EMPLOYMENT AGREEMENTEmployee Retention Agreement |
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SIMMONS CO | SIMMONS BEDDING COMPANY | Sleep Country USA, Inc | THL Bedding Holding Company. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
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EMPLOYMENT AGREEMENT
This
EMPLOYMENT AGREEMENT (the “
Agreement ”) is made as of the 7th day of
December, 2007 and is effective as of the 1st day of January,
2008 (the “ Effective Date ”), among
SIMMONS BEDDING
COMPANY , a Delaware corporation
(the “ Company ”), SIMMONS HOLDCO,
INC. , a Delaware corporation,
(“ Holdco ”), and STEPHEN G.
FENDRICH , an individual resident of the State of
Georgia (the “ Executive ”).
W I T N
E S S E
T H :
WHEREAS, the Company and Holdco desire that the Executive
accept employment as President and Chief Operating Officer of the
Company as of the Effective Date; and
WHEREAS, the Company, Holdco and the Executive, each
desire to enter into this Agreement and set forth in writing the
terms and conditions of the Executive’s employment with the
Company;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as
follows:
SECTION
1.
EMPLOYMENT .
1.1.
Agreement . The Company hereby agrees to employ the
Executive as of the Effective Date as its President and Chief
Operating Officer, and the Executive hereby agrees to serve
the Company in such capacities, in each case subject to the
terms and conditions set forth herein.
1.2.
Term . The period of the Executive’s employment
under this Agreement shall commence on the Effective Date, and
shall continue thereafter for a continuously (on a daily
basis) renewing two (2) year term, without any further action
by either the Company or the Executive, unless either the
Executive or the Company shall provide written notice to the
other parties hereto not to renew such term, specifying in
such notice the date of such non-renewal, in which case this
Agreement shall expire on the date that is two (2) years after
the date specified in such non-renewal notice. Notwithstanding
the foregoing, this Agreement may be earlier terminated by the
Company or the Executive in accordance with the terms of
Section 6 below. The date on which termination or expiration
of this Agreement is effective pursuant to the provisions of
this Section 1.2 or of Section 6 shall be referred to herein
as the “ Termination Date ”. For
all purposes of this Agreement, references to the “
Term ” of the Executive’s employment
hereunder shall mean the period commencing on the Effective
Date and ending on the Termination Date.
SECTION 2.
POSITION AND DUTIES . The
Executive shall serve as President and Chief Operating
Officer of the Company. Executive’s duties
and responsibilities as the President and Chief Operating Officer
of the Company shall include the day-to-day management and
operation of the business, as well as those duties customarily
associated with an officer with a similar title, and Executive
shall be accountable to, and shall have such additional powers,
duties and responsibilities as may from time to time be prescribed
by, the Chairman of the Board of Directors of the Company (the
“ Company Board ”) and Chief Executive Officer,
the Company Board or the Board of Directors of Holdco (the “
Holdco Board ”). The
Executive shall perform and discharge, faithfully, diligently,
competently and in good faith, such duties and responsibilities.
The Executive (a) shall devote all of his business time and
attention and his best efforts and ability to the business and
affairs of the Company and its Subsidiaries and (b) shall not
engage in other business activities whether or not compensated
during the Term without the prior written consent of the Holdco
Board (provided, however, that Executive may devote a reasonable
amount of time and attention to the management of his personal
affairs and investments or serving as a director or officer of any
charitable, religious, civic, educational or trade organizations,
so long as such activities, individually or in the aggregate, do
not interfere with the performance of the Executive’s duties
and responsibilities under this Agreement). The services
of the Executive shall be based at the offices of the Company in
the Metropolitan Area; provided , however , that the
Executive acknowledges that substantial travel will be required
because the Company conducts operations and maintains facilities
throughout the United States and elsewhere around the
world.
SECTION 3.
COMPENSATION . Subject to
all of the terms and conditions hereof and to the performance by
the Executive of his duties and obligations to the
Company:
3.1.
Salary . As compensation for services
performed during the Term, the Company shall pay the Executive
a salary at a rate of $500,000 per annum or such other amount
as may from time to time be established by the Holdco Board
(such annual rate of salary in effect from time to time
referred to as the “ Salary ”), payable at
regular intervals in accordance with the Company’s
normal payroll practices now or hereafter in
effect. The Holdco Board may consider and declare
from time to time increases in the salary it pays the
Executive and thereby increase the Salary. Any and all
increases in the Executive’s Salary pursuant to this
Section 3.1 shall cause the level of the Executive’s
Salary hereunder to be increased by the amount of each such
increase for all purposes of this Agreement, and the increased
level of Salary as provided in this Section 3.1 shall become
the level of the Executive’s Salary for the remainder of
the Term unless and until there is a further increase in
Salary as provided herein. Except as otherwise provided in
this Agreement, the Salary shall be prorated for any period of
less than a full fiscal year.
3.2.
Annual Bonus . As additional compensation for services
hereunder, the Executive shall be eligible for a bonus for
each Bonus Year during the Term. The amount of any such bonus
shall be determined based upon the achievement of specified
levels of operating performance by the Company for such Bonus
Year measured by the business plan approved by the Board for
such fiscal year (the “ EBITDA
Performance ”). The target bonus payable for any
Bonus Year with respect to the EBITDA Performance shall equal
70% of the Salary. The
actual bonus payable for any Bonus Year with respect to the
EBITDA Performance shall be computed as set forth on
Exhibit A attached hereto and incorporated herein by
this reference; provided, however, that the actual bonus
payable, if any, in for the fiscal year in which termination
occurs shall be determined in accordance with the provisions
in Section 7. Any bonus payable under this Section 3.2 is
referred to herein as an “ Annual Bonus ”.
For the purpose of calculating Executive’s Annual Bonus
for each fiscal year pursuant to this Section 3.2, the target
bonus payable with respect to such fiscal year shall equal 70%
of Executive’s actual salary earned at Simmons for such
year (excluding any special bonuses paid pursuant to Section
3.4 below).
3.3.
Current Shares and Additional Stock Options
. The parties acknowledge that the Executive
currently holds (a) 30,000 Class B Common Stock of Holdco
(“Class B Shares”) pursuant to the Amended and
Restated Restricted Stock Agreement between the Executive and
Holdco (which superseded Simmons Company) dated April 18,
2006, as amended from time to time, and (b) 12,500 Class B
Shares pursuant to the Restricted Stock Agreement between the
Executive and Holdco (which superseded Simmons Company which
superseded THL Bedding Holding Company) dated February 21,
2004, which 12,500 Class B Shares vested upon the sale of
Sleep Country USA, Inc. on or about July 24, 2006
(collectively, the “ Previous Stock Agreements
”). Pursuant to the Previous Stock
Agreements, the Executive is a participant in the Second
Amended and Restated Simmons Holdco, Inc. Equity Incentive
Plan, as amended from time to time (the “ Plan
”) and has also entered into the Securityholders
Agreement between Holdco and Executive dated as of February 9,
2007 (“ Securityholders Agreement ”) and
the Registration Rights Agreement between Holdco and Executive
dated as of February 9, 2007 (“ Registration Rights
Agreement ”). Holdco will issue Executive
options to purchase an additional 30,000 shares of the Class B
Shares under the Plan, which options will be subject to
vesting and terms and conditions as provided in the stock
option agreement between Holdco and the Executive dated as of
the date of issuance (the “ Stock Option A
greement ”). These options to purchase
Class B Shares will be issued after formal approval by the
Holdco Board of the same.
3.5.
Business Expenses . During the Term, the Executive
shall be entitled to receive prompt reimbursement by the
Company for all reasonable business expenses incurred by him
on behalf of the Company or any of its Subsidiaries or
Affiliates in performing services hereunder;
provided , however , that the Executive shall
properly account therefor in accordance with requirements for
federal income tax deductibility and the Company’s
and/or Company Board’s policies and
procedures.
3.6.
Fringe Benefits . At the election of the
Executive and during the Term, the Executive shall be entitled
to participate in or receive benefits under any life
insurance, health and accident plans, retirement plans and
other similar fringe benefit arrangements made generally
available by the Company to its executives and key management
employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and
arrangements. The Company acknowledges and agrees that
the Executive will continue to participate in and receive
benefits under (at the current level) the employee benefit
plans which the Executive is currently participating, subject
to changes in such plans applicable to all other employees
similarly situated. These benefits include an
annual executive physical, financial planning, an additional
long term disability insurance policy provided at no cost to
Executive, and a $1.0 million term life insurance policy,
convertible to whole life, which can be assumed by the
Executive. Notwithstanding any other arrangements that the
Company may make available from time to time to its other
executives or key management employees, the Salary, the
bonuses payable under this Agreement and participation in the
Plan as provided in Section 3.3 of
this Agreement shall be in lieu of the Executive’s
participation in any other bonus, equity incentive or
equity-type incentive plans established by the Company, except
that the Executive shall be entitled to participate in any
supplemental executive retirement plans, “401(k)
plans” and profit sharing plans.
3.7.
Vacations . During the Term, the Executive shall be
entitled to twenty (20) working days of paid vacation in each
year and shall also be entitled to all paid holidays given by
the Company to its employees. The paid vacation days shall be
prorated for any period of service hereunder less than a full
year. The Executive shall not be entitled to cash compensation
for any vacation time not taken during the Term and shall not
be entitled to accrue unused vacation.
3.8.
Transportation Stipend . During the Term, the Executive
shall be entitled to a stipend of $750 each month to cover
expenses associated with transportation, including leasing or
owning an automobile; provided , however , that
the Executive shall properly account therefor on his federal
and applicable state tax returns and related documentation in
accordance with the requirements for federal income tax
deductibility and the Company’s policies and
procedures.
SECTION
4.
OFFICES; SUBSIDIARIES AND AFFILIATES; INDEMNIFICATION
.
4.1.
Generally . The Executive agrees to serve during the
Term, if elected or appointed thereto, in one or more
positions as an officer or director of the Company or any of
its Subsidiaries or Affiliates, or as an officer, trustee,
director or other fiduciary of any pension or other employee
benefit plan of the Company or any of its Subsidiaries or
Affiliates. Service in such additional positions will be
without additional compensation except for reimbursement of
reasonably related business expenses on the same terms as
provided elsewhere in this Agreement.
4.2.
Indemnification . The Company agrees that in connection
with the Executive’s service in additional positions as
provided under Section 4.1, the Executive shall be entitled to
the benefit of any indemnification provisions in the charter
and by-laws of the Company and any of its Subsidiaries and
Affiliates for which the Executive serves in such an
additional position and any director and officer liability
insurance coverage carried by the Company and any of its
Subsidiaries and Affiliates for which the Executive serves as
an officer or director; provided,
however, that this Section 4.2 shall not impose on the
Company or any of its Subsidiaries or Affiliates any
obligation to include any such indemnification provisions in
its charter or by-laws or to maintain any such insurance
coverage.
SECTION
5.
RESTRICTED ACTIVITIES .
(A) Executive
acknowledges that (1) the Company has separately bargained and
paid additional consideration for the restrictive covenants
herein; and (2) the Company will provide certain benefits to
Executive hereunder in reliance on such covenants in view of
the unique and essential nature of the services Executive will
perform on behalf of the Company and its Subsidiaries and
Affiliates and the great, immediate and irreparable injury
that would befall the Company, its Subsidiaries and Affiliates
should Executive breach such covenants.
(B) Executive
further acknowledges that his services are of a special,
unique and extraordinary character and that his position with
the Company will place him in a position of confidence and
trust with employees of the Company and its Subsidiaries and
Affiliates and with the Company’s other constituencies
and will bring him into close contact with many of the
Company’s, its Subsidiaries’ and Affiliates’
Customers, Customer Prospects, Vendors, Trade Secrets, and
Confidential Information.
(C) Executive
further acknowledges that the type and periods of restrictions
imposed by the covenants in this Section 5 are fair,
reasonable and necessary to protect the Company’s
legitimate business interests and its Customer, Customer
Prospect, and/or Vendor relationships, Trade Secrets, and
Confidential Information and that such restrictions will not
prevent Executive from earning a livelihood.
(D) Having
acknowledged the foregoing, Executive covenants and agrees
with Company as follows:
5.1.
Duty of Confidentiality . Executive agrees that during
his employment with the Company and for a period of five (5)
years following the termination of such employment for any
reason, Executive shall not directly or indirectly divulge or
make use of any Confidential Information outside of
his employment with the Company (so long as the information
remains confidential) without the prior written consent of
the Company. Executive shall not directly or
indirectly misappropriate, divulge, or make use of Trade
Secrets for an indefinite period of time, so long as the information remains
a Trade Secret as defined by the DUTSA and/or any other
applicable law. Executive further agrees that if
he is questioned about information subject to this agreement
by anyone not authorized to receive such information,
Executive will notify the Company’s General Counsel
within 24 hours. Executive acknowledges that
applicable law may impose longer duties of non-disclosure,
especially for Trade Secrets, and that such longer periods
are not shortened by this Agreement.
5.2.
Return of Confidential Information And Company Property
. Executive agrees to return all Confidential
Information and/or Trade Secrets within three (3) calendar
days following the termination of his employment for any
reason. To the extent Executive maintains
Confidential Information and/or Trade Secrets in electronic
form on any computers or other electronic devices owned by
him, Executive agrees to irretrievably delete all such
information and to confirm the fact of deletion in writing
within three (3) calendar days following termination of
employment with the Company for any
reason. Executive also agrees to return all
property in his possession at the time of the termination of
his employment with the Company, including but not limited to
all documents, records, tapes, and other media of every kind
and description relating to the Business of the Company and
its Customers, Customer Prospects, and/or Vendors, and any
copies, in whole or in part, whether or not prepared by you,
all of which shall remain the sole and exclusive property of
the Company.
5.3.
Proprietary Rights . Proprietary Rights
shall be promptly and fully disclosed by Executive to the
Company’s General Counsel and shall be the exclusive
property of the Company as against Executive and
Executive’s successors, heirs, devisees, legatees and
assigns. Executive hereby assigns to the Company
his entire right, title, and interest therein and shall
promptly deliver to the Company all papers, drawings, models,
data, and other material relating to any of the foregoing
Proprietary Rights conceived, made, developed, created or
reduced to practice by Executive as aforesaid. All
copyrightable Proprietary Rights shall be considered
“works made for hire.” Executive shall,
upon the Company’s request and at its expense, execute
any documents necessary or advisable in the opinion of the
Company’s counsel to assign, and confirm the
Company’s title in the foregoing Proprietary Rights and
to direct issuance of patents or copyrights to the Company
with respect to such Proprietary Rights as are the
Company’s exclusive property as against Executive and
Executive’s successors, heirs, devisees, legatees and
assigns under this Section 5.3 . or to vest in the
Company title to such Proprietary Rights as against Executive
and Executive’s successors, heirs, devisees, legatees
and assigns, the expense of securing any such patent or
copyright, however, to be borne by the Company.
5.4.
Non-Competition . Executive covenants and
agrees that, during the term of his employment with the
Company and for two (2) years after the termination thereof,
regardless of the reason for the employment termination,
Executive will not, directly or indirectly, anywhere in the
Continental United States, on behalf of any Competitive
Business serve in a senior executive or similar capacity,
whether as owner, partner, investor, consultant, agent,
employee or co-venturer, or undertake any planning for any
Competitive Business.
5.5.
Non-Solicitation of Customers, Customer Prospects, and
Vendors . Executive also covenants and agrees
that during the term of his employment with the Company and
for two (2) years after the termination thereof, regardless of
the reason for the employment termination, Executive will not,
directly or indirectly, solicit or attempt to solicit any
business from any of the Company’s Customers, Customer
Prospects, and/or Vendors with whom he had business related
contact during the last two (2) years of his employment with
the Company.
5.6.
Non-Solicitation of Employees . Executive
also covenants and agrees that during the term of his
employment with the Company and for two (2) years after the
termination thereof, regardless of the reason for the
employment termination, Executive will not, directly or
indirectly, on his own behalf or on behalf of or in
conjunction with any person or legal entity, recruit, solicit,
or induce, or attempt to recruit, solicit, or induce, any
non-clerical employee of the Company with whom Executive had
personal contact or supervised while performing his Job
Duties, to terminate their employment relationship with the
Company.
5.7.
No Disparagement . Executive will not make
any negative, disparaging or defamatory statement, comment, or
remark, directly or indirectly, either in writing or any other
medium, regarding the Company, Thomas H. Lee Partners, or any
of their respective officers, directors, employees,
affiliates, subsidiaries, successors and assigns, compelled
truthful testimony under oath being expressly
accepted.
5.8.
False Claims Representations, Cooperation and Promises
. Executive also agrees to disclose to the Company
any information he learns concerning any conduct involving the
Company that he has any reason to believe may be
unlawful. Executive promises to cooperate fully
with the Company during and after his employment with the
Company in any investigation the Company undertakes into
matters occurring during his employment with
Company. Executive agrees that, as and when
requested by the Company whether during or after his
employment with the Company, he will fully cooperate with
Company in effecting a smooth transition of his
responsibilities to others. If requested by the
Company, Executive will promptly and fully respond to all
inquiries from the Company and its representatives relating to
any claims or lawsuits which relate to matters which occurred
during his employment with the Company. If
Executive is contacted as a potential witness to any claim or
in any litigation at any time, he will notify Company of any
such contact or request within one (1) day after learning of
it and will permit the Company to take all steps it deems to
be appropriate, if any, to prevent his involvement, or to be
present during any such discussions. This Section
does not prohibit Executive’s participation as a witness
to the extent otherwise legally required but does require that
Executive provide Company with notice and the opportunity to
object and/or participate.
5.9.
Outside Activities . The Executive agrees that, during
his employment with the Company, he will not undertake any
outside activity (except as explicitly allowed pursuant to
Section 2), whether or not competitive with the business of
the Company or any of its Subsidiaries or Affiliates, that
could reasonably give rise to a conflict of interest with his
duties and obligations to the Company or any of its
Subsidiaries or Affiliates.
5.10.
Ownership of Securities . Notwithstanding the
provisions set forth herein, the Executive shall have the
right to (a) invest in or acquire any class of securities
issued by any Person not engaged in a Competitive Business, or
(b) acquire as a passive investor (with no involvement in the
operations or management of the business) up to 1% of any
class of securities which is (i) issued by any Person engaged
in a Competitive Business, and (ii) publicly traded on a
national securities exchange or over-the-counter
market.
SECTION 6.
TERMINATION .
Subject to the respective continuing obligations of the
parties hereto, including those set forth in Section 5, the
Executive’s employment by the Company hereunder may be
terminated prior to the expiration of the Term as
follows:
6.1.
Death . The Executive’s employment hereunder
shall terminate upon his death.
6.2.
Incapacity . If the Executive shall have been unable to
perform his duties hereunder by reason of any physical or
mental illness, injury or other incapacity (a) for any period
of sixty (60) consecutive days or (b) for a total of one
hundred twenty (120) days in any period of twelve (12)
consecutive calendar months, in the reasonable judgment of the
Holdco Board, after consultation with such experts, if any, as
the Holdco Board may deem necessary or advisable, the Company
may terminate the Executive’s employment hereunder by
written notice to the Executive.
6.3.
Cause . The Company may terminate the Executive’s
employment hereunder for Cause at any time upon written notice
to the Executive. For purposes of this Agreement, the Company
shall have “ Cause ” to terminate the
Executive’s employment hereunder upon: (a)
the Executive’s breach of any of his obligations set
forth in this Agreement, which breach is not cured within
fifteen (15) days after receipt by the Executive of written
notice from the Holdco Board of such breach; (b) the
Executive’s breach of his fiduciary duties as an officer
or director of the Company or any of its Subsidiaries or
Affiliates, or as an officer, trustee, director or other
fiduciary of any pension or employee benefit plan of the
Company or any of its Subsidiaries or Affiliates; or (c) the
Executive’s commission of a felony involving fraud,
personal dishonesty or moral turpitude (whether or not in
connection with his employment).
6.4.
Other than for Cause . The Company may terminate the
Executive’s employment hereunder other than for Cause at
any time upon written notice to the Executive.
6.5.
Good Reason . The Executive may terminate the
Executive’s employment hereunder for Good Reason at any
time upon sixty (60) days’ prior written notice to the
Company. In the event of termination of the
Executive pursuant to this Section 6.5, the Holdco Board or
the Com
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