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EXHIBIT 10.6
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is entered into as of the
1st day of August, 1997, by and between SEALY CORPORATION, a Delaware
corporation (the "Company"), and XXXXXX X. XXXXX (the "Employee").
WITNESSETH:
WHEREAS, the Company and the Employee (collectively "the Parties") desire
to enter into this Amended and Restated 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 President and Chief
Executive Officer, based on the terms and subject to the
conditions set forth herein. This Agreement replaces that
certain letter employment agreement between the Parties dated as
of March 4, 1996. Such letter employment agreement is hereby
terminated effective as of the date hereof.
(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 third (3rd)
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
two (2) years; 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:
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(a) Hold the position of President and Chief Executive Officer of
the Company reporting to the Board of Directors of the Company
(the "Board");
(b) Have those duties and responsibilities, and the authority,
customarily possessed by the Chief Executive Officer of a
major corporation and such additional duties as may be
assigned to the Employee from time to time by the Board which
are consistent with the position of Chief Executive Officer of
a major corporation;
(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 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.
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. Furthermore, service by the Employee on the boards of directors of
up to two noncompeting companies shall not be deemed to be a violation of this
agreement, provided such service does not interfere with the performance 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
Five Hundred Thirty Thousand Dollars ($530,000.00). This
salary shall be subject to annual review, in December of each
year commencing in December 1997, by the Human Resources
Committee of the Board
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(the "Committee) and may be increased, but not decreased, to
the extent, if any, that the Committee may determine.
(b) The Employee shall participate in the Sealy Corporation Annual
Bonus Plan (the "Bonus Plan") in accordance with the
provisions of the Bonus 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, will be eighty percent (80%) (his
"Target Annual Bonus Percentage") of annual base salary, with
a range of zero percent (0%) to one hundred and twenty percent
(120%) 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, or employees in
general, are eligible to participate. This Subsection 3(c)
shall not be deemed to prevent participation in any special
plan or arrangement providing special benefits to the Employee
which are not available to other employees. 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 the greater of (i) four weeks, or
(ii) the amount of vacation time to which the Employee is
entitled under the Company's vacation policy applicable to its
executive officers.
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(f) The Employee shall be entitled to an automobile allowance of
not less than Seven Thousand Five Hundred Dollars ($7,500.00)
per year and a personal financial planning allowance of not
less than Five Thousand Dollars ($5,000.00) per year.
(g) In addition, the Parties do hereby further confirm the
Employee's entitlement to sixty seven thousand six hundred and
thirty-five (67,635) restricted shares of Class A Common Stock
of the Company ("Class A Shares") pursuant to the Restricted
Stock Grant Agreement dated as of March 4, 1996, between the
Parties (the "Restricted Stock Agreement") and options to
purchase five hundred and eighty-seven thousand three hundred
and forty-two (587,342) additional Class A Shares at the
exercise price of Seven and 23/100 Dollars ($7.23) per Class A
Share, all vesting at a rate of twenty-five percent (25%) per
year (unless accelerated as hereinafter provided) commencing
March 4, 1996, pursuant to that Stock Option Agreement dated
as of March 4, 1996, between the Parties (the "First Option
Agreement"). The Parties also do hereby confirm the grant of
options to purchase seventy-five thousand (75,000) additional
Class A Shares at an exercise price of Nine and 60/100 Dollars
($9.60) under the Company's 1997 Stock Option Plan, pursuant
to that certain Stock Option Agreement dated as of December 4,
1996, between the Parties (the "Second Option Agreement"). 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 Restricted Stock Agreement, the First Option
Agreement, the Second Option Agreement, and the related
Stockholder Agreement (the "Stockholder Agreement") dated as
of March 4, 1996, between the Parties (such four (4)
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.
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(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 Board 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 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.
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(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 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 change in the Employee's reporting
relationship, (vi) 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 geographical center of
Greensboro, North Carolina, or (vii) 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 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 Chief
Executive Officer of such subsidiary or 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
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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)(vi), 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 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
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(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) continue to pay the automobile allowance and the
personal financial planning allowance as provided in
Subsection 3(f) hereof;
(v) pay for executive outplacement services for the Employee
from a nationally recognized executive outplacement firm
at the level provided for the most senior executives,
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.
(vi) In lieu of the payments described in Subsections 5(a)(i)
and 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
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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 the Employee's 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 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 calculated as follows:
(A) The value of the Employee's equity consideration
referred to in Subsections 6(c)(i) and 6(c)(ii)
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represented by the value of Employee's restricted
Class A Shares and the "spread" (the difference
between the fair market value of the Shares
underlying the options and the exercise price) of
the Employee's options for the Class A Shares shall
be calculated as of the date of the Change of
Control based on the per Class A Share "Change of
Control Valuation" (as hereinafter defined) paid in
(or implicit in) the Change of Control transaction
(and irrespective of any subsequent increases or
decreases in such value of the equity
consideration) (the "Equity Value");
(B) If the Employee's Equity Value is less than Three
Million Five Hundred Thousand Dollars
($3,500,000.00), the Transaction Bonus will equal
Three Million Five Hundred Thousand Dollars
($3,500,000.00) minus the Equity Value;
(C) If the Employee's Equity Value is Three Million
Five Hundred Thousand Dollars ($3,500,000.00) or
more, no Transaction Bonus shall be payable to the
Employee; and
(D) If the Employee's Equity Value is greater than Four
Million Seven Hundred Thousand Dollars
($4,700,000.00), the Employee shall not receive the
portion of such Equity Value, allocated as the
Employee shall elect among his equity interests, in
whatever form the Employee shall determine
(including by way of example only, the termination
of a portion of the Employee's options), in excess
of Four Million Seven Hundred Thousand Dollars
($4,700,000.00).
(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
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(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.
(iii) If the Employee is not employed by the Company on the
date of the Change of Control or 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 a Transaction Bonus 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 Three Million Five
Hundred Thousand Dollars ($3,500,000.00);
(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) Upon receipt of the Transaction Bonus, the Employee
(or the Employee's personal representative or
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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.
(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
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and remain throughout the full remaining term of such
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 permits the Employee to convert all (or a
portion) of the Employee's options to purchase Class A
Shares, as well as Class A Shares then owned by the
Employee, into such an equity investment in the Successor,
and if the Employee makes such an investment derived from
all or a portion of such options and/or Class A Shares (the
"Investment"), then the Employee shall, after the Change of
Control, have the right, at any time, upon notice to the
Successor, to sell the Investment to the Successor for a
cash payment equal to the greater of (x) the fair market
value of the Investment as of the date of the notice or (y)
the initial value of the Investment determined on the basis
of the
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Change of Control Valuation.
(vi) 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 to 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 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., 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
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hereinafter defined; or
(iii) there occurs (A) 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) the approval by the
stockholders of the Company of a plan of complete
liquidation of the Company, or (C) the sale or disposition
of the components manufacturing business which is
maintained by the Company and its subsidiaries as of the
date of this Agreement, or (D) the sale or disposition by
the Company of more than fifty percent (50%) of the
Company's assets. 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 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);
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(C) on the day of a merger, consolidation, sale of the
components manufacturing business or sale 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
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 280G Protection. The Company shall make a cash payment
-----------------------
to the Employee at the time set forth below equal to the amount
of excise taxes (i.e., the "excise tax gross-up payment") which
Employee would be required to pay pursuant to Section 4999 of the
Internal Revenue Code of 1986, as amended ("Code"), as a result
of any payments made by or on behalf of the Company or any
successor thereto resulting in an "excess parachute payment"
within the meaning of Section 280G(b) of the Code. In addition
to the foregoing, the cash payment due to the Employee under this
Subsection 6(e) shall be increased by the aggregate of the amount
of federal, state and local income and excise taxes for which the
Employee will be liable on account of the cash payment to be made
under this Subsection 6(e), such that the Employee will receive
the excise tax gross-up payment net of all income and excise
taxes imposed on the Employee on account of the receipt of the
excise tax gross-up payment. The computation of this payment
shall be determined, at the expense of the Company, by an
independent accounting, actuarial or consulting firm selected by
the Company.
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Payment of the cash amount set forth above shall be made at such
time as the Company shall determine, in its sole discretion, but
in no event later than the date five (5) business days before the
due date, without regard to any extension, for filing the
Employee's federal income tax return for the calendar year which
includes the date as of which the aforementioned "excess
parachute payments" are determined. Notwithstanding the
foregoing, there shall be no duplication of payments by the
Company under this Subsection 6(e) in respect of excise taxes
under Section 4999 of the Code to the extent the Company is
making cash payments in respect of such excise taxes for any
other arrangement with the Employee. In the event that the
Employee is ultimately assessed with excise taxes under Section
4999 of the Code as a result of payments made by the Company or
any successor thereto which exceed the amount of excise taxes
used in computing the Employee's payment under this Subsection
6(e), the Company or its successor shall indemnify the Employee
for such additional excise taxes plus any additional excise
taxes, income taxes, interest and penalties resulting from the
additional excise taxes and the indemnity hereunder.
(f) Section 16 Protection. If the Employee is subject to Section 16
---------------------
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)(vi), 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
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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 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, 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. 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
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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 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.
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:
Chairman of the Board
Sealy Corporation
0000 Xxxxxx Xxxxxx - Xxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000 - 1886
(b) If the notice is to the Employee:
Xx. Xxxxxx X. Xxxxx
00000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 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
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
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Page 20
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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 the Employee's 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, 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.
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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 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
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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/ XXXXXXX X. XXXXXX
---------------------------------------
Xxxxxxx X. Xxxxxx
Vice President, General Counsel & Secretary
EMPLOYEE
/s/ XXXXXX X. XXXXX
---------------------------------------
Xxxxxx X. Xxxxx
