of a merger, consolidation or sale or
disposition of assets as described in Subsection
6(d)(iii); or
(D) on the day of the approval of a plan of complete
liquidation as described in Subsection 6(d)(iii).
(v) For purposes of this Subsection 6(d), the word "Company"
means Sealy Corporation, and, any other corporation or
business organization in an unbroken chain of
corporations or business organization ending with Sealy
Corporation that owns, directly or indirectly, stock
possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock of Sealy
Corporation other than Xxxx/Chilmark Fund, L.P.
(vi) For purposes of this Subsection 6(d), the words
"Continuing Directors" mean individuals who at the
beginning of any
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period (not including any period prior to the date of
this Agreement) of one (1) year constitute the Board and
any new director(s) whose election by the Board or
nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the
directors then still in office who either were directors
at the beginning of the period or whose election or
nomination for election was previously so approved.
(e) Section 16 Protection. If the Employee is subject to Section 16
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of the Securities Exchange Act of 1934 ("Section 16"), then to
the extent the Employee would be deprived of the benefits of the
equity considerations described herein or under any of the Pre-
existing Agreements or under the 1989, 1992 or 1997 Stock Option
Plan or the 1996 Transitional Restricted Stock Plan, as described
above, or any other plan or arrangement regarding stock of the
Company, by reason of such Section 16 or the Rules issued
thereunder, the Employee shall be provided with the alternative
of receiving a cash payment approximating the loss of such
benefits under a cash compensation plan implemented by the
Company. The Company agrees to have this Agreement, and
specifically this Section 6 approved by the Board in compliance
with Section 16 and Rule 16b-3 thereunder to ensure its
enforceability.
7. SEVERANCE PLAN. It is the intention of the Parties that this
--------------
Agreement provide special benefits to the Employee. If at any time the
Company's Executive Severance Benefit Plan would provide better cash severance
benefits to the Employee than this Agreement, the Employee may elect to receive
such better cash severance benefits in lieu of the cash severance benefits
provided under Subsections 5(a)(i) and 5(a)(ii), or Subsection 5(a)(v), of this
Agreement, whichever is applicable, while continuing to receive any other
benefits or coverages available under this Agreement. If this Agreement would
provide better cash severance benefits to the Employee than the Company's
Executive Severance Benefit Plan, the Employee shall receive the cash severance
benefits under this Agreement, as well as any other benefits or coverages
available under this Agreement. In such case, the cash severance benefits under
this Agreement shall be in lieu of the cash severance benefits payable under the
Company's Executive Severance Benefit Plan.
8. PLAN AMENDMENTS. To the extent any provisions of this Agreement
---------------
modify the terms of any existing plan, policy or arrangement affecting the
compensation or benefits of the Employee, as appropriate, (a) such modification
as set forth herein shall be deemed an amendment to such plan, policy or
arrangement as to the Employee, and both the Company and the Employee hereby
consent to such amendment, (b) the Company will appropriately modify such plan,
policy or arrangement to correspond to this Agreement with respect to the
Employee, or (c) the Company will provide an "Alternative Benefit," as defined
in Section 14 hereof, to or on
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behalf of the Employee in accordance with the provisions of such Section 14.
9. CONFIDENTIAL INFORMATION. The Employee agrees that the Employee
------------------------
will not, during the Employment Term or at any time thereafter, either directly
or indirectly, disclose or make known to any other person, firm, or corporation
any confidential information, trade secret or proprietary information of the
Company that the Employee may acquire in the performance of the Employee's
duties hereunder (except in good faith in the ordinary course of business for
the Company to a person who will be advised by the Employee to keep such
information confidential) or make use of any of such confidential information
except in the performance of the Employee's duties or when required to do so by
legal process, by any governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative body (including
a committee thereof) that requires the Employee to divulge, disclose or make
accessible such information. In the event that the Employee is so ordered, the
Employee shall so advise the Company in order to allow the Company the
opportunity to object to or otherwise resist such order. Upon the termination of
the Employee's employment with the Company, the Employee agrees to deliver
forthwith to the Company any and all proprietary literature, documents,
correspondence, and other proprietary materials and records furnished to or
acquired by the Employee during the course of such employment. In the event of a
breach or threatened breach of this Section 9 by the Employee, the Company will
be entitled to preliminary and permanent injunctive relief, without bond or
security, sufficient to enforce the provisions hereof and the Company will be
entitled to pursue such other remedies at law or in equity which it deems
appropriate.
10. NON-COMPETITION. In consideration of this Agreement, the Employee
---------------
agrees that, during the Employment Term, and for one year thereafter, unless the
Employee has waived the Transaction Bonus and the equity considerations
described in Subsections 6(b) and 6(c), the Employee shall not act as a
proprietor, investor, director, officer, employee, substantial stockholder,
consultant, or partner in any business engaged to a material extent in the
manufacture or sale of (a) mattresses or other bedding products or (b) any other
products which constitute more than ten percent (10%) of the Company's revenues
at the time in direct competition with the Company in any market. If, however,
the Employee has waived the Transaction Bonus and the equity considerations
described in Subsections 6(b) and 6(c), this covenant not to compete shall be
void upon the Employee's termination of employment. The Employee understands
that the foregoing restrictions may limit the Employee's ability to engage in
certain business pursuits during the period provided for above, but acknowledges
that the Employee will receive sufficiently higher remuneration and other
benefits from the Company hereunder than the Employee would otherwise receive to
justify such restriction. The Employee acknowledges that the Employee
understands the effect of the provisions of this Section 10, and that the
Employee has had reasonable time to consider the effect of these provisions, and
that the Employee was encouraged to and had an opportunity to consult an
attorney with respect to these provisions. The Company and the Employee consider
the restrictions contained in this Section 10 to be reasonable and necessary.
Nevertheless, if any aspect of these restrictions is found to be unreasonable or
otherwise unenforceable by a court of
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Page 17
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competent jurisdiction, the Parties intend for such restrictions to be modified
by such court so as to be reasonable and enforceable and, as so modified by the
court, to be fully enforced. In the event of a breach or threatened breach of
this Section 10 by the Employee, the Company will be entitled to preliminary and
permanent injunctive relief, without bond or security, sufficient to enforce the
provisions hereof and the Company will be entitled to pursue such other remedies
at law or in equity which it deems appropriate.
During the ten (10) day period ending on the date of a Change of Control,
the Employee may, by written notice to the Company, elect to waive his
Transaction Bonus and the equity considerations described in Subsections 6(b)
and 6(c). Such waiver shall be irrevocable. In the event of such a waiver, the
Employee's agreement not to compete with the Company as set forth in this
Section 10 shall be void upon his termination of employment.
11. NOTICES. For purposes of this Agreement, all communications
-------
provided for herein shall be in writing and shall be deemed to have been duly
given when hand delivered or mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(a) If the notice is to the Company:
Xx. Xxxxxx X. Xxxxx
Chief Executive Officer
Sealy Corporation
0000 Xxxxxx Xxxxxx - Xxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000-0000
With a copy to:
Xxxxxxx Xxxxxx, Esq.
Vice President and General Counsel
Sealy Corporation
0000 Xxxxxx Xxxxxx - Xxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000-0000
(b) If the notice is to the Employee:
Xx. Xxxxx X. Xxxxxx
0000 Xxxxxx Xxxx Xxxxx
Xxxxxxxxx Xxxxxxx, Xxxx 00000
or to such other address as either party may have furnished to the other in
writing and in accordance herewith; except that notices of change of address
shall be effective only upon receipt.
12. ASSIGNMENT; BINDING EFFECT. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the parties to this Agreement and their respective
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successors, heirs (in the case of the Employee) and permitted assigns. No
rights or obligations of the Company under this Agreement may be assigned or
transferred by the Company except that such rights or obligations may be
assigned or transferred in connection with the sale or transfer of all or
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee expressly assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale or transfer of assets as described in the preceding sentence, it
shall be a condition precedent to the consummation of any such transaction that
the assignee or transferee expressly assumes the liabilities, obligations and
duties of the Company hereunder. No rights or obligations of the Employee under
this Agreement may be assigned or transferred by the Employee other than the
Employee's rights to compensation and benefits, which may be transferred only by
will or operation of law, except as provided in this Section 12.
The Employee shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefits payable hereunder following the Employee's death by
giving the Company written notice thereof. In the absence of such a selection,
any compensation or benefit payable under this Agreement following the death of
the Employee shall be payable to the Employee's spouse, or if such spouse shall
not survive the Employee, to the Employee's estate. In the event of the
Employee's death or a judicial determination of his incompetence, reference in
this Agreement to the Employee shall be deemed, where appropriate, to refer to
the Employee's beneficiary, estate or other legal representative.
13. INVALID PROVISIONS. Any provision of this Agreement that is
------------------
prohibited or unenforceable shall be ineffective to the extent, but only to the
extent, of such prohibition or unenforceability without invalidating the
remaining portions hereof and such remaining portions of this Agreement shall
continue to be in full force and effect. In the event that any provision of
this Agreement shall be determined to be invalid or unenforceable, the Parties
will negotiate in good faith to replace such provision with another provision
that will be valid or enforceable and that is as close as practicable to the
provisions held invalid or unenforceable.
14. ALTERNATIVE SATISFACTION OF COMPANY'S OBLIGATIONS. In the event
-------------------------------------------------
this Agreement provides for payments or benefits to or on behalf of the Employee
which cannot be provided under the Company's benefit plans, policies or
arrangements either because such plans, policies or arrangements no longer exist
or no longer provide such benefits or because provision of such benefits to the
Employee would adversely affect the tax qualified or tax advantaged status of
such plans, policies or arrangements for the Employee or other participants
therein, the Company may provide the Employee with an "Alternative Benefit," as
defined in this Section 14, in lieu thereof. The Alternative Benefit is a
benefit or payment which places the Employee and the Employee's dependents in at
least as good of an economic position as if the benefit promised by this
Agreement (a) were provided exactly as called for by this Agreement,
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Page 19
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and (b) had the favorable economic, tax and legal characteristics customary for
plans, policies or arrangements of that type. Furthermore, if such adverse
consequence would affect the Employee or the Employee's dependents, the Employee
shall have the right to require that the Company provide such an Alternative
Benefit.
15. ENTIRE AGREEMENT, MODIFICATION. Subject to the provisions of
------------------------------
Section 16 hereof, this Agreement contains the entire agreement between the
Parties with respect to the employment of the Employee by the Company and
supersedes all prior and contemporaneous agreements, representations, and
understandings of the Parties, whether oral or written. No modification,
amendment, or waiver of any of the provisions of this Agreement shall be
effective unless in writing, specifically referring hereto, and signed by both
Parties.
16. NON-EXCLUSIVITY OF RIGHTS. Notwithstanding the foregoing
-------------------------
provisions of Section 15, nothing in this Agreement shall prevent or limit the
Employee's continuing or future participation in any benefit, bonus, incentive
or other plan, program, policy or practice provided by the Company for its
executive officers, nor shall anything herein limit or otherwise affect such
rights as the Employee has or may have under any stock option, restricted stock
or other agreements with the Company or any of its subsidiaries. Amounts which
the Employee or the Employee's dependents or beneficiaries are otherwise
entitled to receive under any such plan, policy, practice or program shall not
be reduced by this Agreement except as provided in Section 7 hereof with respect
to payments under the Executive Severance Benefit Plan if cash payments of
annual base salary are made hereunder.
17. WAIVER OF BREACH. The failure at any time to enforce any of the
----------------
provisions of this Agreement or to require performance by the other party of any
of the provisions of this Agreement shall in no way be construed to be a waiver
of such provisions or to affect either the validity of this Agreement or any
part of this Agreement or the right of either party thereafter to enforce each
and every provision of this Agreement in accordance with the terms of this
Agreement.
18. GOVERNING LAW. This Agreement has been made in, and shall be
-------------
governed and construed in accordance with the laws of, the State of Ohio. The
Parties
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agree that this Agreement is not an "employee benefit plan" or part of an
"employee benefit plan" which is subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
19. TAX WITHHOLDING. The Company may withhold from any amounts
---------------
payable under this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation. Where
withholding applies to Class A Shares, the Company shall make cashless
withholding available to the Employee.
20. EXPENSE OF ENFORCEMENT. The Company shall reimburse reasonable
----------------------
attorney fees and expenses incurred by the Employee to enforce the provisions of
this Agreement, even if his claims are not successful, provided they are not
ultimately determined by the court to be frivolous.
21. REPRESENTATION. The Company represents and warrants that it is
--------------
fully authorized and empowered to enter into this Agreement and that the
performance of its obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization.
22. SUBSIDIARIES AND AFFILIATES. Notwithstanding any contrary
---------------------------
provision of this Agreement, to the extent it does not adversely affect the
Employee, the Company may provide the compensation and benefits to which the
Employee is entitled hereunder through one or more subsidiaries or affiliates,
including, without limitation, Sealy, Inc.
23. NO MITIGATION OR OFFSET. In the event of any termination of
-----------------------
employment, the Employee shall be under no obligation to seek other employment.
Amounts due the Employee under this Agreement shall not be offset by any
remuneration attributable to any subsequent employment he may obtain.
24. SOLE REMEDY. The Parties agree that the remedies of each against
-----------
the other for breach of this Agreement shall be limited to enforcement of this
Agreement and recovery of the amounts and remedies provided for herein. The
Parties, however, further agree that such limitation shall not prevent either
Party from proceeding against the other to recover for a claim other than under
this Agreement.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the day and year first above written.
SEALY CORPORATION
By: /s/ XXXXXX X. XXXXX
-----------------------
President & Chief Executive Officer
EMPLOYEE
/s/ XXXXX X. XXXXXX
-----------------------
Vice President, R & D, 8/25/97
