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EXECUTION COPY
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is dated as of April 28, 2000, by
and among Simon Mattress Manufacturing Co., a California corporation (the
"Company"), Sleepmaster Holdings L.L.C., a New Jersey limited liability company
("Holdings"), Sleepmaster L.L.C., a New Jersey limited liability company
("Sleepmaster"), and Xxxxxxx Xxxxxxx (the "Executive").
WHEREAS the parties desire to enter into an agreement
regarding the employment of the Executive as Vice President of Finance of the
Company upon terms and conditions set forth herein;
WHEREAS, the Executive acknowledges and agrees that the
provisions of this Agreement, including, without limitation, Sections 3, 4 and 5
are material to the Company Group and that the Company Group would not have
entered into this Agreement without such provisions;
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 and such breach shall not have been cured within
15 days after written notice to the Executive, (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 120 consecutive days or for
shorter periods
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aggregating at least 180 days (whether or not consecutive) during any
twelve-month period, as determined in the reasonable judgment of the Board;
provided that the Company shall comply with the requirements of the Americans
with Disabilities Act.
"Key Employee" means all salaried employees of the Company
receiving a base salary greater than $50,000 per year from the Company as
compensation.
"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.
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 Finance of
the Company under the supervision and direction of 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
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responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner.
(c) Base Salary and Benefits.
(i) Base Salary. During the Employment Period, the
Executive's base salary shall be $185,000 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.
(ii) Executive Bonus Plan. 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 $6,600,000 for fiscal year 2000.
(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) 20%
and (z) the Executive's Base Salary for such fiscal year. The bonus payment
shall be made within five (5) days of the Board's determination. The bonus
payment shall be subject to customary withholding.
Achieved EBITDA Percentage Bonus Multiple
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80% 50%
100% 100%
110% 125%
120% 150%
(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
150%. 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 137.5%.
(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").
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(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 April 28, 2001,
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.
(i) If the Employment Period is terminated on or
before April 28, 2001:
(A) by resolution of the Board other than for
Cause, 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 from the date of
termination through the period ending on the six-month anniversary of the date
of termination.
(B) as a result of the Executive's death or
Disability, the Executive or the Executive's estate, as applicable, 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.
(C) as a result of the Executive's voluntary
resignation 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 Section 2(d)(i)(A)
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
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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) 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 termination of this Agreement
pursuant to Section 2(d)(i)(A). If the Employee does obtain 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 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).
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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 hereof, within any geographical area in which the
Company Group engages or has written 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 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 the
period beginning on the date of termination through the six-month anniversary
date of the date of termination of the Executive's employment.
(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 at any time during the Executive's employment period, 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 5, money damages would be
inadequate and the Company Group would
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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 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
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:
Simon Mattress Manufacturing Co.
0000 Xxxx Xxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: President
Telephone No.: (000) 000-0000
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
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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
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:
c/o Simon Mattress Manufacturing Co.
0000 Xxxx Xxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000-0000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxxx Xxxxxx Xxxxxx & Xxxx XX
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone No. (000) 000-0000
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.
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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.
(b) Complete Agreement. This Agreement embodies the complete
agreement and understanding among the parties and supersedes and preempts 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.
(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, 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
CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
PROVISION OR RULE (WHETHER OF THE STATE OF CALIFORNIA OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF CALIFORNIA; 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 (including reasonable attorneys' fees) 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.
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(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 HOLDINGS L.L.C.
By: /S/ Xxxxxxx Xxxxxxxxxx
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Name: Xxxxxxx Xxxxxxxxxx
Title: President
SLEEPMASTER L.L.C.
By: /S/ Xxxxxxx Xxxxxxxxxx
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Name: Xxxxxxx Xxxxxxxxxx
Title: President
SIMON MATTRESS MANUFACTURING CO.
By: /S/ Xxxxxxx Xxxxxxxxxx
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Name: Xxxxxxx Xxxxxxxxxx
Title: Chief Executive Officer
/S/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
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SCHEDULE A
EMPLOYEE BENEFITS
Existing Health and Welfare Benefits -- consistent with those paid to key senior
executives of Simon Mattress Manufacturing Co.
Permitted Vacation -- 4 weeks per year (5 vacation days per year may be
rolled-over)
Life Insurance -- West Coast Life Insurance Policy Number ZUA336173, which
policy shall be paid for by Simon Mattress Manufacturing Co.
Schedule A, Page 1
