Separation Agreement - Select Comfort Corp. and John D. Watson
SEPARATION AGREEMENT
THIS AGREEMENT, dated as of July 13, 1998 entered into by and between Select
Comfort Corporation, a Minnesota Corporation (the "Company") and John D. Watson,
an individual presently residing in the State of Minnesota (the "Employee").
RECITALS
A. The Company and the Employee have agreed to certain terms and conditions
relating to the remaining term of the Employee's employment with the
Company and the Employee's separation from the Company.
B. All of the terms and conditions relating to the Employee's employment with
the Company and the Employee's separation from the Company are set forth
herein and this Agreement supersedes and replaces in its entirety any
previous agreement or understanding relating thereto between the Company
and the Employee.
In consideration of the foregoing and the mutual agreements set forth below the
parties hereto agree as follows:
1. TERM OF SERVICE: SEPARATION FROM SERVICE. The Company agrees that the
Employee's employment with the Company will continue until September 1,
1998 (the "Separation Date"). The Employee agrees to continue performing
services as an employee of the Company as directed by the President and
Chief Executive Officer of the Company through the Separation Date. On the
Separation Date, the Employee understands that his position as an employee
and officer of the Company and all of its subsidiaries has been eliminated.
2. COVERAGE UNDER PLANS. The Employee will continue to participate in all
employee benefit plans for which he is eligible through the Separation
Date. From and after the Separation Date and until the earlier of (i)
eleven months after the Separation Date or (ii) the date that the Employee
becomes employed by another employer, the Company will continue to pay the
employer portion of the premiums for the Employee's coverage in the
Company's health and dental plans and the Employee will remain responsible
for the Employee's portion of such premiums.
3. SEVERANCE COMPENSATION. Subject to compliance by the Employee with the
terms and conditions of this Agreement, and subject to the execution and
delivery by the Employee of the release in the form of Exhibit A attached
hereto (the "Release") and the effectiveness of the Release following the
passage of any applicable period of time during which the Release may be
revoked by the Employee, and in consideration for the obligations of the
Employee under Section 6 below, the Company agrees to pay severance
compensation to the over a period of eleven (11) months commencing
immediately following the "Separation Date of the Employee" at the current
rate of
<PAGE>
annual salary of $155,000. Such severance compensation will be paid in
accordance with the Company's standard payroll practices, including timing
and manner of payment and the Company will be entitled to deduct and
withhold any amounts necessary to satisfy any income or employment-related
tax requirements.
4. BONUS COMPENSATION. The Company agrees to pay out 8/12 of the employee's
normal eligible bonus. Payment will be determined at the end of fiscal
1998 and paid in accordance with the Company's standard payroll practices,
including timing and manner of payment and the Company will be entitled to
deduct and withhold any amounts necessary to satisfy any income or
employment-related tax requirements.
5. STOCK OPTIONS. All options to purchase shares of Common Stock of the
Company heretofore granted to the Employee that are vested and exercisable
in accordance with their terms as of the Separation Date and not previously
exercised will remain exercisable for a period of three (3) months
following the Separation Date. To the extent that any options held by the
Employee are not exercised within three (3) months following the Separation
Date, such options will terminate and will no longer be exercisable.
6. OUTPLACEMENT SERVICES. The Company will provide the Employee with
outplacement services for the continuing career development of the
Employee, as requested by the Employee, for a period of up to one (1) year
and in an amount not to exceed $5,000.
7. NON-COMPETITION AND NON-DISCLOSURE OF CONFIDENTIAL INFORMATION, The
Employee agrees that from and after the date hereof and through a period of
eighteen (18) months following the cessation of the severance payments
provided for in Section 3 above, the Employee will not alone or in any
capacity with any other person or entity:
A. directly or indirectly engage in any commercial activity that competes
with the Company's business anywhere in the world; or
B. in any way interfere or attempt to interfere with the Company's
relationships with any of its current or potential vendors, suppliers,
distributors, joint venture partners or customers; or
C. solicit for employment, employ or attempt to employ any employee
currently employed by the Company or any employee that hereafter
becomes employed by the Company.
The Employee further agrees that from and after the date hereof, except as
may be expressly required in the performance of the Employee's duties for
and on behalf of the Company the Employee will not use or disclose to any
party any of the Company's proprietary or confidential information.
8. NON-DISPARAGEMENT: The Employee agrees that he will not, at any time,
disparage, demean or criticize, or do or say anything to cause injury to,
the business, reputation, management, employees, members of the Board of
Directors or products of the
<PAGE>
Company. The Company agrees that it will not, at any time, disparage,
demean or criticize, or do or say anything to cause injury to the
reputation or career development of the Employee. In addition to any
other damages or remedies that may be available to a non-breaching party
for any breach of this Section 7, any breaching party shall further be
obliged to the non-breaching party for any reasonable attorneys fees and
costs incurred by the non-breaching party to enforce the provisions of
this Section 7.
9. CONFIDENTIALITY AGREEMENT. The Company and the Employee each agree that
they will hold the facts and circumstances of this Agreement is strict
confidence and will not reveal the impending separation of the Employee
from employment with the Company, the existence of this Agreement or the
terms of this Agreement to anyone except as may be required by law.
Notwithstanding the foregoing, each of the parties hereto will be entitled
to advise their respective professional advisors of the terms hereof, and
the Employee will be entitled to discuss the terms hereof with immediate
family members.
10. NO OTHER COMPENSATION. The Employee agrees and understands that he is
entitled to no other compensation other than as expressly enumerated in
this Agreement and will not accrue or become entitled to any benefits other
than as expressly enumerated herein. The Employee also understands that
payments made pursuant to this Agreement may be subject to withholding of
applicable income and other employment-related taxes and consents to the
Company's right to withhold from such payments. Furthermore, the Employee
acknowledges that the benefits under this Agreement are more than he would
have received under normal policies in the absence of this Agreement and
the attached Release.
11. KNOWING AND WILLFUL AGREEMENT. The Employee hereby acknowledges he fully
understands and accepts the terms of this Agreement, that his signature is
freely, voluntarily and knowingly given, and that he has been provided a
full opportunity to review and reflect on the terms of this Agreement and
to obtain the advise of legal counsel of his choice, which advice the
Company has encouraged him to obtain.
12. RESCISSION PERIOD. After executing this Agreement, the Employee
understands that he may rescind this Agreement by delivering written notice
of such rescission within fifteen (15) days of the date of such execution
by certified mail, return receipt requested, to Select Comfort Corporation,
6105 Trenton Lane North, Minneapolis, Minnesota 55442, Attn: President and
Chief Executive Officer. The Employee understands that this Agreement will
not become effective until the end of such 15-day period and only if the
Employee does not rescind this Agreement.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all previous negotiations, representations and
agreements heretofore made by the Parties with respect to the subject
matter hereof. No amendment waiver or discharge hereof shall be valid
unless in writing and executed by both parties hereto.
14. GOVERNING LAW. The laws of the State of Minnesota will govern the
validity, construction and performance of this Agreement, without regard to
the conflict of law
<PAGE>
provisions of any jurisdictions. Any legal proceeding related to this
Agreement, will be brought In an appropriate Minnesota court, and both the
Company and the Employee hereby consent to the exclusive jurisdiction of
that court for this purpose.
15. SEVERABILITY. Whenever possible, each provision of this Agreement will be
interpreted so that it is valid under applicable law, If any provision of
the Agreement is to any extent rendered invalid under applicable law, that
provision will still be effective to the extent it remains valid. The
remainder of this Agreement also will continue to be valid, and the entire
Agreement will continue to be valid in other jurisdictions.
16. NO ASSIGNMENT. The Employee may not assign this Agreement to any third
party for whatever purpose without the express written consent of the
Company. The Company may not assign this Agreement to any third party,
except by operation of law through merger, consolidation, liquidation or
recapitalization, or by sale of all or substantially all of the assets of
the Company, without the express written consent of the Employee.
17. REMEDIES. The parties hereto agree that the rights granted by this
Agreement are both unique and special, and the parties contemplate that
enforcement of this Agreement may be had by recourse to the equitable
remedies available in courts of appropriate jurisdiction in addition to any
other remedies which may be or may become available at law.
18. BINDING EFFECT. This Agreement and the obligations of the respective
parties hereunder shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto. In furtherance of, and not
in limitation of, the foregoing, the Company agrees that the provisions of
this Agreement shall be binding upon any successor to the business and
assets of the Company and the provisions of this Agreement for the benefit
of the Employee shall inure to the benefit of the Employee's estate in the
event of the Employee's death.
The parties have duly executed this Agreement as of the date set forth above.
SELECT COMFORT CORPORATION
By /s/ Robert Hawthorne
---------------------------------
Its: President and CEO
JOHN D. WATSON
/s/ John D. Watson
------------------------------------