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EXHIBIT 10.13
EXECUTION COPY
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is dated as of June 30, 2000, by and
among Crescent Sleep Products Company, a Delaware corporation (the "Company"),
Sleepmaster L.L.C., a New Jersey limited liability company ("Sleepmaster"), and
Xxxxxxx Xxxxxxx (the "Executive").
WHEREAS, as an inducement to the Company Group to enter into
this Agreement, the Executive has agreed to the provisions of this Agreement
including, without limitation, Sections 3, 4 and 5;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. As used herein, the following terms shall have
the following meanings.
"Affiliate" means, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"Board" means the Company's board of directors.
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized to close in New
York, New York.
"Cause" means (i) a material breach of the Executive's
covenants under this Agreement or any other agreements with the Company or its
Subsidiaries and such breach shall not have been cured within 15 days after
written notice to the Executive; provided, that a breach of any of the
Executive's covenants contained in Sections 3, 4 or 5 of this Agreement shall be
deemed material, (ii) the commission by the Executive of a felony, a crime
involving moral turpitude or other act causing material harm to the standing and
reputation of the Company or any of its Subsidiaries, or (iii) the Executive's
repeated wilful failure to comply with the reasonable and lawful written
directives of the Board.
"Company Group" means the Company, Holdings, Sleepmaster and
their respective Subsidiaries.
"Disability" means the inability, due to illness, accident,
injury, physical or mental incapacity or other disability, of the Executive to
carry out effectively his duties and obligations to the Company or to
participate effectively and actively in the management of the Company or a
Subsidiary of the Company for a period of at least 90 consecutive days or for
shorter periods aggregating at least 120 days (whether or not consecutive)
during any twelve-month period, as determined in the reasonable judgment of the
Board.
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"EBITDA" for any period, means the net income of the Company
giving effect to the payment of all bonuses, determined in accordance with GAAP
on a basis consistent with the 1999 audited consolidated financial statements of
the Company as audited by Xxxxxx Xxxxxxxx LLP excluding (i) any effect of any
acquisitions by the Company, Sleepmaster or any of their Affiliates, (ii) any
noncash reversals of accruals, (iii) any gain realized upon the disposition of
any property, plant and equipment not in the ordinary course of business, (iv)
any extraordinary or nonrecurring gain, and (v) any interest or similar income
plus to the extent reflected as an expense in the determination of net income,
(A) interest or similar expense, (B) federal, provincial or municipal/state or
local income taxes, (C) depreciation and amortization of tangible and intangible
property of the Company except for any depreciation or amortization recorded
related to the impairment of assets acquired by Sleepmaster pursuant to the
Merger Agreement, (D) any extraordinary or non-recurring losses, (E) any loss
realized upon the disposition of any property, plant and equipment not in the
ordinary course of business and (F) any intercompany charges.
"GAAP" means U.S. generally accepted accounting principles,
as in effect from time to time and as adopted by the Company with the consent
of its independent public accountants, consistently applied.
"Good Reason Event" means (i) a material breach of this
Agreement by the Company, (ii) the relocation of the Executive's office more
than 25 miles from Greensboro, North Carolina, or (iii) a substantial reduction
by the Company of the Executive's job responsibilities which is not connected to
the Executive's illness or disability (prior to a determination that the
Executive has a Disability).
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, limited liability company, association or other
business entity of which (i) if a corporation or a limited liability company, a
majority of the total voting power of securities entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a partnership, limited liability company,
association or other business entity, a majority of the partnership or other
similar ownership interest thereof is at the time owned or controlled, directly
or indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a partnership, limited liability company,
association or other business entity if such Person or Persons shall be
allocated a majority of partnership, limited liability company, association or
other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, limited liability company,
association or other business entity.
"Termination Year" means that fiscal year of the Company
during which the Employment Period ends pursuant to the terms of Section 2(d)
hereof.
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2. Employment.
(a) Employment. The Company agrees to employ the Executive,
and the Executive hereby accepts employment with the Company, upon the terms and
conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in Section 2(d) (the "Employment Period").
(b) Position and Duties.
(i) Commencing on the date hereof and continuing
during the Employment Period, the Executive shall serve as Vice President of
Sales of the Company under the supervision and direction of the President or the
Board.
(ii) The Executive shall devote his best efforts and
his full business time and attention (except for permitted vacation periods and
reasonable periods of illness other than Disability) to the business and affairs
of the Company. The Executive shall perform his duties and responsibilities to
the best of his abilities in a diligent, trustworthy, businesslike and efficient
manner. Subject to the provisions of Sections 3, 4 and 5 of this Agreement,
nothing in this Section 2(b) will prevent the Executive from participating in
reasonable charitable activities and personal investment activities so long as
such activities shall not interfere with his performance of his obligations
under this Agreement.
(c) Base Salary and Benefits.
(i) Base Salary. During the Employment Period, the
Executive's base salary shall be $140,000 per annum (the "Base Salary"), which
salary shall be paid by the Company in regular installments in accordance with
the Company's general payroll practices and shall be subject to customary
withholding. The Executive's Base Salary will be subject to review on or about
January 1 of each fiscal year during the Employment Period.
(ii) Executive Bonus Plan. For each fiscal year during
the Employment Period, the Executive will be eligible to receive a bonus based
on the Company's achievement of the Target EBITDA for such fiscal year. Target
EBITDA for the Company shall be $10,400,000 for the period of July 1st through
the end of fiscal year 2000 and for each subsequent fiscal year shall be
determined by the Board no later than March 31st of such fiscal year.
(A) Once the Board has determined (which
determination shall be made within thirty (30) days from the issuance of the
Company's audited financial statements) the percentage of EBITDA achieved for
such fiscal year as compared to the Target EBITDA for such fiscal year (the
"Achieved EBITDA Percentage"), so long as the Achieved EBITDA Percentage for
such fiscal year equals or exceeds 80%, the Executive shall be entitled to
receive a bonus payment in an amount equal to the product of (x) the Bonus
Multiple (as set forth opposite the Achieved EBITDA Percentage below), (y) 40%
and (z) the Executive's Base Salary for such fiscal year (or, with respect to
fiscal year 2000, the prorated portion of such fiscal year beginning July 1,
2000). The bonus payment shall be made within five (5) days of the Board's
determination. The bonus payment shall be subject to customary withholding.
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Achieved EBITDA Percentage Bonus Multiple
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80% 50%
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100% 100%
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110% 110%
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120% 120%
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130% 130%
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(B) Each Bonus Multiple set forth above shall
increase linearly as the Achieved EBITDA Percentage increases; therefore, so
long as the Achieved EBITDA Percentage equals or exceeds 80%, in the event the
actual Achieved EBITDA Percentage falls between any of the target Achieved
EBITDA Percentages set forth above, the applicable Bonus Multiple shall be
adjusted accordingly; provided, that in no event shall the Bonus Multiple exceed
130%. For example, (1) in the event the actual Achieved EBITDA Percentage is
90%, the Bonus Multiple shall be 75% or (2) in the event the actual Achieved
EBITDA Percentage is 115%, the Bonus Multiple shall be 115%.
(iii) Benefits. In addition to the Base Salary and any
bonuses payable to the Executive pursuant to Section 2(c)(ii), the Executive
shall be entitled, during the Employment Period, to all benefits set forth on
Schedule A hereto (the "Benefits").
(iv) Expenses. The Company shall reimburse the
Executive for all reasonable expenses incurred by him in the course of
performing his duties under this Agreement which are consistent with the Company
Group's policies in effect from time to time with respect to travel,
entertainment and other business expenses, subject to the requirements of the
Company Group with respect to reporting and documentation of such expenses.
(d) Term. The Employment Period shall end on June 30, 2003,
subject to earlier termination (x) by reason of the Executive's death or
Disability, (y) by resolution of the Board, with or without Cause or (z) upon
the Executive's voluntary resignation with or without a Good Reason Event.
(i) If the Employment Period is terminated on or
before June 30, 2003:
(A) by resolution of the Board other than for
Cause or as a result of the Executive's voluntary resignation within 15 days of
a Good Reason Event, the Executive shall be entitled to receive (1) all
previously earned and accrued but unpaid Base Salary up to the date of such
termination, (2) a portion of the bonus payment earned by the Executive during
the Termination Year pro rated based on the number of days of the Termination
Year prior to the date of termination, which such payment will be made when the
bonus payments for such Termination Year are otherwise due, and (3) Base Salary
and Benefits from the date of termination through the period that is the lesser
of (x) the period ending on June 30, 2003 or (y) the period ending on the one
year anniversary of the date of termination.
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(B) as a result of the Executive's death, the
Executive's estate shall be entitled to receive (1) all previously earned and
accrued but unpaid Base Salary up to the date of such termination and (2) a
portion of the bonus payment earned by the Executive during the Termination Year
pro rated based on the number of days of the Termination Year prior to the date
of termination due to the Executive's death, which such payment will be made
when the bonus payments for such Termination Year are otherwise due, but shall
not be entitled to any further Base Salary, bonus payments or Benefits for that
year or any future year, or to any other severance compensation of any kind,
nature or amount.
(C) as a result of the Executive's Disability,
the Executive shall be entitled to receive (1) all previously earned and accrued
but unpaid Base Salary up to the date of such termination, but shall not be
entitled to any further Base Salary, bonus payments or Benefits for that year or
any future year, or to any other severance compensation of any kind, nature or
amount.
(D) as a result of the Executive's voluntary
resignation other than within 15 days following a Good Reason Event, or by
resolution of the Board for Cause, the Executive shall be entitled to all
previously earned and accrued but unpaid Base Salary up to the date of such
termination but shall not be entitled to any further Base Salary, bonus payments
or Benefits for that year or any future year, or to any other severance
compensation of any kind, nature or amount.
(ii) Following the termination of the Employment
Period:
(A) the Executive agrees that: (1) the
Executive shall be entitled to the payments provided for in Section
2(d)(i)(A), if any, if and only if Executive has not breached as of the date of
termination of the Employment Period the provisions of Sections 3, 4 and 5
hereof and does not breach such sections at any time during the period for
which such payments are to be made and (2) the Company's obligation to make
such payments will terminate upon the occurrence of any such breach during any
such severance period.
(B) any payments pursuant to Sections
2(d)(i)(A)(1) shall be paid by the Company in regular installments in accordance
with the Company's general payroll practices and shall be subject to customary
withholding, and following such payments none of the Company Group shall have
any further obligation to the Executive pursuant to this Section 2(d) except as
provided by law.
(iii) The Executive hereby agrees that except as
expressly provided herein, no severance compensation of any kind, nature or
amount shall be payable to the Executive and except as expressly provided
herein, the Executive hereby irrevocably waives any claim for severance
compensation.
(iv) Except as provided in Section 2(d)(i)(A) above,
all of the Executive's rights to Benefits hereunder (if any) shall cease upon
the termination of the Employment Period.
(v) The Executive has no obligation to seek or obtain
other engagements or employment to mitigate any damages to which the Executive
may be entitled by reason of any
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termination of this Agreement pursuant to Sections 2(d)(i)(A). However, if the
Executive obtains other engagements or employment of any nature and in any
location, the total compensation actually earned by the Executive from such
other employment or engagements during the period that he is to receive
payments, if any, pursuant to Section 2(d)(i)(A) shall reduce any amounts which
the Company would otherwise be required to pay the Executive under this
Agreement.
3. Confidential Information. The Executive acknowledges that
the information, observations and data obtained by him while employed by the
Company Group concerning the business or affairs of the Company Group,
including any business plans, pricing information, sales figures, profit or
loss figures, information relating to customers, clients, suppliers, sources of
supply and customer lists ("Confidential Information") are the property of such
member of the Company Group. Therefore, the Executive agrees that, except as
required by law or court order, he shall not disclose to any unauthorized
person or use for his own account any Confidential Information without the
prior written consent of the Board, unless and to the extent that the
aforementioned matters become generally known to and available for use by the
public other than as a result of the Executive's acts or omissions to act. The
Executive shall deliver to the Company at the termination of such Executive's
employment, or at any other time the Company may request, all memoranda, notes,
plans, records, reports, computer tapes and software and other documents and
data (and copies thereof) relating to the Confidential Information, Work
Product (as defined below) and the business of the Company Group which he may
then possess or have under his control.
4. Inventions and Patents. The Executive agrees that all
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports, and all similar or related information which relates to the
Company Group's actual or anticipated business, research and development or
existing or future products or services and which are conceived, developed or
made by the Executive while employed by the Company Group ("Work Product")
belong to such member of the Company Group. The Executive will promptly disclose
such Work Product to the Board and perform all actions reasonably requested by
the Board (whether during or after the Employment Period) to establish and
confirm such ownership (including, without limitation, assignments, consents,
powers of attorney and other instruments).
5. Noncompete, Nonsolicitation.
(a) The Executive acknowledges that in the course of his
employment with the Company he has become familiar, and he will become familiar,
with the Company Group's trade secrets and with other Confidential Information
and that his services have been and will be of special, unique and extraordinary
value to the Company Group. Therefore, the Executive agrees that, during the
time he is employed by the Company Group and during any applicable
Post-Termination Period (the "Noncompete Period"), he shall not directly or
indirectly own, operate, manage, control, participate in, consult with, advise,
provide services for, or in any manner engage in any business (including by
himself or in association with any person, firm, corporate or other business
organization or through any other entity) in competition with, or potential
competition with, the businesses of the Company Group as such businesses exist
or are in process on the date of the termination of the Executive's employment,
within any geographical area in which the Company Group engages or plans to
engage in such businesses. Nothing herein shall prohibit the Executive from
being a passive owner of not more than 2% of the outstanding stock of a
corporation which is
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publicly traded, so long as the Executive has no active participation in the
business of such corporation. For purposes of this Section 5, "Post-Termination
Period" means, as applicable: the period beginning on the date of termination
through the last date that the Executive receives any severance payments;
provided that the Company may elect to extend the Post-Termination Period for an
additional one year period by providing written notice to the Executive 30 days
prior to the expiration of the Post-Termination Period and paying the Executive
the Base Salary through the end of such additional one year period.
(b) During the Noncompete Period, the Executive shall not
directly or indirectly through another entity (i) induce or attempt to induce
any employee of the Company Group to leave the employ of the Company Group, or
in any way interfere with the relationship between the Company Group and any
employee thereof, including without limitation, inducing or attempting to induce
any union, employee or group of employees to interfere with the business or
operations of the Company Group, (ii) hire any person who was a key employee of
the Company Group unless at least six months have elapsed since the termination
of such key employee's employment with the Company Group, or (iii) induce or
attempt to induce any customer, supplier, distributor, franchisee, licensee or
other business relation of the Company Group to cease doing business with the
Company Group, or in any way interfere with the relationship between any such
customer, supplier, distributor, franchisee, licensee or business relation and
the Company Group.
(c) The Executive agrees that: (i) the covenants set forth
in this Section 5 are reasonable in geographical and temporal scope and in all
other respects, (ii) the Company Group would not have entered into this
Agreement but for the covenants of the Executive contained herein, and (iii)
the covenants contained herein have been made in order to induce the Company
Group to enter into this Agreement.
(d) If, at the time of enforcement of this Section 5, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(e) The Executive recognizes and affirms that in the event of
his breach of any provision of Sections 3, 4 or this Section 5, money damages
would be inadequate and the Company Group and the Investor would have no
adequate remedy at law. Accordingly, the Executive agrees that in the event of a
breach or a threatened breach by the Executive of any of the provisions of
Sections 3, 4 or this Section 5, the Company Group, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof (without posting a bond or other security).
6. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally,
mailed by certified or registered mail, return receipt requested and postage
prepaid, or sent via a nationally recognized overnight courier, or sent via
facsimile to
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the recipient with telephonic confirmation by the sending party. Such notices,
demands and other communications will be sent to the address indicated below:
To the Company:
Crescent Sleep Products Company
X.X. Xxx 0000
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: President
Telecopy No.: (000) 000-0000
With copies to:
Sleepmaster L.L.C.
0000 Xxxxx Xxxx
Xxxxxx, XX 00000
Attention: President
Telecopy No.: (000) 000-0000
Citicorp Venture Capital, Ltd.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Mr. Xxxx Xxxxx
Telecopy No.: (000) 000-0000
Xxxxxxxx & Xxxxx
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
To any other Member of the Company Group:
c/o Sleepmaster L.L.C.
0000 Xxxxx Xxxx
Xxxxxx, XX 00000
Attention: President
Telecopy No.: (000) 000-0000
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With copies to:
Citicorp Venture Capital, Ltd.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Mr. Xxxx Xxxxx
Telecopy No.: (000) 000-0000
Xxxxxxxx & Xxxxx
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
To the Executive:
x/x Xxxxxxxx Xxxxx Products Company
X.X. Xxx 0000
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
Schell, Bray, Xxxxxx, Xxxx & Xxxxxxxxxx
000 Xxxxx Xxx Xx.
Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxx, Esq.
Telecopy No.: (000) 000-0000
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
7. Miscellaneous.
(a) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
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(b) Complete Agreement. This Agreement embodies the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way,
including, without limitation, the Previous Agreement.
(c) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(d) Successors and Assigns. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the Executive and the Company Group, and their respective successors and
assigns
(e) GOVERNING LAW. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS
HERETO WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS
OF THE STATE OF NORTH CAROLINA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NORTH CAROLINA OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NORTH CAROLINA; PROVIDED, THAT ANY
QUESTIONS REQUIRING INTERPRETATION OF THE LAWS GOVERNING LIMITED LIABILITY
COMPANIES SHALL BE GOVERNED BY THE NEW JERSEY LIMITED LIABILITY COMPANY ACT.
(f) Remedies. Each of the parties to this Agreement will be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs caused by any breach of any provision of this Agreement and to
exercise all other rights existing in its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
(g) Amendment and Waiver. The provisions of this Agreement
may be amended and waived only with the prior written consent of the Company and
the Executive.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Employment Agreement as of the date first written above.
SLEEPMASTER L.L.C.
By: /S/ Xxxxx X. Xxxxxxx
--------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President
CRESCENT SLEEP PRODUCTS COMPANY
By: /S/ Xxxxx X. Xxxxxxx
--------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President
/S/ Xxxxxxx Xxxxxxx
-------------------
XXXXXXX XXXXXXX
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SCHEDULE A
EMPLOYEE BENEFITS
Life & Supplemental Insurance and Accidental Death & Dismemberment
Health and Dental Insurance
Section 125 Plan for Health and Dental Insurance
Long Term Care
Long Term Disability
Short Term Disability
Profit Sharing Plan
Vacation Pay and Holiday Pay
Car Allowance and car expenses. The Company pays for gas, service and repairs.
Promotional trip and spouses travel with customers on these trips.
Travel and Entertainment Expenses: Executive is reimbursed for company-related
travel and entertainment expenses, subject to customary reporting
requirements.
Company-related expenses: The Company reimburses Executive for all
company-related expenses, subject to customary reporting requirements.
ALL BENEFITS PROVIDED TO THE EXECUTIVE SHALL BE
SUBSTANTIALLY EQUIVALENT IN THE AGGREGATE TO THE
BENEFITS PROVIDED BY CRESCENT SLEEP PRODUCTS
COMPANY IMMEDIATELY PRIOR TO THE DATE HEREOF.
Schedule A, Page 1
