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EXHIBIT 10.27
THL BEDDING HOLDING COMPANY
DEFERRED COMPENSATION PLAN
1.0 PURPOSE.
THL Bedding Holding Company, a Delaware corporation ("THL
Bedding"), (herein, together with its successors, referred to as
the
"Company") by means of this nonqualified deferred compensation
plan
(the "Plan") desires to grant certain employees of THL Bedding or
its
subsidiaries (the "Participants") the right to participate in a
deemed
investment in Class A Common Stock, $.01 par value per share, of
the
Company, and under certain circumstances, Class B Common Stock,
$0.01
par value per share, of the Company, in exchange for the
cancellation
of certain stock options granted to Participants under the
Simmons
Holdings, Inc. 1999 Stock Option Plan, as amended, the Simmons
Holdings, Inc. Management Stock Incentive Plan, the Simmons
Holdings,
Inc. 2002 Stock Option Plan and the Stock Appreciation Rights
Plan
("Options") as reflected in those certain Option Cancellation
Agreements, dated as of December 19, 2003. The Plan shall be
effective
as of December 19, 2003 (the "Effective Date"). This Plan is a
compensatory benefit plan within the meaning of Rule 701 of the
Securities Act of 1933, as amended (the "Securities Act") and
the
issuance of Common Stock pursuant to the Plan is intended to
qualify
for the exemption from registration under the Securities Act
provided
by Rule 701.
2.0
DEFINITIONS
The following terms shall have the
following meanings unless the context
indicates otherwise:
2.1
"Affiliate" shall mean, as to any Person, a person that directly,
or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
2.2 "Board"
shall mean the Board of Directors of the Company.
2.3 "Call
Amount" shall mean (A) with respect to any Senior Manager or
any
Participant who is not a Senior Manager who has been terminated by
the
Company without Cause, the Fair Market Value of the number of
shares of
Class A Common Stock (or following a Public Offering, Common
Stock)
that such Senior Manager or Participant is deemed to own under
Section
4.1 hereof, measured as of the date of such Senior Manager's or
Participant's termination of employment, which amount shall
represent
the total amount then deemed held in the Deferred Compensation
Account,
(B) with respect to any Participant who is not a Senior Manager who
has
been terminated by the Company for Cause or voluntarily leaves
the
Company, the lesser of (i) the Fair Market Value of the number
of
shares of Class A Common Stock (or following a Public Offering,
Common
Stock) that such Participant is deemed to own under Section 4.1
hereof,
measured as of the date of such Participant's termination of
employment, and (ii)
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the Deferred Amount, which amount, in either case, shall represent
the
total amount then deemed held in the Deferred Compensation
Account.
2.4 "Cause"
with respect to any Participant who is not a Senior Manager
shall mean any one or more of the following: (a) the Participant
shall
have been convicted of, or shall have pleaded guilty or nolo
contendere
to, any felony or a crime involving fraud, personal dishonesty or
moral
turpitude (whether or not in connection with his employment); (b)
the
Participant shall have repeatedly or consistently failed or refused
to
perform his or her duties or fulfill his or her responsibilities to
the
Company, after verbal notice and ten (10) days opportunity to cure;
(c)
the Participant shall have breached any nondisclosure or other
restrictive
covenants to which the Participant is subject; or (d) the
Participant shall have committed any fraud, embezzlement,
misappropriation of funds, breach of fiduciary duty or other act
of
dishonesty against the Company.
2.5 "Change of
Control" shall mean the consummation of a transaction,
whether in a single transaction or in a series of related
transactions
that are consummated contemporaneously (or consummated pursuant
to
contemporaneous agreements), with any other party or parties,
other
than an Affiliate of any of the THL Holders, on an arm's-length
basis,
pursuant to which (a) a party or group (as defined under Rule 13d
under
the Securities Exchange Act of 1934, as amended) who is not a
stockholder of the Company on the Effective Date, acquires,
directly or
indirectly (whether by merger, stock purchase,
recapitalization,
reorganization, redemption, issuance of capital stock or
otherwise),
more than 50% of the voting stock of the Company, (b) such party
or
parties, directly or indirectly, acquire assets constituting all
or
substantially all of the assets of the Company and its subsidiaries
on
a consolidated basis, or (c) prior to an initial public offering of
the
Company common stock pursuant to an offering registered under
the
Securities Act, Thomas H. Lee Equity Fund V, L.P., a Delaware
limited
partnership, and its affiliates cease to have the ability to
elect,
directly or indirectly, a majority of the Board of Directors of
the
Company.
2.6 "Class A
Common Stock" shall mean the Class A Common Stock, $0.01 par
value per share, of the Company.
2.7
"Committee" shall mean, as the case may be, the Board of Directors
of
the Company or a committee appointed by the Board of Directors of
the
Company.
2.8 "Common
Stock" shall mean the Class B Common Stock of the Company or
other securities issued in exchange for or upon conversion of Class
A
Common Stock in accordance with Section 3.6 of the
Securityholders
Agreement.
2.9 "Deferred
Amount" shall have the meaning set forth in Section 4.1.
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2.10 "Deferred
Compensation Account" shall mean a notional account
established and maintained by the Company for a Participant which
shall
record the deemed investment in Class A Common Stock or Common
Stock,
as the case may be, with respect to each Participant under Section
4.1
below. This notional account shall be established by the Company
for
bookkeeping purposes only, and no separate funds shall be
segregated by
the Company for the benefit of the Participant.
2.11 "Employee Put
Amount" shall mean the lesser of (a) Fair Market Value of
the number of shares of Class A Common Stock (or following a
Public
Offering, Common Stock) that the Participant is deemed to own
under
Section 4.1 hereof, measured as of the date of such
Participant's
termination of employment, and (b) the Deferred Amount, which
amount,
in either case, shall represent the total amount then deemed held
in
the Deferred Compensation Account.
2.12 "Fair Market
Value" shall be determined by the Board of Directors in
good faith. Upon such determination, the Company shall promptly
provide
the Participant with notice of the Fair Market Value so determined
(the
"Notice"). In the event of a determination of Fair Market Value
with
respect to Class A Common Stock or Common Stock owned by a
Senior
Manager, such Senior Manager shall have the right to contest
such
determination in good faith, by delivery of a written notice to
the
Company within ten (10) days after the Notice is delivered. If
the
Senior Manager does not notify the Company of his or her
disagreement
with the Fair Market Value determination set forth in the Notice,
then
the Fair Market Value shall be as set forth in the Notice. If
the
Senior Manager does notify the Company of his or her disagreement
with
the Fair Market Value set forth in the Notice within such 10-day
time
period, then the Company must retain an independent third party
appraiser to make such Fair Market Value determination (the
"Final
Determination"), and such Final Determination shall govern;
provided,
however, that if the Final Determination of Fair Market Value
equals
less than 110% of the Fair Market Value set forth in the Notice,
then
the Senior Manager shall pay for all costs and expenses of the
third
party appraiser retained by the Company.
2.13 "Financing
Default" shall mean any event of default or breach under (i)
that certain Credit and Guaranty Agreement, dated as of December
19,
2003 by and among THL-SC Bedding Company, certain of its
subsidiaries,
as Guarantors, Goldman Sachs Credit Partners, L.P., as sole
bookrunner,
joint lead arranger and co-syndication agent, certain Lenders,
UBS
Securities LLC, as joint lead arranger and co-syndication agent,
and
Deutsche Bank, A.G., Cayman Islands Branch, as administrative agent
for
Lenders, as amended, modified, restated or refinanced from time
to
time, (ii) that certain senior unsecured floating rate facility by
and
among THL-SC Bedding Company, certain of its subsidiaries,
certain
lenders, party thereto and Deutsche Bank, A.G., Cayman Islands
Branch,
as
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administrative agent, as amended, modified, restated or refinanced
from
time to time, (iii) the covenant contained in Section __ of the
Indenture which permits repurchases by the Company of employee
stock
not exceeding a specified amount in the aggregate, or (iii) any
other
similar notes or instruments that the Company or its Subsidiaries
may
issue from time to time.
2.14 "Indenture"
shall mean that certain Indenture dated as of December 19,
2003 governing the Company's Senior Subordinated Notes due 2013,
as
amended, modified, restated or refinanced from time to time.
2.15 "Options" shall
have the meaning set forth in the preamble.
2.16 "Option
Cancellation Agreement" shall mean an agreement between a
Participant and
the Company canceling Options pursuant to the terms of
the Stock Purchase Agreement made as of November 17, 2003 (the
"Purchase Agreement"), by and among THL Bedding Company, a
Delaware
corporation, Simmons Holdings, Inc., a Delaware corporation, and
the
sellers party thereto, and providing for the establishment of
deferred
compensation amounts resulting from the cancellation of
Options.
2.17 "Person" shall
mean any person or entity of any nature whatsoever,
specifically including an individual, a firm, a company, a
corporation,
a partnership, or a trust.
2.18 "Public
Offering" means a sale of Common Stock to the public in an
offering pursuant to an effective registration statement filed with
the
Securities Exchange Commission pursuant to the 1933 Act, as then
in
effect, provided that a Public Offering shall not include an
offering
made in connection with a business acquisition or combination or
an
employee benefit plan.
2.19 "Public Offering
Share Amount" shall mean that number of shares of
Common Stock equal to (i) the number of shares of Common Stock
deemed
held in such Participant's Deferred Compensation Account,
multiplied by
(ii) a fraction, the numerator of which shall equal the number
of
shares of Common Stock to be sold by THL in a Public Offering and
the
denominator of which shall equal the aggregate number of shares
of
Common Stock held by THL immediately prior to such Public
Offering.
2.20 "Registration
Rights Agreement" shall mean the Registration Rights
Agreement, dated as of December 19, 2003, by and among the Company
and
its shareholders.
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2.21 Securityholders
Agreement" shall mean the Securityholders' Agreement,
dated as of December 19, 2003, by and among the Company and the
other
parties thereto.
2.22 "Senior Manager"
shall mean each of Charles Roy Eitel, William S.
Creekmuir, Robert W. Hellyer and Rhonda C. Rousch, and/or any
other
Persons designated by the Board as Senior Managers (collectively,
the
"Senior Managers").
2.23 "Senior Manager Put
Amount" shall mean the Fair Market Value of the
number of shares of Class A Common Stock (or following a Public
Offering, Common Stock) that the Senior Manager is deemed to own
under
Section 4.1 hereof, measured as of the date of such Senior
Manager's
termination of employment, which amount shall represent the
total
amount then deemed held in the Deferred Compensation Account.
2.24 "Subsidiary"
shall mean a corporation of which the Company directly or
indirectly owns more than 50% of the voting stock or any other
business
entity in which the Company directly or indirectly has an
ownership
interest of more than 50%.
2.25 "THL Holders"
shall mean, collectively, Thomas H. Lee Equity Fund V,
L.P., a Delaware limited partnership, Thomas H. Lee Parallel Fund
V,
L.P., Thomas H. Lee Cayman Fund V, L.P., 1997 Thomas H. Lee
Nominee
Trust, Thomas H. Lee Investors Limited Partnership, Putnam
Investments
Holdings, LLC, Putnam Investments Employees' Shares Company I LLC
and
Putnam Investments Employees' Shares Company II, LLC.
2.26 "THL Sale" shall
have the meaning set forth in Section 4.2(c) of this
Plan.
3.0 ELIGIBILITY AND
PARTICIPAT
