EMPLOYMENT AGREEMENT
 
This EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the 10th day of
November, 2006, among SIMMONS BEDDING COMPANY, a Delaware corporation (the
“Company”), SIMMONS COMPANY, a Delaware corporation (“Holdings”), and GARY S.
MATTHEWS, an individual resident of the State of Connecticut (the “Executive”).
 
W I T N E S S E T H:
 
WHEREAS, the Company and Holdings desire that the Executive accept employment as
President of the Company as of the Effective Date; and
 
WHEREAS, the Company, Holdings 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 the Executive hereby agrees to serve the
Company in such capacity, 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 first actual working day of employment of the Executive (the
“Effective Date”), and shall continue thereafter for a continuously (on a daily
basis) renewing eighteen (18) month 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 eighteen (18) months 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 of the
Company. Executive’s duties and responsibilities as the President 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 Holdings (the “Holdings
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 Holdings Board (provided,
however, that Executive may serve on the Board of Directors of up to two (2) for
profit enterprises which are not engaged in a Competitive Business (currently,
Molson Coors Brewing Co. and Van Wagner, Inc.), and 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 $575,000 per annum or such other
amount as may from time to time be established by the Holdings 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 Executive shall have an annual review
and the Salary may be increased, but not decreased, from time to time. 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. 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 of termination 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 by the Executive from the Company for such year (excluding any
special bonuses paid pursuant to Section 3.4 below).
 
3.3. Restricted Stock Agreement; Stock Options, Class A Stock. (a) If the
Executive makes the investment described in Section 3.3(b) below, the Executive
shall be included as a participant in the Simmons Company Equity Incentive Plan,
as amended from time to time (the “Plan”), pursuant to which Holdings will issue
Executive on the Effective Date (i) 40,000 shares of the Class B Common Stock of
Holdings (“Class B Shares”), subject to vesting and terms and conditions as
provided in the restricted stock agreement between Holdings and the Executive
dated as of the Effective Date (the “Restricted Stock Agreement”) and (ii)
options to purchase 30,000 shares of the Class B Common Stock of Holdings
(“Stock Options”), subject to vesting and terms and conditions as provided in
the stock option agreement between Holdings and the Executive dated as of the
date of issuance (the “Stock Option Agreement”). The Class B Shares will be
subject to the securityholders agreement between Holdings and Executive dated as
of the same date (“Securityholders Agreement”) and the registration rights
agreement between Holdings and Executive dated as of the same date
(“Registration Rights Agreement”). Executive will pay $0.01 per Class B Share as
well as the taxes due on the difference between the then current Fair Market
Value (as defined in the Restricted Stock Agreement) as of the date of issuance
and the $0.01 per share paid. The Stock Options will have a strike price equal
to the Fair Market Value (as defined in the Stock Option Agreement) as of the
Effective Date.
 
(b) The Executive will invest $250,000 of his personal funds in Class A Common
Stock of Holdings (“Class A Shares”) as of the Effective Date. The Class A
Shares will be held pursuant to the terms of the Securityholders Agreement and
the Registration Rights Agreement. Executive will pay Fair Market Value (as
defined in the Securityholders Agreement) as of the Effective Date.
 
3.4 Signing Bonus. The Company will pay Executive a one-time bonus in an amount
of $600,000 on the Effective Date.

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. The Company shall pay the Executive’s legal expenses
incurred in connection with the preparation, negotiation and execution of this
Agreement and the related Agreements referenced herein, up to a maximum of
$25,000.
 
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.
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 four (4)
weeks 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 $1,000.00 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.
 
3.9. Relocation and Interim Housing. The Executive shall be entitled to
participate in the Company’s Level 1 Relocation Package, eligibility for which
shall continue for eighteen (18) months following the Effective Date. In
addition, the Company will reimburse the Executive for interim housing and
weekend travel expenses between the Metropolitan Area and Executive’s current
residence, to a maximum amount of $5,000.00 per month, until such time as the
Executive has relocated to the Metropolitan Area; provided, however, that
reimbursement is subject to the Executive submitting documentation
substantiating such expenditures. The Executive agrees that he shall establish
his primary residence in the Metropolitan Area within eighteen (18) months of
the Effective Date. Payments pursuant to this Section 3.9 shall be net of any
tax or other amounts required to be withheld by the Company under any applicable
law or legal requirement.
 
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 the Excecutive, 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 eighteen (18) months after the
termination thereof, regardless of the reason for the employment termination,
Executive will not, directly or indirectly, anywhere in the Continental United
States or Canada, 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 eighteen (18) months 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 eighteen (18) months
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. (a) 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 excepted from this Section 5.7 and permitted.

(b) Following the termination of the Executive’s employment for any reason, none
of the Company, Holdings or the executive leadership team and General Counsel of
the Company or Holdings will make any negative, disparaging or defamatory
statement, comment, or remark, directly or indirectly, either in writing or any
other medium, about the Executive externally, compelled truthful testimony under
oath being expressly excepted from this Section 5.7 and permitted.

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 as promptly as practicable (but in
no event more than five (5) business days) 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 Holdings Board, after
consultation with such experts, if any, as the Holdings 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 material
obligations set forth in this Agreement, which breach, if capable of being
cured, is not cured within fifteen (15) days after receipt by the Executive of
written notice from the Holdings Board of such breach; (b) the Executive’s
breach of his fiduciary duties involving a matter of material consequence 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, which
breach, if capable of being cured, is not cured within fifteen (15) days after
receipt by the Executive of written notice from the Holdings Board of such
breach; 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 Holdings Board or the Company Board may elect to waive the
period of notice or any portion thereof. For the purposes of this Agreement, the
Executive shall have “Good Reason” to terminate the Executive’s employment
hereunder upon: (a) material diminution in the nature or scope of Executive’s
responsibilities, duties or authority, in each case except in the event of
termination of the Executive’s employment pursuant to Section 6.1, 6.2, 6.3 or
6.6; provided, however, that the Company’s failure to continue Executive’s
appointment or election as a director or officer of any of its Affiliates and
any diminution of the business of the Company or any of its Affiliates,
including without limitation the sale or transfer of any or all of the assets of
the Company or any of its Affiliates, shall not constitute “Good Reason”, (b)
material failure of the Company to provide Executive the Salary and benefits in
accordance with the terms of Section 3 hereof, or (c) failure of the Company to
indemnify the Executive (or advance expenses in connection with indemnification)
in connection with the Executive’s services hereunder as required by the Company
under law or pursuant to its charter, by-laws or other contractual arrangements
with the Executive then in effect, which failure shall not have been cured
within fifteen (15) days after receipt by the Company of written notice from the
Executive of such breach.
 
6.6. Other than for Good Reason or Justifiable Cause. The Executive may
terminate his employment hereunder 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 6.6, the Holdings Board may elect to waive the period
of notice, or any portion thereof.
 
6.7 Justifiable Cause. The Executive may terminate his employment for
“Justifiable Cause” upon sixty (60) days prior written notice to the Company at
any time within ninety (90) days after the failure of the Company to appoint the
Executive as Chief Executive Officer of the Company promptly after the
termination, for any reason, of Charles Eitel as Chief Executive Officer of the
Company.
 
SECTION 7. COMPENSATION UPON TERMINATION.
 
7.1. Death. In the event of the Executive’s death during the Term, the Company
shall pay or transfer, as the case may be, to the Executive’s designated
beneficiary or, if no beneficiary has been designated by the Executive, to his
estate, (1) his Salary that is earned and unpaid at the date of death and (2) on
the earlier of (i) the date of the release of the audited financial statements
of the Company for the Bonus Year during which death occurs or (ii) the date
which is one hundred twenty (120) days after the end of such Bonus Year, an
amount equal to the product of (x) the Annual Bonus that the Executive would
otherwise have earned for such Bonus Year if death had not occurred,
multiplied by (y) a fraction, the numerator of which is the number of days from
the beginning of such Bonus Year until the date of death and the denominator of
which is 365.
 
7.2. Incapacity. If the Executive’s employment shall be terminated by reason of
his incapacity pursuant to Section 6.2, then the Company shall (1) continue to
pay the Executive his Salary, and the Executive shall continue to participate in
the employee benefit, retirement, compensation plans and other perquisites as
provided in Section 3, through the Termination Date, and (2) pay the Executive
on the earlier of (i) the date of the release of the audited financial
statements of the Company for the Bonus Year during which termination pursuant
to Section 6.2 occurs or (ii) the date which is one hundred twenty (120) days
after the end of such Bonus Year, an amount equal to the product of (x) the
Annual Bonus that the Executive would otherwise have earned for such Bonus Year
if termination pursuant to Section 6.2 had not occurred, multiplied by (y) a
fraction, the numerator of which is the number of days from the beginning of
such Bonus Year until the date of termination pursuant to Section 6.2 and the
denominator of which is 365.
 
7.3 Cause or Without Good Reason. If the Company shall terminate the Executive’s
employment hereunder for Cause pursuant to Section 6.3, or the Executive shall
terminate the Executive’s employment hereunder without Good Reason pursuant to
Section 6.6, the Company shall have no further obligations to the Executive
under this Agreement other than the payment of his Salary through the
Termination Date.
 
7.4. Other than for Cause; Good Reason.
 
(a) If the Company shall terminate the Executive’s employment hereunder without
Cause pursuant to Section 6.4 or the Executive shall terminate his employment
hereunder for Good Reason pursuant to Section 6.5, then:
 
(1) the Company shall pay to the Executive:
 
(A) as soon as reasonably practicable after the Termination Date, his Salary
through the Termination Date;
 
(B) as soon as reasonably practicable following the last day of the month in
which the Termination Date occurs, his Annual Bonus as described in Section 3.2,
subject to the following sentence. For purposes of computing the percentage of
Targeted EBITDA which has been achieved pursuant to Exhibit A (the “Applicable
Percentage”), the Company shall compare (i) the actual EBITDA achieved from the
beginning of the fiscal year in which the Termination Date occurs through the
last day of the month in which the Termination Date occurs to (ii) the budgeted
EBITDA from the beginning of the fiscal year in which the Termination Date
occurs through the last day of the month in which the Termination Date occurs.
The amount of the Annual Bonus payable to the Executive under this Section
7.4(a)(1)(B) shall be equal to (x) the applicable percentage of Salary set forth
opposite the Applicable Percentage on Exhibit A, multiplied by (y) the
Executive's Salary paid or payable from the beginning of the fiscal year in
which the Termination Date occurs through the Termination Date; and

(C) for a period of eighteen (18) months after the Termination Date, severance
at a rate equal to 100% of his Salary in effect at the time notice of
termination is given;
 
(2) until the earlier to occur of (A) the passage of eighteen (18) months after
the Termination Date or (B) the date on which the Executive commences other
employment in connection with which the Executive is eligible to receive medical
and dental benefits (including self-employment or engaging in an enterprise as a
sole proprietor or partner) (the “Benefits Termination Date”), if the Executive
was participating in any Company medical, vision and dental plans pursuant to
Section 3.6 and subject to any employee contribution applicable to Executive as
of the Termination Date, the Company shall contribute to the premium cost of
Executive’s coverage and that of Executive’s qualified dependents under its
medical, vision, and dental plans at the same rate that it contributes to the
premium cost for its active executives and their qualified dependents.
 
(b) The obligations of the Company to the Executive under this Section 7.4
(other than Section 7.4(a)(1)(A)) are conditioned upon the Executive’s signing a
release of claims in the form of Exhibit B (the “Release”) within twenty-eight
(28) days of the date on which notice of termination is given and upon such
Release remaining in full force and effect thereafter. All severance payments
under this Section 7.4 will be in the form of salary continuation, payable in
accordance with the normal payroll practices of the Company and will begin at
the Company’s next regular payroll period following the effective date of the
Release, but shall be retroactive to the Termination Date.
 
7.5 Justifiable Cause. If the Executive shall terminate the Executive’s
employment hereunder for Justifiable Cause pursuant to Section 6.7, then (a) as
soon as reasonably practicable after the Termination Date, the Company shall pay
his Salary through the Termination Date, (b) the Company shall pay to the
Executive for a period of twelve (12) months after the Termination Date,
severance at a rate equal to 100% of his Salary in effect at the time notice of
termination is given, and (c) the Executive shall be entitled to participate in
the Company’s Level 1 Relocation Package with respect to the Executive’s
relocation from the Metropolitan Area to another location in the United States.
The obligations of the Company to the Executive under this Section 7.5 (other
than Section 7.5(a)) are conditioned upon the Executive’s signing the Release
within twenty-eight (28) days of the date on which notice of termination is
given and upon such Release remaining in full force and effect thereafter. All
severance payments under this Section 7.5 will be in the form of salary
continuation, payable in accordance with the normal payroll practices of the
Company and will begin at the Company’s next regular payroll period following
the effective date of the Release, but shall be retroactive to the Termination
Date.
 
7.6. Early Termination of Severance Benefits. If the Executive’s employment
hereunder is terminated by the Company without Cause pursuant to Section 6.4 or
the Executive shall terminate his employment hereunder for Good Reason pursuant
to Section 6.5 or the Executive shall terminate his employment hereunder for
Justifiable Cause, and Executive subsequently engages in the activities
prohibited by Section 5, then the Company may thereafter immediately terminate
and shall not be required to continue on behalf of the Executive or his
dependents and beneficiaries any compensation provided for in Section 7.4 or
Section 7.5, as the case may be, other than those benefits that the Company may
be required to maintain for the Executive under applicable law.
 
7.7. Continuation of Health Care Benefits. If Executive was enrolled in the
Company’s medical, vision, and/or dental plans as of the Termination Date, then
upon the expiration of the Company’s obligations pursuant to this Section 7 with
respect to such medical, vision and/or dental benefits, the Executive may elect
to continue Executive’s participation and that of Executive’s qualified
dependents in those plans for the remainder of the COBRA period, if any, by
paying the full premium cost plus an administrative fee, without regard to any
provision of this Agreement.
 
7.8. Post-Termination Obligations Generally. Except as expressly set forth in
this Section 7, and in the Restricted Stock Agreement, Stock Option Agreement,
the Securityholders Agreement and Registration Rights Agreement, the Company and
Holdings shall have no further obligations to the Executive following expiration
of the Term, and performance by the Company and/or Holdings of any obligation
specifically provided in this Section 7 shall constitute full settlement of any
claim that the Executive may have on account of such termination against the
Company and/or Holdings or their respective Subsidiaries and Affiliates and all
of their respective past and present officers, directors, stockholders,
controlling Persons, employees, agents, representatives, successors and assigns
and all other others connected with any of them, both individually and in their
official capacities.
 
7.9. Payments after Death. Should the Executive die after the termination of his
employment with the Company while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and be enforceable by Executive’s
executors, administrators, heirs, distributees, devisees and legatees, and all
amounts payable hereunder shall be paid in accordance with the terms of this
Agreement to Executive’s devisee, legatee or other designee or, if there is no
such designee, to his estate.
 
7.10 Stock Repurchases. Upon termination of the Executive for any reason,
Holdings shall have the right to repurchase the Executive’s vested and unvested
Class B Shares and Class A Shares pursuant to the terms of the Restricted Stock
Agreement, Stock Option Agreement, Securityholders Agreement and Registration
Rights Agreement (collectively, the “Related Agreements”). For purposes of each
of the Related Agreements, the Executive shall be considered a “Senior Manager”
as used and defined in such Related Agreement. For purposes of Section 3.5 of
the Securityholders Agreement, a termination by the Executive for Justifiable
Cause shall have the same consequences as a termination for “good reason”
thereunder.
 
SECTION 8. CONFLICTING AGREEMENTS. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of the Executive’s
obligations hereunder will not breach or be in conflict with any other agreement
to which the Executive is a party or by which the Executive is bound and that
the Executive is not now subject to any covenants against competition,
non-solicitation or similar covenants that would affect the performance of the
Executive’s obligations hereunder or would restrict the Company in its
operations, including hiring any additional executives. The Executive will not
disclose to or use on behalf of Holdings or the Company any confidential or
proprietary information or trade secrets of a third party without such party’s
consent.
 
SECTION 9. WITHHOLDING. Except as otherwise expressly provided, all payments
made by the Company under this Agreement shall be net of any tax or other
amounts required to be withheld by the Company under any applicable law or legal
requirement.
 
SECTION 10. NOTICES. All notices, requests and demands to or upon the parties
hereto to be effective shall be in writing, by facsimile, by overnight courier
or by registered or certified mail, postage prepaid and return receipt
requested, and shall be deemed to have been duly given or made upon: (a)
delivery by hand, (b) two business days after being sent by nationally
recognized overnight courier; or (c) in the case of transmission by facsimile,
one business day after when confirmation of receipt is obtained. Such
communications shall be addressed and directed to the parties as follows (or to
such other address as either party shall designate by giving like notice of such
change to the other party):
 
If to the Executive:
 
Gary S. Matthews
130 Lower Cross Road
Greenwich, CT 06831

with a copy to:

Schiff Hardin LLP
6600 Sears Tower
Chicago, IL 60606
Attention: John F. Adams
Facsimile: (312) 258-5600

If to the Company:
 
Simmons Bedding Company
One Concourse Parkway, Suite 800
Atlanta, Georgia, 30328
Attention: Chief Executive Officer, General Counsel
and Senior Vice President - Human Resources
Facsimile: (770) 206-2669

with copies to:
 
Thomas H. Lee Partners, L.P.
100 Federal Street, 35th Floor
Boston, MA 02109
Attention:  Scott A. Schoen
Todd M. Abbrecht
George Taylor
Facsimile: (617) 227-3514

and

Weil, Gotshal & Manges, LLP
 
100 Federal Street, 34th Floor
 
Boston, Massachusetts 02110
 
Attention: Marilyn French
 
Facsimile: (617) 772-8333
 
SECTION 11. DEFINITIONS; CERTAIN RULES OF CONSTRUCTION. Certain capitalized
terms are used in this Agreement with the specific meanings defined below in
this Section 11. Except as otherwise explicitly specified to the contrary or
unless the context clearly requires otherwise, (a) the capitalized term
“Section” refers to sections of this Agreement, (b) the capitalized term
“Exhibit” refers to exhibits to this Agreement, (c) references to a particular
Section include all subsections thereof, (d) the word “including” shall be
construed as “including, without limitation”, and (e) references to “$” mean
United States dollars.
 
11.1. “Affiliate” shall mean (a) any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with the Company (or
other specified Person), (b) any other Person which, together with its
Affiliates (as defined in clause (a) above), shall, directly or indirectly, own
beneficially or control the voting of at least 10% of the ownership interest in
the Company (or other specified Person) and (c) any other Person of which the
Company (or other specified Person) and its Affiliates (as defined in clauses
(a) and (b) above) shall, directly or indirectly, own beneficially or control
the voting of at least 10% of any class of outstanding capital stock or other
evidence of beneficial interest or of any interest as a general partner or joint
venturer.
 
11.2. “Agreement” is defined in the Preamble to this Agreement.
 
11.3. “Annual Bonus” is defined in Section 3.2.
 
11.4. “Benefits Termination Date” is defined in Section 7.4(a)(3).
 
11.5. “Bonus Year” means fiscal year of the Company, provided, however, that in
the event the fiscal year of the Company is changed, any calculations made under
Section 3.2 and Exhibit A hereto shall be proportionately adjusted as the Board,
in its sole and absolute discretion, shall deem appropriate.
 
11.6. “Business of the Company” means the highly competitive business of
developing, manufacturing, marketing, distributing, and/or selling sleep
products, including mattresses, foundations, changing pads and covers, and
bedding components for the same.

11.7. “Cause” is defined in Section 6.3.
 
11.8. “Common Stock” means the common stock, $.01 par value, of Holdings.
 
11.9. “Class A Shares” is defined in Section 3.3
 
11.10 “Class B Shares” is defined in Section 3.3
 
11.11. “Company” is defined in the preamble to this Agreement.
 
11.12. “Company Board” is defined in Section 2.
 
11.13. “Competitive Business” means any firm, partnership, joint venture,
corporation and/or any other entity and/or person, including but not limited to
Sealy Corporation, Serta International, Spring Air Company, Select Comfort
Corporation, Tempur-Pedic International, Inc., King Koil Licensing Company,
Inc., and/or any licensee of such entity, that develops, manufactures, markets,
distributes, and/or sells any of the sleep products described in Section 11.6.
 
11.14. “Confidential Information” means information about the Company and its
Customers, Customer Prospects, and/or Vendors that is not generally known
outside of the Company, which you will learn of in connection with your
employment with the Company. Confidential Information may include, without
limitation: (1) the terms of this Agreement, except as necessary to inform a
subsequent employer of the restrictive covenants contained herein and/or your
attorney, spouse, or professional tax advisor and, even as to such a person,
only if the person agrees to honor this confidentiality requirement; (2) the
Company’s business policies, finances, and business plans; (3) the Company’s
financial projections, including but not limited to, annual sales forecasts and
targets and any computation(s) of the market share of Customers and/or Customer
Prospects; (4) sales information relating to the Company’s product roll-outs;
(5) customized software, marketing tools, and/or supplies that you may be
provided access to by the Company and/or may create; (6) the identity of the
Company’s Customers, Customer Prospects, and/or Vendors (including names,
addresses, and telephone numbers of Customers, Customer Prospects, and/or
Vendors); (7) any list(s) of the Company’s Customers, Customer Prospects, and/or
Vendors; (8) the account terms and pricing upon which the Company obtains
products and services from its Vendors; (9) the account terms and pricing of
sales contracts between the Company and its Customers; (10) the proposed account
terms and pricing of sales contracts between the Company and its Customer
Prospects; (11) the names and addresses of the Company’s employees and other
business contacts of the Company; and (12) the techniques, methods, and
strategies by which the Company develops, manufactures, markets, distributes,
and/or sells any of the sleep products described in Section 11.6.
 
11.15. “Customers” means any firm, partnership, corporation and/or any other
entity and/or person that purchased or purchases from the Company any of the
sleep products described in Section 11.6.

11.16. “Customer Prospects” means any firm, partnership, corporation and/or any
other entity and/or person reasonably expected by the Company to purchase from
the Company any of the sleep products described in Section 11.6.

11.17. “$” is defined in the introductory paragraph to this Section 11.
 
11.18. “EBITDA Performance” is defined in Section 3.2.
 
11.19. “Effective Date” is defined in the preamble.
 
11.20. “Executive” is defined in the preamble.
 
11.21. “Exhibit” is defined in the introductory paragraph to this Section 11.
 
11.22. “Good Reason” is defined in Section 6.5.
 
11.23. “including” is defined in the introductory paragraph to this Section 11.
 
11.24. “Holdings” means Simmons Company, a Delaware corporation.
 
11.25. “Holdings Board” is defined in Section 2.
 
11.26 “Justifiable Cause” is defined in Section 6.7.
 
11.27. “Metropolitan Area” means the Atlanta, Georgia metropolitan area.
 
11.28. “Person” means any individual, partnership, corporation, association,
trust, joint venture, limited liability company, unincorporated organization or
entity, and any government, governmental department or agency or political
subdivision thereof.
 
11.29. “Plan” is defined in Section 3.3.
 
11.30. “Products” means all products planned, researched, developed, tested,
manufactured, sold, licensed, leased or otherwise distributed or put into use by
the Company or any of its Subsidiaries or Affiliates, together with all services
provided or planned by the Company or any of its Subsidiaries or Affiliates,
during the Executive’s employment.
 
11.31. “Proprietary Rights” means any and all inventions, discoveries,
developments, methods, processes, compositions, works, supplier and customer
lists (including information relating to the generation and updating thereof),
concepts, and ideas (whether or not patentable or copyrightable) conceived,
made, developed, created, or reduced to practice by Executive (whether at the
request or suggestion of the Company or otherwise, whether alone or in
conjunction with others, and whether during regular hours of work or otherwise)
prior to or during Executive’s, which may be directly or indirectly useful in,
or related to, the Business of the Company or any business or products
contemplated by the Company while Executive was or is an employee, officer, or
director of the Company.
 
11.32 “Related Agreements” is defined in Section 7.10.
 
11.33. “Release” is defined in Section 7.4(b).
 
11.34. “Registration Rights Agreement” is defined in Section 3.3.
 
11.35. “Restricted Stock Agreement” is defined in Section 3.3.
 
11.36. “Salary” is defined in Section 3.1.
 
11.37. “Section” is defined in the introductory paragraph to this Section 11.
 
11.38. “Securityholders Agreement” is defined in Section 3.3.
 
11.39. “Stock Options” are defined in Section 3.3.
 
11.40. “Stock Option Agreement” is defined in Section 3.3.
 
11.41. “Subsidiary” means any Person of which the Company (or other specified
Person) shall, directly or indirectly, own beneficially or control the voting of
at least a majority of the outstanding capital stock (or other shares of
beneficial interest) entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, or in which the Company (or
other specified Person) or a Subsidiary thereof shall be a general partner or
joint venturer without limited liability.
 
11.42. “Term” is defined in Section 1.2.
 
11.43. “Termination Date” is defined in Section 1.2.
 
11.44. “Trade Secret” means Confidential Information which meets the additional
requirements of the Delaware Uniform Trade Secrets Act (“DUTSA”), 6 Del. Code
Ann.§§ 2001-2011, and/or under any other applicable law.
 
11.45. “Vendors” means any individual and/or entity that provided goods and
services to the Company.
 
SECTION 12. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is approved
by the Board and agreed to in writing by the Executive and such officer as may
be specifically authorized by the Board in connection with such approval. No
waiver by either party hereto at any time of compliance with or of any breach by
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
 
SECTION 13. GOVERNING LAW AND REMEDIES. In addition to any other remedies at law
or in equity it may have, each party shall be entitled to seek equitable relief,
including injunctive relief and specific performance, in connection with a
breach of the provisions of this Agreement. The Company and Executive
acknowledge and agree that they are bound by their arbitration obligations under
Exhibit C attached hereto, which the Company and Executive also hereby agree to
execute contemporaneously and is an integral part of this Agreement. The Company
and Executive agree and acknowledge that all provisions of this Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware exclusively and without reference to principles of conflict of laws;
provided, however, the Federal Arbitration Act (“FAA”) will supersede state laws
to the extent inconsistent. The Arbitrator(s) shall have no authority to apply
the law of any other jurisdiction.

/s/GSM Your initials to acknowledge agreement to Governing Law and Remedies
provision in Section 13.

 
SECTION 14. SEVERABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
 
SECTION 15. COUNTERPARTS. This Agreement may be executed in any one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument. Executed counterparts may
be delivered by facsimile transmission.
 
SECTION 16. ENTIRE AGREEMENT. This Agreement, the Plan, the Restricted Stock
Agreement, Securityholders Agreement and Registration Rights Agreement
constitute the entire agreement between the parties hereto, and supersede any
and all prior communications, agreements and understandings, written or oral,
with respect to the terms and conditions of the Executive’s employment with the
Company.
 
SECTION 17. ASSIGNMENT. This Agreement shall inure to the benefit of and be
binding upon (a) the Executive, his personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees and (b) the Company, Holdings and their respective successors
(including by means of reorganization, merger, consolidation or liquidation) and
permitted assigns. The Company or Holdings may assign this Agreement to any of
its Subsidiaries or to any successor of the Company or Holdings by
reorganization, merger, consolidation or liquidation and any transferee of all
or substantially all of the business or assets of the Company or Holdings or of
any division or line of business of the Company or Holdings with which the
Executive is at any time associated. The Company requires the personal services
of the Executive hereunder and the Executive may not assign this Agreement.
 

 
\
 
[Signatures next page]

BO1:\147807\04\361R04!.DOC\74339.0001 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, or caused this Agreement to be executed and delivered by its duly
authorized officer, as the case may be, all as of the date first above written.

SIMMONS BEDDING COMPANY
 
By:    /s/Charles R. Eitel
Name:  Charles R. Eitel 
Its:    Chairman and CEO 

SIMMONS COMPANY

By:    /s/Charles R. Eitel
Name:  Charles R. Eitel 
Its:    Chairman and CEO
 
 
/s/Gary S. Matthews
GARY S. MATTHEWS

BO1:\147807\04\361R04!.DOC\74339.0001 

--------------------------------------------------------------------------------

Exhibit A
 
COMPUTATION OF EBITDA PERFORMANCE
 
% of Budgeted EBITDA Target
 
% of Annual Bonus
 
 
% of Salary
 
<902
 
0
 
0
 
90
 
9.09
 
6.363
 
 
91
 
 
18.18
 
 
12.726
 
 
92
 
 
27.27
 
 
19.089
 
 
93
 
 
36.36
 
 
25.452
 
 
94
 
 
45.45
 
 
31.815
 
 
95
 
 
54.55
 
 
38.185
 
 
96
 
 
63.64
 
 
44.548
 
 
97
 
 
72.73
 
 
50.911
 
 
98
 
 
81.82
 
 
57.274
 
 
99
 
 
90.91
 
 
63.637
 
 
100
 
 
100
 
 
70
 
 1  The budgeted EBITDA target will be reset each year. The Board will approve
the budgeted EBITDA target for any fiscal year on or prior to the later of (a)
the date which is 45 days after the end of such fiscal year or (b) the date
which is 15 days after the date of release of the audited financial statements
of the Company for the immediately preceding fiscal year.  2  Upon attaining
100% of budgeted EBITDA target, the amount of the Annual Bonus will be increased
thereafter by 4% of Salary for each 1% increase in EBITDA in excess of 100% of
the Target. The Annual Bonus is not capped.

 

--------------------------------------------------------------------------------

 
 

--------------------------------------------------------------------------------

EXHIBIT B - RELEASE OF CLAIMS
 
FOR AND IN CONSIDERATION OF the special payments and benefits to be provided in
connection with the termination of my employment in accordance with the terms of
the Employment Agreement dated as of __________ 2006 (as amended and in effect
from time to time, the "Employment Agreement") among SIMMONS COMPANY, a Delaware
corporation (“Holdings”), and SIMMONS BEDDING COMPANY, a Delaware corporation,
along with its subsidiaries, parents, joint ventures, affiliated entities, and
includes its successors and assigns or any such related entities (the
“Company”), and me, I, on my own behalf and on behalf of my personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees and all others connected with me, hereby release and
forever discharge the Company and their respective Affiliates (as defined in the
Employment Agreement) and all of their respective past and present officers,
directors, stockholders, controlling persons, employees, agents,
representatives, successors and assigns and all others connected with any of
them (all collectively, the "Released"), both individually and in their official
capacities, from any and all rights, liabilities, claims, demands and causes of
action of any type (collectively, "Claims") which I have had in the past, now
have, or might now have, through the date of my signing of this Release of
Claims, in any way resulting from, arising out of or connected with my
employment or its termination or pursuant to any federal, state, foreign or
local employment law, regulation or other requirement (including, without
limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company, each as amended from time to time); provided, however, that the
foregoing release shall not apply to (a) any right explicitly set forth in the
Employment Agreement to special payments and benefits to be provided in
connection with the termination of my employment, (b) any right to
indemnification set forth in Section 4.2 of the Employment Agreement or (c) any
rights as a participant in any retirement, profit sharing or other employment
benefit plan in accordance with the terms of such plans.

In signing this Release of Claims, I acknowledge that I have had at least 21
days from the date of notice of termination of my employment to consider the
terms of this Release of Claims and that such time has been sufficient; that I
have been advised in writing by the Company to seek the advice of an attorney
prior to signing this Release of Claims; and that I am signing this Release of
Claims voluntarily and with a full understanding of its terms.

I understand that I may revoke this Release of Claims at any time within seven
days of the date of my signing by written notice to the Company and that this
Release of Claims will take effect only upon the expiration of such seven-day
revocation period and only if I have not timely revoked it.

Intending to be legally bound, I have signed this Release of Claims under seal
as of the _____ day of ________________, _________.

__________________________________________
GARY S. MATTHEWS

 
 

--------------------------------------------------------------------------------

 

EXHIBIT C - ARBITRATION CLAUSE

(1) In consideration of the benefits described in the Employment Agreement
executed by GARY S. MATTHEWS (the “Employee” or ”you”) and SIMMONS COMPANY, a
Delaware corporation (“Holdings”), and SIMMONS BEDDING COMPANY, a Delaware
corporation, along with its subsidiaries, parents, joint ventures, affiliated
entities, and includes its successors and assigns or any such related entities
(the “Company”) on the same date hereto and into which this Exhibit C is
incorporated (“Agreement”), the parties hereby agree that any controversy or
claim arising under federal, state and local statutory or common or contract law
between the Company and/or Holdings and you involving the construction or
application of any of the terms, provisions, or conditions of the Agreement,
including, but not limited to, breach of contract, tort, and/or fraud, must be
submitted to arbitration on the written request of the parties served on the
other. Arbitration shall be the exclusive forum for any such controversy. For
example, if the Company and you disagree as to whether the Company had Cause, as
defined by the Agreement, to terminate your employment or if the Company and you
have a dispute concerning the interpretation or enforceability of one or more
restrictive covenants, the parties will resolve the dispute exclusively through
arbitration. The Arbitrator’s decision shall be final and binding on the
parties.
 
(2) If any claim or cause of action at law or in equity is filed by a party in
any state or federal court which results in arbitration being compelled and/or
the claim or cause of action being dismissed, stayed, and/or removed to
arbitration pursuant to this Agreement, the party who instituted the claim or
cause of action in state or federal court, either wholly or in substantial part,
shall, at the discretion of the Arbitrator(s), reimburse the respondent for its
reasonable attorneys’ fees, costs, and necessary disbursements to the extent
permitted by law, in addition to any other relief to which it may be entitled,
related to the state or federal court claim or action.
 
(3) Excluding the initial filing fee, which shall be borne by the claimant, the
cost of arbitration shall be borne by the Company, unless the Arbitrator
determines that any claim(s) brought by you was/were wholly frivolous or
fraudulent. If an arbitration or any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party, either
wholly or in substantial part, shall, at the discretion of the Arbitrator, be
entitled to its reasonable attorneys’ fees, costs, and necessary disbursements
to the extent permitted by law, in addition to any other relief to which it may
be entitled.
 
(4) The parties hereby agree that all claims must be submitted to arbitration
administered by the American Arbitration Association’s Southeast Case Management
Center in Atlanta, Georgia and the arbitration will be conducted in Atlanta,
Georgia.
 
 
(5) The arbitration shall comply with and be governed by the American
Arbitration Association’s Commercial Arbitration Rules (“Rules”) effective as of
the execution date below, to the extent such Rules are not contrary to the
express provisions of this Agreement. The parties also agree that the American
Arbitration Association Optional Rules for Emergency Measures of Protection
(“Emergency Rules”) shall apply to proceedings under this Agreement. The above
Rules and Emergency Rules can be found at the following page of the American
Arbitration Association’s website,
www.adr.org: http://www.adr.org/sp.asp?id=22440. You acknowledge that you should
read these Rules and Emergency Rules and that it is your responsibility to be
familiar with them prior to signing the Agreement. If you are unable to access
the Rules and/or Emergency Rules at the above website, you can request a copy of
them from a Company official prior to signing the Agreement.
 
(6) The parties agree and acknowledge that all provisions of this Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware exclusively and without reference to principles of conflict of laws;
provided, however, the Federal Arbitration Act (“FAA”) will supersede state laws
to the extent inconsistent. Any claim(s) involving the construction or
application of this Agreement must be submitted to arbitration within the
statute of limitations period for such claim(s) under Delaware state law. The
Arbitrator(s) shall have no authority to apply the law of any other
jurisdiction. 
 
(7) The dispute shall be heard and determined by one Arbitrator, unless the
parties mutually consent in writing signed by you and an authorized
representative of Company and/or Holdings to a panel of three (3) Arbitrators.
Unless the parties mutually consent otherwise, the parties agree and request
that the Arbitrator(s) issue a reasoned award in accordance with Commercial
Arbitration Rule R-42(b).
 
I UNDERSTAND THAT BY SIGNING THIS AGREEMENT I AM GIVING UP MY RIGHT TO A JURY
TRIAL.

Executed this 10th day of November, 2006.
(day) (month)  

 

GARY S. MATTHEWS     SIMMONS BEDDING COMPANY
SIMMONS COMPANY

/s/Gary S. Matthews          By: /s/Charles R. Eitel
                    Name: /s/Charles R. Eitel
Social Security #: __________         Title: Chariman and
CEO_______________________________