Document:

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                                 Exhibit 10.37

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                                SIMMONS COMPANY
                        ONE CONCOURSE PARKWAY, SUITE 600
                             ATLANTA, GEORGIA 30328

                               February 22, 2000

BY HAND DELIVERY

Mr. Zenon Nie
8490 Sentinae Chase Drive
Roswell, Georgia  30076

Dear Mr. Nie:

         As we have discussed, Simmons Company (the "Company") will accept your
resignation of employment with the Company and all offices and positions that
you held with the Company, its parent Simmons Holdings, Inc. ("Holdings") or
any of their subsidiaries, employee benefit or stock ownership plans or
affiliates, as well as Simmons dining and country clubs and other
organizations, as applicable, effective January 4, 2000 (the "Separation
Date"). Reference is made to your employment agreement dated as of November 15,
1993, as amended to date (the "Employment Agreement"). The Employment Agreement
is modified as follows, and except as so modified will remain in full force and
effect. Provided that you accept this letter and have not revoked it as
permitted in the last paragraph hereof, this letter contains the agreement
between you and the Company concerning your separation arrangements, as
follows:

         1. Within five business days of the later of (a) the expiration of the
revocation period as provided in this letter or (b) the date of our receipt of
this executed agreement, you will receive a wire transfer payment of $4,615.38
based on the Company's payroll practices and your current base salary, for all
work performed for the Company from the end of the last payroll period through
the Separation Date.

         2. In consideration for your acceptance of this agreement and subject
to your fully meeting your obligations under it, the Company will provide you
with the following:

                  1. To the extent earned, the Company will provide you with a
         bonus amount for the 1999 fiscal year as provided in the Employment
         Agreement.

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Mr. Zenon Nie                        -2-                       February 22, 2000

                  2. Within five business days of the later of (a) the
         expiration of the revocation period as provided in this letter or (b)
         the date of our receipt of this executed agreement, the Company will
         provide you with a separation payment equal to $2,280,000, payable by
         wire transfer to an account designated by you.

                  3. Subject to the terms and conditions of this paragraph
         2(c), Holdings will repurchase 280,000 shares of Holdings Common Stock
         held by you at a price per share of $6.7315 for a total value of
         $1,884,820. Subject to the terms and conditions of this paragraph
         2(c), Holdings hereby agrees to pay you deferred compensation over a
         three-year period in the sum of $3,035,146 ("Deferred Compensation")
         plus interest as hereinafter provided. All options of Holdings held by
         you are hereby terminated.

                  Subject to approval by the Company's senior lenders and as
         soon as practicable thereafter, Holdings will pay to you $1,250,000 by
         wire transfer to an account designated by you in partial payment for
         your shares of Holdings Common Stock. Subject to approval by the
         Company's senior lenders, Holdings will pay you (i) the principal
         balance owed under the Promissory Note (as defined below), which note
         shall be delivered to you coincident to the payment of $1,250,000 as
         set forth in the preceding sentence and (ii) the Deferred Compensation
         over a three-year period, as provided below, and all sums owing to you
         for the Deferred Compensation and the Promissory Note shall bear
         interest, computed on the basis of a 365-day year, commencing on the
         date of this agreement, on the principal amount from time to time
         unpaid at a per annum rate equal to 9%, and will be payable to you as
         follows:

         (1) $634,820 plus accrued interest will be payable by delivery of a
         promissory note (the "Promissory Note") from Holdings maturing on
         January 4, 2001;

         (2) $615,180 plus accrued interest will be payable on January 4, 2001
         by wire transfer to an account designated by you as the first payment
         on the Deferred Compensation due you;

         (3) $1,250,000 plus accrued interest will be payable on January 4,
         2002 by wire transfer to an account designated by you as the second
         payment on the Deferred Compensation due you;

         (4) $1,169,966 plus accrued interest will be payable on January 4,
         2003 by wire transfer to an account designated by you as the third and
         final payment on the Deferred Compensation due you.

                  All unpaid amounts of principal and interest under the
         Promissory Note and all unpaid amounts of Deferred Compensation plus
         accrued interest thereon owed to you

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Mr. Zenon Nie                           -3-                    February 22, 2000

         pursuant to this paragraph 2(c) will accelerate, and full payment of
         all such amounts will be immediately owed to you, upon the occurrence
         of (A) a Change of Control (as defined below), (B) an Initial Public
         Offering (as defined below) or (C) a default in any payment due under
         the Promissory Note or the Deferred Compensation due you; PROVIDED,
         HOWEVER, that Holdings' obligation to pay such amounts under clauses
         (A), (B) and (C) above is subject to the limitations of the indenture
         governing the senior subordinated notes of the Company. The Company
         agrees to use its reasonable best efforts to promptly obtain the
         approval of the Company's senior lenders for all amounts payable to
         you as provided under this paragraph 2(c) (the "Approval"). The
         Company agrees that if initially it is unsuccessful in obtaining such
         Approval, it shall on a continuing basis seek such Approval and upon
         your request will confirm to you the status of their efforts to obtain
         such Approval.

                  "Change of Control" means a transaction or series of related
         transactions which results in a bona fide, unaffiliated change of
         beneficial ownership of the Company or its business of greater than
         50% (disregarding for this purpose any disparate voting rights
         attributable to the outstanding stock of Holdings), whether pursuant
         to the sale of the stock of Holdings or the Company, the sale of the
         assets of the Company, or a merger or consolidation involving Holdings
         or the Company.

                  "Initial Public Offering" means the effectiveness of a
         registration statement under the Securities Act of 1933, as amended,
         covering any of the capital stock of Holdings or the Company (other
         than preferred stock that is not convertible into common stock) and
         the completion of a sale of such stock thereunder, if as a result of
         such sale (i) Holdings or the Company becomes a reporting company
         under Section 12(b) or 12(g) of the Securities Exchange Act of 1934,
         as amended, and (ii) such stock is traded on the New York Stock
         Exchange or the American Stock Exchange, or is quoted on the Nasdaq
         Stock Market or is traded or quoted on any other national stock
         exchange or securities system.

                  4. As provided in the Employment Agreement, the Company will,
         for three (3) years after the Separation Date, continue to provide
         coverage and benefits under the employee benefit plans and programs in
         which you currently participate at the same rate at which the Company
         currently provides such benefits to you.

                  5. As provided in the Employment Agreement, the Company will
         provide you with outplacement services (including but not limited to
         an office and secretarial, telephone and related support services)
         with a provider selected by you and reimbursement for job search costs
         and expenses incurred by you, provided that the total cost of such
         services shall not exceed $90,000.

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Mr. Zenon Nie                         -4-                      February 22, 2000

                  6. As provided in the Employment Agreement, the Company shall
         continue to provide you with a leased automobile under the terms of
         the lease in effect as of the Separation Date, and will continue to
         provide for insurance and maintenance for such automobile, until the
         later of (i) three years after the Separation Date or the expiration
         of the lease of such automobile and (ii) 180 days after the Separation
         Date.

                  7. The Company will provide you with payment for expenses for
         dining and country club dues and membership fees that have been
         incurred since the last payment of such expenses.

                  8. The Company will reimburse you for legal expenses incurred
         by you in connection with the negotiation of this agreement, provided
         that the total cost of such expenses shall not exceed $20,000.

         3. All payments by the Company under this agreement will be reduced by
all taxes and other amounts that the Company is required to withhold under
applicable law and all other deductions authorized by you.

         4. You agree that the payments provided under paragraph 2 of this
agreement are in complete satisfaction of any and all payments due to you from
the Company through the Separation Date. You will not earn any additional
amounts after the Separation Date and, except as expressly provided in
paragraph 2(d) and (e), your participation in all employee benefit plans and
programs of the Company will end as of the Separation Date, in accordance with
the terms of those plans and programs.

         5. You agree that you will not disclose this agreement or any of its
terms or provisions, directly or by implication, except to members of your
immediate family and to your legal and tax advisors, and then only on condition
that they agree not to further disclose this agreement or any of its terms or
provisions to others; PROVIDED, HOWEVER, that in the event that you become
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process) to disclose this
agreement or any of its terms or provisions, you will provide the Company with
prompt prior written notice of such requirement so that the Company may seek a
protective order or other appropriate remedy and/or waive compliance with the
terms of this paragraph 5. In the event that such protective order or other
remedy is not obtained, or that the Company waives compliance with the
provisions hereof, you agree to furnish only the portion of this agreement or
its terms or provisions which you are advised by counsel is legally

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Mr. Zenon Nie                         -5-                      February 22, 2000

required to be furnished, and to exercise your reasonable efforts to obtain
assurances that confidential treatment will be accorded to such information.

         6. You agree that you will not directly or indirectly disparage in any
public communication the Company, Holdings, its direct or indirect stockholders
or any affiliate or employee or director thereof, or otherwise publicly
communicate, in writing or orally, or do or say anything that could reasonably
be expected to injure the business or reputation of any of them, including in
connection with any communication with employees or customers of the Company;
PROVIDED, HOWEVER, that this sentence will not prevent you from responding to
any disparaging statements made in a public forum or any public communications
that could reasonably be expected to injure your reputation. The Company and
Holdings, for themselves and their affiliates, agree that they will not
directly or indirectly disparage you in any public communication or otherwise
publicly communicate, in writing or orally, or do or say anything that could
reasonably be expected to injure your name or reputation; PROVIDED, HOWEVER,
that this sentence will not prevent the Company from responding to any
disparaging statements made in a public forum or any public communications that
could reasonably be expected to injure its business or reputation.

         7. In signing this agreement, you give the Company assurance that you
have returned to the Company any and all documents, materials and information
related to the business, whether present or otherwise, of the Company, its
parent, subsidiaries and other affiliates, and all keys and other property of
the Company, its parent, subsidiaries and other affiliates in your possession
or control. Notwithstanding the foregoing, you shall retain in your possession
and hereby become the owner of the personal computer located at your home,
provided that all electronic data related to the Company's business is returned
to the Company and you hereby give the Company assurance that you have returned
to the Company such electronic data. Recognizing that your employment with the
Company has terminated, you agree that you will not, for any purpose, attempt
to access or use any Company computer or Company computer network or system,
including without limitation its electronic mail system.

         8. From and after the Separation Date, you will not make any
commitments of any nature on behalf of, or otherwise attempt to bind, the
Company or its affiliates, and you will not charge any expenses to the account
of, or otherwise cause any expenses to be incurred on behalf of, the Company or
its affiliates. You agree to cooperate with the Company hereafter with respect
to all matters arising during or related to your employment, including but not
limited to all matters in connection with any governmental investigation,
litigation or regulatory or other proceeding

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Mr. Zenon Nie                         -6-                      February 22, 2000

which may have arisen or which may arise following the signing of this
agreement, and the Company agrees, upon your submission of appropriate
documentation, to reimburse you for reasonable travel and incidental expenses
incurred in connection with such cooperation by you. You agree to turn over to
Kenneth Barton or his designee all of your work responsibilities, any and all
documents, materials and other information relating to the Company or any of
its affiliates, and all Company keys, credit cards and other Company property.

         9. The Company agrees (a) to reimburse you for all reasonable
attorney's fees and expenses incurred by you to enforce the provisions of this
agreement if your claims are successful and (b) to reimburse you for 25% of
such reasonable attorney's fees and expenses if your claims are not successful;
PROVIDED, HOWEVER, that you and the Company shall each use good faith efforts
to reach mutual agreement, and based on such good faith efforts, shall have
reached mutual agreement as to the amount of such expenses.

         10. In order to be certain that this agreement will resolve any and
all dissatisfaction that you might have and to be certain that you are signing
this letter knowingly and voluntarily, the Company requests that you carefully
consider its terms, including the release of claims set forth below and, in
that regard, encourages you to seek the advice of an attorney before signing
this agreement. This letter contains the entire agreement between you and the
Company and its affiliates and replaces all prior and contemporaneous
agreements, communications and understandings, whether written or oral, with
respect to your employment and its termination and all related matters except
as explicitly contemplated hereby. This agreement will be governed by and
interpreted in accordance with the laws of the State of Georgia.

         11. In exchange for benefits provided you under this agreement, you
agree that, except as set forth in the proviso to the next succeeding sentence,
this letter shall be in complete and final settlement of any and all causes of
action, rights, or claims that you have had, now have or might now have in any
way related to or arising out of or in connection with your employment with the
Company and its termination or your equity or other interests in the Company
and its affiliates or pursuant to any federal, state or local employment laws,
regulations, executive orders or other requirements, including without
limitation the federal Age Discrimination in Employment Act of 1967, as
amended, Title VII of the federal Civil Rights Act of 1964, as amended, and the
Georgia fair employment practices statutes. On behalf of yourself and your
heirs, representatives, executors, administrators, devisees, legatees, assigns,
and anyone else claiming by or through you, you hereby release the

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Mr. Zenon Nie                          -7-                     February 22, 2000

Company, its affiliates, and their respective past, present and future
directors, trustees, shareholders, officers, partners, employees, agents,
successors and assigns and any others associated with any of them, individually
and in their official capacities, from any such cause of action, right or claim
that you have had, now have or might now have against any of them; PROVIDED,
HOWEVER, that you are not hereby releasing any cause of action, right or claim
for breach of the Company's obligations to you under or contemplated by this
letter.

         In exchange for your agreements contained in this letter, the Company
agrees that, except as set forth in the proviso to the next succeeding
sentence, this letter shall be in complete and final settlement of any and all
causes of action, rights, or claims that the Company or any of its affiliates
has had, now has or might now have against you in any way related to or arising
out of or in connection with your employment with the Company. On behalf of
themselves and their successor and assigns, the Company and its affiliates
hereby release you from any such cause of action, right or claim that they have
had, now have or might now have against you; PROVIDED, HOWEVER, that they are
not hereby releasing any cause of action, right or claim for breach of your
obligations under or contemplated by this letter.

         12. In signing this agreement, you give the Company assurance that you
have signed it voluntarily and with a full understanding of its terms and that
you have had sufficient opportunity to consider this agreement and to consult
with those persons described in paragraph 10 above before signing it.

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Mr. Zenon Nie                           -8-                    February 22, 2000

         In signing this agreement, you also acknowledge that you first
received this agreement on January 4, 2000, and, whether or not the changes to
this agreement since that date are material, you freely and voluntarily waive
any right you may have to an additional twenty-one days to consider this
agreement. You may revoke this agreement at any time during the seven- day
period immediately following the date of your signing, provided that you do so
to me in writing. If you do not do so, then, at the expiration of that
seven-day period, this letter will take effect as a legally-binding agreement
between you and the Company on the basis set forth above. The enclosed copy of
this letter, which you should also sign and date, is for your records.

                                               Sincerely,

                                               Richard C. Dresdale
                                               Director, Simmons Company and
                                               Simmons Holdings, Inc.

Accepted and agreed:

Signature:  ____________________________
               Zenon Nie

Date:  ________________________________<PAGE>   1
                                 Exhibit 10.38

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                    SEPARATION AGREEMENT AND GENERAL RELEASE
                    ----------------------------------------

         This Separation Agreement and General Release ("Agreement") is made as
of this 7th day of January, 2000, between SIMMONS COMPANY ("Company"), a
Delaware corporation, and Martin R. Passaglia ("Employee"), a resident of
Duluth, GA.
                                    RECITALS
                                    --------

         1. Employee was originally employed by the Company on 11/1/73.

         2. The Company and Employee desire to enter into this Agreement to
resolve any disputes relating to Employee's employment relationship with the
Company and all other matters as set forth herein.

         In consideration of the above premises and agreements contained
herein, the parties agree hereto as follows:

         1. NO ADMISSION. Employee agrees, represents, and acknowledges (i)
that neither this Agreement nor the Company's offer to enter into this
Agreement shall be construed as an admission by the Company that it has acted
wrongfully towards the Employee or any other person or that the Employee has
any rights against the Company and (ii) that the Company expressly denies any
liability to, or wrongful acts against, the Employee or any other person on the
part of itself, its employees or its agents.

         2. SEPARATION DATE. Employee agrees that his employment with the
Company ceased on November 12, 1999 (the "Separation Date").

         3. EMPLOYEE CONFIDENTIALITY AGREEMENT. Employee agrees, represents and
acknowledges that as a result of his employment with the Company he has had and
may now have in his possession and control proprietary documents, data,
materials, files and similar items concerning Trade Secrets and Confidential
Information of the Company. Employee acknowledges, warrants and agrees that he
will return to the Company all such items and any copies or excerpts thereof
and

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any other properties, files or documents obtained as a result of his employment
with the Company by the close of business on January 31, 2000. "Confidential
Information" means information, regardless of form, that (i) the Company keeps
confidential from competitors and the general public; (ii) relates to the
business in which the Company is engaged; and (iii) either derives actual or
potential economic value from not being generally known by competitors of the
Company or the public, or might result in harm to the Company if disclosed to
competitors or the public. Confidential Information does not include
information that is generally available to or known by the public other than as
a result of a breach of this Agreement. From and after November 12, 2001, the
term Confidential Information does not include any information that is not a
Trade Secret. Whether any particular information constitutes Confidential
Information shall be determined as of the time of any alleged violation of any
provision of this Agreement. "Trade Secrets" means any information, regardless
of form, constituting a trade secret of the Company under applicable state law.
Whether any particular information constitutes a Trade Secret shall be
determined as of the time of any alleged violation of any provision of this
Agreement. Except as hereinafter provided in this Section, Employee shall never
use or disclose, or threaten to use or disclose, any Confidential Information
other than as required in the performance of his duties under this Agreement.
Further, the Employee will use his best efforts to protect Confidential
Information from any unauthorized disclosure. The Employee may otherwise
disclose Confidential Information only to the extent that disclosure is
required by force of law (such as by subpoena, court order or civil
investigative demand), but then only if he both notifies the Company in writing
of the required disclosure and furnishes the Company with a copy of each
instrument purporting to require disclosure as far

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in advance of the date for disclosure as the circumstances permit so that the
Company may take such action as it deems proper to obviate the requirement for
disclosure or otherwise protect its interests.

         4. RELEASE BY EMPLOYEE. Except as to claims arising after this
Agreement is executed, Employee hereby forever releases, dismisses and
discharges the Company and its officers, directors, employees, agents,
predecessors, successors, assigns, and transferees from any and all causes of
action, suits, damages, debts, claims, counterclaims, obligations and
liabilities in law or equity of whatever nature, known or unknown, resulting
from or arising out of, directly or indirectly, Employee's employment
relationship with the Company or the termination of Employee's employment
relationship with the Company, including, without limitation by reason of
specification, any claims for wrongful discharge of any kind and any claims
arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C. && 2000 e
ET. SEQ., the Age Discrimination In Employment Act, 29 U.S.C. && 621 ET. SEQ.,
and any federal, state or local laws or ordinances prohibiting employment
discrimination and any common law claims resulting from or growing out of any
legal restrictions on the Company's right to terminate an employee.

         5. RELEASE BY COMPANY. Except as to claims arising after this
Agreement is executed, Company hereby forever releases, dismisses and
discharges Employee from any and all causes of action, suits, damages, debts,
claims, counterclaims, and liability in law or equity of whatever nature, known
or unknown, resulting from or arising out of, directly or indirectly,
Employee's employment relationship with the Company.

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         6.       SEVERANCE CONSIDERATION. In full consideration and as
                  material inducement for Employee's signing of this Agreement,
                  the Company will provide to Employee the following Severance
                  Benefits:

                  (a)      Severance payments to Employee at a rate equal to
                           $22,291.67 per month, less legal deductions, for a
                           period of seventeen and one tenths (17.1) months,
                           terminating on April 15, 2001. The maximum gross
                           amount payable to Employee under this Section 6 (a)
                           is $381,187.56.

                  (b)      Pay 1999 Management Bonus prorated through
                           Separation Date, if earned.

                  (c)      Distribution of the cash value of stock held by the
                           Employee will be made as soon as possible under
                           conditions of the stock holder agreement.

                  (d)      Continue Employee's coverage under all company
                           benefit plans in which Employee is currently
                           enrolled terminating November 12, 2000 provided,
                           however, Employee shall be responsible for and shall
                           pay his portion as currently paid by the Employee as
                           of the Separation Date.

         (e)      Distribute to Employee his portion of Simmons Company
                  Non-Qualified ESOP Plan at $6.73 per share.

         (f)      Provide Outplacement assistance equal to a value of
                  $20,000.00.

         (g)      Provide company phone extension, voice mail, and phone credit
                  card through December 31, 1999.

         (h)      Provide financial planning assistance through Creative
                  Financial through November 30, 2000.

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         (i)      Provide neutral employment references.

         7.  EMPLOYEE'S EXECUTION OF THIS AGREEMENT; RIGHT OF REVOCATION.
Employee may revoke this agreement within seven (7) days after the date the
employee executes this agreement and delivers a properly executed agreement to
the company. This Agreement shall not become effective and the Company shall
have no obligation to provide any payment or other benefits enumerated in this
Agreement until seven days after the date the Employee executes this Agreement
and delivers a properly executed copy of it to the Company and does not revoke
it.

         8.  COVENANT NOT TO COMPETE. Employee agrees that for a period of
Seventeen and one tenths (17.1) months following the last day of the employee's
employment with the Company, he will not render any service within the United
States for the benefit of any Proscribed Company (as hereinafter defined) that
is the same as, or substantially similar to, any service that was a material
function of any position he held as an officer and/or director of the Company
at any time during the last two (2) years of employment with the Company. For
purposes of this Section VIII, the term `'Proscribed Company" includes the
following companies, their parents, affiliates, and/or subsidiaries: Heilig
Meyers Company; Heilig Meyers Furniture Company; Mattress Discounters, Inc.;
Bedding Experts, Inc.; Sealy & Company, Inc.; Serta, Inc.; Spring Air Bedding
Company; and The Mattress Firm.

         9.  COVENANT NOT TO SOLICIT EMPLOYEES. Employee agrees and represents
that he will not for a period of twenty-four (24) calendar months from the
Separation Date, either directly or indirectly, on his own behalf or in the
service, or on behalf of others, divert, solicit or hire away or attempt to

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divert, solicit or hire away to any person, concern or entity, any person
employed by the Company or any subsidiary of the Company, whether or not such
employee is a full-time employee or a temporary employee of the Company or any
subsidiary of the Company, whether or not such employment is pursuant to
written agreement, and whether or not such employment is for a determined
period or is at will. During such period, the Employee shall not, and shall
cause any person or entity with which he is affiliated not to solicit or
induce, or attempt to solicit or induce, any person who was employed by the
Company or any of its subsidiaries on a full-time basis during the ninety (90)
days immediately prior to the termination of the employee's employment to
accept employment with the Employee or with any person or entity with which he
is affiliated. For the purpose of this Agreement, a subsidiary of the Company
shall mean any person, concern or entity in which the Company has an equity
interest representing 20% or more of the voting or other controlling rights in
the person, concern or entity.

         10. CONSULTATION. Employee agrees that notwithstanding the cessation
of his employment in accordance with Section 2 hereof he shall, from and after
the date hereof, without any additional cost to the Company except for
reimbursement of his direct out-of-pocket expenses reasonably incurred: (i)
provide assistance to, consult with and advise the Company and its
subsidiaries, including their respective lawyers, with respect to any actual or
threatened litigation or investigation to which the Company or a subsidiary of
the Company may become party or subject arising out of activities in which he
was involved during his employment with the Company (or of which he has any
knowledge as a result of his employment with the Company), and (ii) appear
and/or testify, if requested upon

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reasonable notice, in depositions, at trials and other court proceedings
relating thereto regardless of location.

         11. CONFIDENTIALITY OF THIS AGREEMENT. Employee represents and agrees
that he will keep the existence of this Agreement, the terms of and amounts set
forth in this Agreement completely CONFIDENTIAL, and that he will not hereafter
disclose any such information concerning this Agreement to anyone except his
immediate family, investment advisor, tax advisor, accountant and attorney,
provided that they agree to keep this information CONFIDENTIAL, or as necessary
to enforce the terms of this Agreement.

         12. BREACH BY EMPLOYEE. In the event that the Board of Directors of
the Company makes a good faith determination that Employee has breached or
violated any of the terms or provisions of this Agreement, all payments then
outstanding and unpaid under Section 6 of this Agreement will cease. In
addition to all other remedies provided at law or in equity for damages or
otherwise to which the Company may be entitled, the Company shall be entitled
to a temporary restraining order and a permanent injunction to prevent a breach
of any of the terms or provisions contained in this Agreement.

         13. CONSULTATION WITH ATTORNEY; KNOWLEDGEABLE DECISION BY EMPLOYEE.
Employee represents and warrants that he has read all the terms of this
Agreement, and has had an opportunity to discuss these documents with any
attorney of his choosing prior to executing it. Employee understands the terms
of this Agreement, and understands that this Agreement releases forever the
Company from any legal action arising from his employment relationship and the
termination of his employment relationship by the Company except as
specifically set forth in this Agreement. Employee is signing and delivering
this Agreement of his own free will in exchange for the consideration to be
given to him, which

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he acknowledges is in addition to any remuneration or other items of value to
which he is already entitled. Employee further acknowledges and agrees that the
consideration provided by the Company for executing this Agreement is adequate
and satisfactory. Employee acknowledges and agrees that in executing and
delivering this Agreement, he did not rely on any representation or statement
written or oral by the Company or any of its agents, representatives,
consultants or employees concerning the terms or effects of this Agreement, not
set forth in this document.

         14. SEVERABILITY. In case one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, the same shall not affect any other provisions in
this Agreement, but this Agreement shall be construed as if such invalid or
illegal or unenforceable provisions had never been contained herein or therein.

         15. ENTIRE AGREEMENT, MODIFICATION. This Agreement embodies the entire
agreement of the parties hereto relating to the subject matter hereof. No
amendment or modification of this Agreement shall be valid or binding upon the
parties unless made in writing and signed by the parties hereto.

         16. BINDING EFFECT, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefits of the parties hereto and their respective heirs,
representatives, successors, transferees and assigns. This Agreement shall not
be assignable by Employee but shall be freely assignable by the Company.

         17. COUNTERPART COPIES. This Agreement may be executed in any number
of counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.

         18. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.

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         19. HEADINGS. The section headings set forth in this Agreement are
included for convenience only and shall not be considered in the construction
or interpretation of this Agreement.

         IN WITNESS WHEREOF, the parties have executed this Agreement this
________ day of _________________, 1999.

EMPLOYEE;                                      COMPANY:

                                            SIMMONS COMPANY

________________________________            By: __________________________

Martin R. Passaglia                         Title: _______________________

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                              NOTE OF LEGAL RIGHTS
                UNDER THE OLDER WORKERS' BENEFIT PROTECTION ACT

         Simmons Company has prepared a severance pay and benefit package to
assist you when your employment with us ends. In exchange for this severance
pay and benefit package, you will be required to sign a general release. By
signing the attached Separation Agreement and General Release (hereinafter
"Release"), you are giving up all claims you may have against Simmons Company
including claims under the Age Discrimination in Employment Act (hereinafter
called "ADEA"), which arose on or before the date you sign the Release. Federal
law requires Simmons Company to inform you of your legal rights before you sign
the attached release.

         You should carefully review the terms of the Release with an attorney
before you sign it. Be sure you understand all of its terms and conditions and
are signing it voluntarily. If you do not understand any of its terms or
conditions, or if you have any questions, please ask a representative of
Simmons Company for assistance.

         You may consider whether to sign this Release for twenty-one (21)
days. After you sign the Release, you may change your mind and revoke it for a
period of seven (7) days following the date you signed it. If you do not revoke
the Release within this time period, it will become enforceable, and Simmons
Company will give you the pay and benefits outlined in it.

         The law also requires that you receive consideration in addition to
anything of value that you are already entitled to receive in exchange for
signing any settlement agreement and release in which you waive your rights and
claims under the ADEA against Simmons Company. Because Simmons Company does not
pay severance pay and benefits as a matter of policy and practice, but has
implemented this agreement in conjunction with your termination, this severance
pay is the additional consideration required by the law.

         Please sign and date the attached copy of this Notice. This is simply
to let us know that you received it.

                                ACKNOWLEDGEMENT

         I acknowledge that I received a Notice of Legal Rights explaining my
legal rights under the Older Workers' Benefit Protection Act on the date stated
below.

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       (date)                                           (signature)

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