GENERAL RELEASE AND SEPARATION AGREEMENT
Simmons
Bedding Company, a corporation incorporated under the laws of
the State of Delaware (“ Company ”), and
Simmons Holdco, Inc., a corporation incorporated under the
laws of the State of Delaware (“ Holdings
”) (collectively Company and Holdings are referred to
herein as “Simmons”), and Gary S. Matthews
(“ Executive ”) hereby enter into this
General Release and Separation Agreement (“
Separation Agreement ”), contracting and agreeing
as follows:
1.
Termination Date and Employment
Agreement. The parties agree that Executive's
last day of employment with Company is May 25, 2007 (the
“ Terminat ion Date
”). Executive acknowledges and agrees that except
as specifically set forth below, the Employment Agreement dated as
of November 10, 2006 among Simmons Company, Company and
Executive (the “ Employment Agreement ”) is
terminated. Executive further agrees that effective as
of the Termination Date, he hereby resigns from all officer and
director positions with Simmons and any of its subsidiaries and
affiliates and agrees to sign any letters or other documents on or
after such date effecting such resignations.
2.
Consideration Period. Executive acknowledges
that Executive was given this Separation Agreement to consider on
May 9, 2007 and that Executive has twenty-one (21)
days to consider whether to sign this
Separation Agreement. Executive is hereby advised to
consult a lawyer before signing this Separation
Agreement.
3.
Effective Date. Executive may accept this
Separation Agreement only by signing, initialing and dating this
Separation Agreement in the spaces provided and delivering the
Separation Agreement to Simmons Bedding Company,
Attention: Kristen K. McGuffey, Executive Vice President
and General Counsel, One Concourse Parkway, Suite 800,
Atlanta, Georgia 30328, no later than Company’s normal close
of business on the later of (a) the twenty-second (22
nd ) day
following Executive’s receipt of this Separation Agreement or
(b) if the twenty-second (22 nd ) day
following receipt is a Saturday, Sunday or legal holiday in the
State of Georgia, the next day that is not a Saturday, Sunday or
legal holiday. Time is of the essence as it pertains to
this Section 3.The “Effective Date” of this
Separation Agreement shall be seven (7) days after the date on
which Executive signs and delivers the Separation Agreement
pursuant to this Section, so long as Executive has not revoked the
Separation Agreement pursuant to Section 4 below.
4.
Revocation. Executive may revoke this
Separation Agreement at any time within seven (7) days after
signing and delivering it to Simmons. If Executive
elects to revoke, Executive must give notice of his decision in
writing delivered to Simmons Bedding Company, Attention: Kristen K.
McGuffey, Executive Vice President and General Counsel, One
Concourse Parkway, Suite 800, Atlanta, Georgia
30328. The notice shall be sent in a manner so that it
will be received by Ms. McGuffey within seven (7) days of the date
of Executive’s execution of this Separation
Agreement.
5.
Separation Benefits. Provided that Executive
satisfies the conditions of this Separation Agreement and does not
revoke this Separation Agreement, Company will do the
following:
(a)
Pay
to Executive his unpaid salary through the Termination
Date. Such amount will be paid at the next regular pay
period after the Termination Date.
(b)
Pay
to Executive the Annual Bonus due for fiscal year 2007, if any, in
accordance with Sections 3.2 and 7.4(a) of his Employment
Agreement. Such amount will be paid to Executive as soon
as practicable following the last day of the month in which the
Termination Date occurs.
(c)
Pay
to Executive the gross amount of $862,500, which equals eighteen
(18) months of Executive’s current salary of $575,000 per
year. This amount, less legal deductions, will be paid
in accordance with Executive’s current pay schedule for a
period from May 25, 2007 through November 24, 2008 (the
“ Severance Pay Period ”) provided that the
first payment shall not be made until after the expiration of the
revocation period, and which first payment will include any missed
payments between the first payment due date and the expiration of
the revocation period.
(d)
(i) Executive
and Executive’s Dependents (as defined below) may continue to
participate in the Company’s medical, dental and vision plans
at the same level of participation that was in effect immediately
prior to the Termination Date through the earlier of (i)
November 24, 2008, or (ii) the date on which the Executive
commences other employment in connection with which the Executive
is eligible to receive medical, dental and vision benefits
substantially comparable to those made available by the Company
(including self employment or engaging in an enterprise as a sole
proprietor, member or partner). Executive shall continue
to pay for such coverage at the same rate or rates that apply from
time to time to active employees for comparable
coverage. Notwithstanding the foregoing, if the benefit
plan for which Executive is currently enrolled is no longer offered
by Simmons, then Executive through November 24, 2008 will be
eligible to participate in any plan offered to then-current
Simmons’ associates. Executive must pay
Executive’s portion by deductions from Executive’s
severance payments. The 18 month period during which
benefits under the Consolidated Omnibus Budget Reconciliation Act
(aka COBRA) are available to Executive and his Dependants shall
begin on the Termination Date and run concurrently with the
benefits available under this Section 5(d)(i).
(ii) For
2008, the new medical, dental and vision rates will be
communicated to the Executive before December 31,
2007. Executive is required to complete all
necessary forms required during the 2008 open enrollment
period. Further, if Executive discontinues his
coverage under the Company’s medical, dental or vision
plans at any time, he will no longer be entitled to any of the
benefits described in this Section 5(d) with respect to such
plan after such date.
(iii) As
used herein, a “Dependent” is a dependent of
Executive enrolled and qualified in Simmons’ medical,
dental and/or vision plans immediately prior to the
Termination Date and will only continue to be a
“Dependent” hereunder for as long as he or he
continues to be qualified as outlined in the applicable health
plan documents. Simmons reserves the right from
time to time to require proof from Executive that
Executive’s Dependents are still considered qualified
under the applicable health plan documents.
(iv) Nothing
contained herein shall give Executive any rights to any other
Simmons sponsored benefits, including without limitation, long
term disability, short term disability, and retirement
contributions, except as permitted under those plans for
retired associates.
(e)
Pay
all verified and approved expense reports submitted by Executive to
Company within two (2) weeks of the Termination Date in accordance
with Company’s current policies, practices and
procedures.
(f)
Executive
agrees that if Executive subsequently engages in activities
prohibited by Section 10 below, then the Company may thereafter
immediately terminate and shall not be required to continue on
behalf of the Executive or his Dependents any compensation
provided for in this Section 5 other than those benefits that the
Company may be required to maintain for the Executive under
applicable law. Except as expressly provided in this
Section 5(f), the Company’s obligation to pay all
compensation to Executive provided for in this Section 5 shall be
absolute, and shall not be eliminated or otherwise diminished in
any manner by reason of Executive’s hereafter commencing
other employment or self-employment, or otherwise.
6.
Repurchase of Shares.
(a)
Class A Shares . Pursuant to Section 3.5(b)(i) of the
Securityholders Agreement dated as of December 19, 2003 among
Executive, Holdings (as successor to Simmons Company) and the other
parties thereto (as amended to date the “ SH Agreement
”), Holdings exercises its right to repurchase the 4,195.33
Class A shares that Executive currently owns. The
Call Notice (as that term is defined in the SH Agreement) shall be
deemed to have been given as of the Effective Date of this
Separation Agreement. The Call Closing (as that term is
defined in the SH Agreement) will take place at One Concourse
Parkway, Suite 800, Atlanta, Georgia 30328 on or before the 30th
day after the Effective Date of this Separation Agreement and such
shares will be repurchased at the then current Fair Market
Value.
(b)
Class B Shares . Pursuant to Section 2(b) and 3(a) of
the Restricted Stock Agreement dated as of December 1, 2006 by and
between Executive and Holdings, as successor to Simmons Company
(the “ RSA ”), the vesting of Executive’s
Restricted Class B stock has terminated, and Holdings may now, or
at such later date, as the case may be, exercise the following
rights:
(i) For
the portion, if any, of Executive’s 3,333 Class B
shares that may become Vested Shares pursuant to Section 2(b)
of the RSA if Holdings meets the performance requirements for
fiscal year 2007 as set forth in Section 2(a)(i) of the
RSA (as such targets were adjusted in January 2007 in
accordance with the terms of the RSA, which new targets are
set forth on Exhibit A hereto), Holdings may, in
its sole discretion, exercise its right to repurchase any such
vested shares on a date that is no earlier than 180 days after
such shares become vested at the then current
FMV. For the portion, if any, of these shares that
do not vest pursuant to the performance requirements for 2007,
then Holdings will repurchase these unvested shares at
Executive’s original purchase price of one penny per
share within thirty (30) days of the Measurement Date in
2008.
(ii) &n
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