Sample Business Contracts

Separation Agreement - Select Comfort Corp. and John D. Watson

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                             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").


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


     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.

     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


     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


     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.


By   /s/ Robert Hawthorne         
     Its: President and CEO


     /s/ John D. Watson