Document:

Exhibit 10.42

 

Sealy Corporation

 

Directors’ Deferred Compensation Plan

 

(as amended and restated effective as of December 17, 2008)

 

 

Sealy Corporation

 

Directors’ Deferred Compensation Plan

 

Table of Contents

 

	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  ELECTION TO DEFER

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  DEFERRED COMPENSATION ACCOUNTS

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  PAYMENT OF DEFERRED COMPENSATION

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  ADMINISTRATION

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  AMENDMENT OF PLAN; GOVERNING LAW; CHANGE IN CONTROL

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII SECTION 409A COMPLIANCE

  	
  4

  

 

 

ARTICLE I

 

DEFINITIONS

 

1.1.                             “Board” shall mean the Board of
Directors of Sealy Corporation.

 

1.2.                             “Change in Control” shall mean (i) the
sale of all or substantially all of the assets of the Company to an
Unaffiliated Person (as defined below), (ii) a sale by the Company, Sealy
Holding LLC (the “Investor”) or any of their respective affiliates resulting in
more than 50% of the voting stock of the Company being held by a person or
group (as such terms are used in the Securities Exchange Act of 1934, as
amended) that does not include the Investor or any of its respective
affiliates, or (iii) a merger, consolidation, recapitalization or
reorganization of the Company with or into an Unaffiliated Person; if and only if any such event listed in clauses
(i) through (iii) above results in the inability of KKR Millennium
Fund L.P. (“KKR”), the Investor, or any member or members of the Investor, to
designate or elect a majority of the Board (or the board of directors of the
resulting entity or its parent company). 
For purposes of this definition, the term “Unaffiliated Person”
means any person or group who is not (x) KKR, the Investor or any member
of the Investor, (y) an affiliate of KKR, the Investor or any member of
the Investor, or (z) an entity in which KKR, the Investor, or any member
of the Investor holds, directly or indirectly, a majority of the economic
interests in such entity.

 

1.3.                             “Code” shall mean the Internal
Revenue Code of 1986, as amended.

 

1.4.                             “Common Stock” shall mean the
common stock of the Company.

 

1.5.                             “Company” shall mean Sealy
Corporation.

 

1.6.                             “Director” shall mean a member
of the Board who is not an employee of the Company or any of its subsidiaries.

 

1.7.                             “Fees” shall mean amounts earned
for serving as a member of the Board, including any committees of the Board.

 

1.8.                             “He”, “Him”, or “His” shall
apply equally to male and female members of the Board.

 

1.9.                             “Plan” shall mean this Directors’
Deferred Compensation Plan, as it may be amended from time to time.

 

1.10.                       “Stock Account” shall mean the
account created by the Company pursuant to Article III of this Plan in accordance with
an election by a Director to receive stock compensation under Article II
hereof.

 

1.11.                       “Stock Value” shall mean, for any given day, the closing price of the Company’s Common
Stock as reported on the New York Stock Exchange Inc. (“NYSE”) Composite Tape
on such day. If the closing price is not available from the NYSE for the Common
Stock on a date in question, then the next preceding practicable date for which
such closing price is available shall be used.

 

1.12.                       “Year” shall mean any calendar
year.

 

1

 

ARTICLE II

 

ELECTION TO DEFER

 

2.1.                             A Director may elect, on or
before December 31 of any Year, to irrevocably defer payment of all or a
specified part of all Fees to be earned during the Year following the Year in
which such election is made and succeeding Years (until the Director ceases to be a Director or elects (in writing) to change such election
pursuant to Section 2.3 herein). Any person who shall become a Director
during any Year, and who was not a Director of the Company on the preceding December 31
or otherwise an employee of the Company or any of its subsidiaries who
participated in any other deferred compensation plan of the Company or any of
its subsidiaries, may elect, before the Director’s term begins (but in no event
later than thirty (30) days after the date such person first becomes eligible
to participate in this Plan), to defer payment of all or a specified part of
such Fees earned during the  remainder
of such Year and for succeeding Years. 
Any Fees deferred pursuant to this Section 2.1 shall be paid to the
Director at the time(s) and in the manner specified in Article IV
hereof.

 

2.2.                             The election to participate in
the Plan and manner and form of payment shall be designated by submitting a
letter in the form attached hereto as Appendix A (the “Election Form”) to the
Secretary of the Company.

 

2.3.                             The election shall continue from
Year to Year and become irrevocable on December 31 of each Year unless the
Director changes or terminates it by written request delivered to the Secretary
of the Company prior to December 31 of the Year preceding the commencement
of the Year for which the change or termination is first
effective.  If the Director changes his
existing election to defer Fees in order to receive Fees on a current basis,
such Director may not subsequently reelect to defer payment of Fees for at
least one Year.

 

ARTICLE III

 

DEFERRED COMPENSATION ACCOUNTS

 

3.1.                             The Company shall maintain
separate memorandum accounts for the Fees deferred by each Director based on
the elections each Director has made.

 

3.2.                             If a Director has elected to
defer a portion of his Fees, the Company shall credit, on the date Fees become
payable, the Stock Account of each Director with the number of shares of Common
Stock which is equal to the deferred portion of any Fee due the Director as to
which an election to defer Fees into the Stock Account has been made, divided
by the Stock Value on the date such fees would otherwise have been paid. For
purposes of this section 3.2, the Stock Value shall be determined on the date
fees would otherwise have been paid.

 

3.3.                             The Company shall credit the
Stock Account of each Director with the number of shares of Common Stock
equal to any cash dividends (or the fair market value of dividends paid 

 

2

 

in property other than dividends payable in Common Stock) payable on
the number of shares of Common Stock represented in each Director’s Stock
Account divided by the Stock Value on the dividend payment date. Dividends
payable in Common Stock will be credited to each Directors Stock Account in the
form of the right to receive Common Stock. If adjustments are made to the
outstanding shares Common Stock as a result of split-ups, recapitalizations,
mergers, consolidations and the like, an appropriate adjustment also will be
made in the number of shares of Common Stock credited to the Director’s Stock
Account.

 

3.4.                             Common Stock shall be computed
to three decimal places.

 

3.5.                             The right to receive Common
Stock at a later date shall not entitle any person to rights of a stockholder
with respect to such Common Stock unless and until shares of Common Stock have
been issued to such person pursuant to Article IV hereof.

 

3.6.                             The Company shall not be
required to acquire, reserve, segregate, or otherwise set aside shares of its
Common Stock for the payment of its obligations under the Plan, but shall make
available as and when required a sufficient number of shares of its Common
Stock to meet the needs of the Plan.

 

3.7.                             The Plan is intended to be a
non-qualified, unfunded deferred compensation arrangement.  Nothing contained herein shall be deemed to give
a Director, a Director’s beneficiary or any other person any interest in the
assets of the Company or create any kind of fiduciary relationship between the
Company and any person. To the extent that any person acquires a right to
receive payments from the Company under the Plan, such right shall be no
greater than the right of any unsecured general creditor of the Company.

 

ARTICLE IV

 

PAYMENT OF DEFERRED COMPENSATION

 

4.1.                             Subject to the second succeeding
sentence, amounts contained in a Director’s Stock Account shall be distributed
as the Director’s election (made pursuant to Section 2.2) shall
provide.  Subject to Section 6.3
below, distributions from the Director’s Stock Account shall be paid in Common
Stock or the cash equivalent thereof, at the election of the Company, and all
such distributions shall begin on the first day of the Year following the later
of the attainment of the Director’s retirement date (as indicated in the
Director’s Election Form) or “separation from service” (within the meaning of Section 409A
of the Code) with the Board.

 

4.2                                Each
Director shall have the right to designate one or more beneficiaries to succeed
to his right to receive payments hereunder in the event of his death. No
beneficiary designation shall be valid unless it is made in writing, signed by
the Director and filed with the Secretary of the Company.  [Notwithstanding anything herein to the
contrary or in the Director’s Election Form, in the event of the death of a
Director, each designated beneficiary or, in the case of a failure of
designation or the death of all designated beneficiaries without any designated
successors, the Director’s estate shall be entitled to receive, in the form in
which such amounts would have otherwise been paid to the Director (as indicated
on the Director’s Election Form), any and all amounts contained in such
Director’s Stock Account in a lump sum payment no later than the later of (x) 

 

3

 

December 31 of the Year in which the
Director’s death occurs and (y) ninety (90) days following the date of the
Director’s death.  In the event such
amounts are paid in cash (as provided in Section 4.1), then such amounts
will be determined by multiplying the number of shares of Common Stock in the
Director’s Stock Account by the then Stock Value per share.][Note to draft: confirm this is acceptable]

 

ARTICLE V

 

ADMINISTRATION

 

5.1.                             The Company shall administer and
interpret the Plan in its sole discretion and the Company shall maintain the
Plan at its expense.  All decisions made
by the Company with respect to issues hereunder shall be final and binding on
all parties.

 

5.2.                             Except to the extent required by
law, the right of any Director or any beneficiary to any benefit or to any
payment hereunder shall not be subject in any manner to attachment or other
legal process for the debts of such Director or beneficiary; and any such
benefit or payment shall not be subject to alienation, sale, transfer,
assignment or encumbrance.

 

ARTICLE VI

 

AMENDMENT OF PLAN; GOVERNING LAW; CHANGE IN
CONTROL

 

6.1.                             The Plan may be amended,
suspended or terminated in whole or in part from time to time by the Board
except that no amendment, suspension, or termination shall apply to the payment
of any amounts previously credited to a Director’s Stock Account.

 

6.2.                             The
Plan shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware, without regard to principles of conflict of law.

 

6.3.                             Notwithstanding
anything herein to the contrary, in the event of a Change in Control that is a “change
in ownership or effective control” of the Company within the meaning of Section 409A
of the Code, all amounts contained in each Director’s Stock Account shall be
distributed (in the same manner which such amounts would have otherwise been
paid as indicated in the Director’s election) within thirty (30) days after the
occurrence of such Change in Control.

 

ARTICLE VII

 

SECTION 409A COMPLIANCE

 

7.1.                             Notwithstanding any other
provisions of the Plan, no Fees shall be deferred, accelerated, extended, paid
out or modified under this Plan in a manner that would result in the imposition
of an additional tax under Section 409A of the Code.

 

7.2.                             In the event that is reasonably
determined by the Board that, as a result of Section 409A of the Code,
payments under the Plan may not be made at the time contemplated by the terms
of the Plan without causing the Director to be subject to taxation under Section 409A
of the Code, the Company will make such payment on the first day that would not
result in Director incurring any tax liability under Section 409A of the
Code; which, if the Director is a “specified employee” within the meaning of
the Section 409A, shall be the 

 

4

 

first day following the six-month period beginning on the date of the
Director’s separation from service.  The
Company shall have no liability to any Director for any failure to comply with Section 409A
of the Code hereunder.

 

Adopted by Sealy Corporation and effective on the 17th
day of December, 2008.

 

5

 

APPENDIX A

 

[Date]

 

Ken Walker

Secretary

Sealy Corporation

One Office Parkway

Trinity, North Carolina  27370

 

Dear Mr.                      :

 

Pursuant to the Sealy Corporation Directors’ Deferred Compensation
Plan, dated as of           ,
200   (the “Plan”), I hereby elect to defer receipt of all or a
portion of my Director’s fees commencing 2005 and for succeeding calendar years
in accordance with the percentages indicated below.

 

I elect to have my director’s fees (and committee fees, if any)
credited as follows (fill in appropriate percentages for options (a) and
(b), below):

 

(a)             % of the aggregate Director’s
fees shall be credited to my Stock Account as provided for in the Plan;

 

(b)             % of the aggregate Director’s
fees shall not be deferred, but shall be paid to me directly as they accrue.

 

Further, I elect to receive any future payments to be made from my
Stock Account in the following method (check one desired method below):

 

        in one lump sum;

 

        in           
(insert number) equal annual installments.

 

I understand that my Stock Account will become payable on either the
first day of the Year following or six months following (whichever is later)
the later of the attainment of my “retirement date” (as indicated below) or
separation from the Board.  For this
purpose,

 

I elect my
retirement date to be attainment of age             .

 

I further understand that, in any event, my Stock Account will become
payable in the same manner as elected above within thirty (30) days after the
occurrence of a Change in Control (as defined in the Plan).

 

 

In the event of my death prior to receipt of all or any amount of the
balance of my Stock Account so accumulated, I designate the following one or
more individuals                                                                                                   
as my beneficiary or beneficiaries to receive the funds so accumulated, but
unpaid.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Name]

  
	
   

  	
   

  
	
   

  	
   

  
	
  [Witness]

  	
   

  

 

2Exhibit
10.43

 

EXECUTION COPY

 

THE AMENDED AND RESTATED SEALY CORPORATION BONUS PLAN

 

Sealy Corporation (the “Company”) hereby
adopts the Amended and Restated Sealy Corporation Bonus Plan (the “Plan”) for
the benefit of certain employees and subject to the terms and provisions set
forth below.

 

1.                                       Purpose.  The Sealy Corporation Bonus
Plan is intended to attract and retain employees in key positions of Sealy
Corporation and selected subsidiaries (the “Company”), to motivate participants
toward achieving the Company’s objectives and to reward participants for their
contributions to the success of the Company.

 

2.                                       Administration.  The
Plan is administered by the Board of Directors of the Company.  The Board may delegate any of its rights and
duties under the Plan to the Compensation Committee or an officer of the
Company.  The Board establishes
administrative rules, determines employee eligibility, and establishes the
awards to be made under the Plan and their terms and conditions.  In addition, the Board has authority to
adjust or modify the Plan or its operations to deal with unusual or
unanticipated events in a fair and equitable manner. The Board shall construe
and interpret the Plan and its determinations shall be final and binding upon
all Plan participants.

 

3.                                       Participation. 
Participants in the Plan are selected during each fiscal year by the
Board from exempt salaried employees. 
Participants are assigned to a bonus group at the sole discretion of the
Board, with groupings generally as follows:

 

	
   

  	
  Group 8:

  	
   

  	
  Selected Senior Company Executives

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Group 7:

  	
   

  	
  Senior Company Executives

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Group 6:

  	
   

  	
  Corporate and Regional Sales & Operations Vice Presidents

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Group 5:

  	
   

  	
  Other Senior Management

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Group 4:

  	
   

  	
  Plant Managers, Sales Managers

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Group 3:

  	
   

  	
  Other Middle Management

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Group 2:

  	
   

  	
  Senior Professionals and Plant Supervisors

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Group 1:

  	
   

  	
  Selected Exempt Employees

  

 

Non-exempt employees (eligible for overtime)
and Sales Representatives shall not participate in the Bonus Plan.  Participation in the Plan in one year does
not establish an employment relationship for a fixed duration and does not
confer the right to continue in the employ of the Company or to participate in
the Plan or any similar plan in any subsequent year.  Participants may be added or have their bonus
group changed during a fiscal year on a pro-rated basis at the discretion of
the Board.

 

 

4.                                       Amount of Award. 
Bonus awards under the Plan are based on the degree to which the
financial performance of the Company, its operating plants, regions and
selected subsidiaries meet the goals established for each fiscal year.

 

Individual awards under the Plan are based on
the performance of the business segment (i.e., Company, division, plant and/or
region) to which such participant is assigned. 
The percentage of salary used in the bonus award calculation for each
Group increases from zero to a stated maximum as performance exceeds the
minimum goal according to the following Schedule of Bonus Awards:

 

	
  GROUP

  	
   

  	
  MINIMUM

  	
   

  	
  TARGET

  	
   

  	
  MAXIMUM

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  (As determined by the
  Board for each participant)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  0%

  	
   

  	
  35%

  	
   

  	
  70%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  0%

  	
   

  	
  30%

  	
   

  	
  60%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  0%

  	
   

  	
  25%

  	
   

  	
  50%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  0%

  	
   

  	
  20%

  	
   

  	
  40%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  0%

  	
   

  	
  15%

  	
   

  	
  30%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  0%

  	
   

  	
  10%

  	
   

  	
  20%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  0%

  	
   

  	
  5%

  	
   

  	
  10%

  	
   

  

 

Subject to section 5 below, bonus awards will be calculated as a
percentage of a participant’s weighted average annual rate of base salary in
effect for the fiscal year for which a bonus is payable.

 

5.                                       Special Circumstances.  A
participant’s bonus award will be prorated based upon the number of days of
active employment during the fiscal year under any of the following
circumstances occurring during the fiscal year:

 

a)                                      The participant is hired or rehired after the
beginning of the fiscal year, and on or before October 31st of the fiscal year;

 

b)                                     The participant terminates employment by
reason of:

 

(1)                                  Death,

 

(2)                                  Long-term disability, or

 

2

 

(3)                                  Retirement (after attainment of age 65 or
attainment of age 62 with 10 or more years of service), or

 

c)                                      The participant experiences a period of
unpaid leave of absence (whether by layoff, workers compensation leave or other
leave of absence) for a continuous period of 30 days or more.

 

A participant who is hired, transferred or promoted during the fiscal
year will receive a prorated bonus based upon the number of days worked in each
position and at each location/segment and in each bonus group. Hires,
transfers, or promotions, which occur after October 31st, shall not take effect for bonus purposes until the following fiscal
year.

 

Furthermore, if a participant terminates employment by reason set forth
in Section 5(b), and if such termination occurs in the calendar year in
which the fiscal year begins, the proration shall be applied to the participant’s
target percentage of his weighted average annual rate of base salary in effect
for the fiscal year in which such termination occurs.

 

6.                                       Goals.  The performance goals for
business segments will be based on corporate cash requirements, budgets, and
expected results. One or more goals are defined annually for each business
segment at the following achievement levels:

 

Maximum is the goal assigned to each segment that
provides a bonus payout of two times the target payment amount.

 

Target is the goal assigned to each segment that
provides a bonus payout at the target payment level.

 

Minimum is the goal assigned to each segment that
must be achieved prior to any bonus payout for the segment.

 

Each year a communication will be issued to segment managers defining
the corporate and segment goals and quantifying the achievement levels for each
goal. Segment managers will receive a list of participants in their area and
periodic updates on corporate and segment performance against goals.

 

Adjustments to goals may be provided for:

 

a)                                      Extraordinary Items as defined by APB 30,
i.e. items which are “unusual in nature and infrequent in occurrence,”

 

b)                                     Any financial impact of new accounting
pronouncements, and

 

c)                                      Any other items approved by the Board or the Compensation
Committee.

 

3

 

7.                                       Eligibility and Method of Payment of Award.  In
order to be eligible to receive a bonus payment for a given fiscal year, a
participant must be hired on or before October 31st of the fiscal year and must remain employed by
the Company through the last day of the fiscal year, unless employment is
terminated by reason set forth in Section 5(b). All such bonus awards
shall be paid in a single cash lump sum (less applicable withholding).  All such bonus awards shall be paid on February 25
following the end of the fiscal year to which they relate, unless employment is
terminated during the calendar year in which such fiscal year begins by reason
set forth in Section 5(b).  If
termination is during the calendar year in which such fiscal year begins by
reason set forth in Section 5(b), such bonus award shall be paid on February 25
following the end of such calendar year.

 

8.                                       Amendment and Termination.  The
Plan was effective November 29, 1999 for fiscal years 2000 and beyond.  As amended and restated herein, the Plan is
effective December 1, 2008 for fiscal year 2009 and beyond.  In addition, all bonus awards which relate to
fiscal year 2008, unless employment terminated in calendar year 2007 by reason
set forth in Section 5(b), shall be paid on February 25, 2009.  No bonus awards which relate to fiscal year
2008 are payable for employments which terminated before 2008.  The Board of Directors may amend, terminate or
otherwise modify the Plan at any time.

 

                                                IN WITNESS HEREOF, SEALY CORPORATION, by its
appropriate officers duly authorized, has executed this instrument this 18th day of December, 2008.

 

 

	
   

  	
  SEALY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kenneth L. Walker

  	
   

  	
   

  
	
   

  	
   

  	
  Senior Vice President, General Counsel

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  Lawrence J. Rogers

  	
   

  	
   

  
	
   

  	
   

  	
  President & CEO

  	
   

  	
  Title

  

 

4

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