EXHIBIT 10(hh)
CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT
THIS CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT (the "Agreement") is made
and entered into as of December 11, 2001 by and between ▇▇▇▇, INC., a North
Carolina corporation headquartered in High Point, North Carolina (the "Company")
and __________________________, a citizen and resident of ___________ County,
North Carolina ("Employee").
Background Statement
▇▇▇▇, Inc. (the "Company") has determined that it is in its best interests to
have the continued dedication and services of certain employees, notwithstanding
the possibility, threat, or occurrence of a Change of Control (as hereinafter
defined) of the Company. It is imperative to diminish the inevitable distraction
of senior management because of the personal uncertainties and risks created by
any pending or threatened Change of Control, to encourage senior management's
full attention and dedication to the Company in the event of any threatened or
pending change of control, to provide an incentive for certain senior management
members to continue in the employ of the Company for at least six months
following a Change of Control in order to assure continuity in the management of
the Company, and to provide certain senior management members with compensation
arrangements upon a Change of Control which ensure that the compensation
expectations of certain senior management members will be satisfied and that
such compensation will be competitive with the compensation of corporations
similarly situated. The Company has also determined that it is in its best
interests to restrict competition with the Company by certain key management
personnel upon termination of their employment with the Company following a
Change of Control. The purpose of this Agreement is to memorialize the
compensation Employee will receive upon termination of his employment in certain
circumstances following a Change of Control.
In consideration of the foregoing and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and Employee agree as follows:
A. For purposes of this Agreement, the following definitions and related
provisions shall apply:
1. Total Compensation. "Total Compensation" shall mean Employee's annual
salary in effect at the time of termination of employment ("Base Salary"), plus
with respect to the Company's annual incentive plan, the annual targeted amount
for the current year in which Employee's employment is terminated.
For purposes of the Company's incentive plan, and notwithstanding any terms or
conditions of the plan or any of the Company's policies and procedures, if
Employee's employment is terminated by the Company without Cause (as hereinafter
defined) or by Employee for Good Reason (as hereinafter defined) or Employee
terminates his employment during the Window Period (as hereinafter defined) for
any reason other than death or Disability (as hereinafter defined), or
Employee's employment is terminated in anticipation of a Change of Control, and
in each case such termination occurs after the time the incentive payment or
payments made under any such plan for the prior year have been earned and prior
to the time the incentive payment or payments have been distributed, Employee
shall nevertheless be entitled to receive such incentive payment or payments and
any deferred incentive payment or payments.
2. Cause. "Cause" means (i) Employee's willful and continued failure to
substantially perform his duties with the Company (other than any such failure
resulting from Disability (as hereinafter defined) or occurring after issuance
by Employee of a notice of termination for Good Reason (as hereinafter
defined)), after a written demand for substantial performance is delivered to
Employee that specifically identifies the manner in which the Company believes
that Employee willfully failed to substantially perform his duties, and after
Employee has failed to resume substantial performance of his duties on a
continuous basis within thirty calendar days of receiving such demand; or (ii)
Employee has committed an act which seriously and substantially damages or
embarrasses the Company for which there is no cure (for example, and without
limitation, sexual harassment). If Employee is charged with a felony, in the
discretion of the board of directors, Employee may be placed on a paid leave of
absence for six months pending a trial of such charge. If the charge is not
brought on for trial within this six month period, in the discretion of the
board of directors, Employee may be placed on an unpaid leave of absence until
the charge is tried. If Employee is convicted of the felony, he may, in the
discretion of the board of directors, be terminated for Cause. If Employee is
acquitted of the felony, he shall be reinstated to active status to the position
held at the beginning of the paid leave of absence and reimbursed for
compensation and benefits he would have received during the unpaid leave of
absence. For purposes of this definition, actions or failures to act will be
deemed "willful" only if done or omitted in bad faith and without reasonable
belief that the action or omission was in the best interests of the Company.
3. Disability. "Disability" shall have the same meaning as it does under
the Company's Long-Term Disability policy, as maintained for employees. Employee
shall be deemed to be disabled when Employee becomes eligible to commence
benefits under the Company's Long-Term Disability policy.
4. Good Reason. "Good Reason" shall mean, without Employee's express
written consent, the occurrence of any of the following circumstances unless
such circumstances are fully corrected within thirty days after Employee
notifies the Company of the existence of such circumstances as hereinafter
provided:
(i) the assignment to Employee of any duties, functions or responsibilities
materially inconsistent with the position with the Company Employee held
immediately prior to the assignment of such duties or responsibilities or any
adverse alteration in the nature or status of Employee's responsibilities or the
condition of Employee's employment, in each case without Employee's consent;
(ii) a significant change in the persons in the Company reporting to
Employee;
(iii) reduction by the Company in Employee's Total Compensation, except for
across the board salary reductions similarly affecting all management personnel
of the Company;
(iv) the relocation of the Company's headquarters to a location more than
fifty miles from its current location and more than fifty miles from High Point,
North Carolina, or the Company's requiring Employee to be based anywhere other
than the Company's offices at such location, except for required travel on
Company business; or
(v) the failure by the Company to pay Employee any portion of his
compensation within the time guidelines established pursuant to standard Company
policies, or any other material breach by the Company of any material provision
of this Agreement.
Employee shall notify the Company that he believes that one or more of the
circumstances described above exists, and of his intention to terminate this
Agreement for Good Reason as a result thereof, within sixty days of the time
that he gains knowledge of such circumstances. Employee shall not deliver a
notice of termination of employment for Good Reason until thirty days after he
delivers the notice described in the preceding sentence, and Employee may do so
only if the circumstances described in such notice have not been fully corrected
by the Company.
5. Change of Control. "Change of Control" means the occurrence of one of
the following:
(i) any "person" (as that term is used in Sections 13(d)(3) of the Securities
Exchange Act of 1934, as amended), other than (A) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or (B) Employee
or a group of persons including Employee, is or becomes the beneficial owner (as
determined pursuant to the provisions of Section 13(d) of the Securities
Exchange Act of 1934, without regard to the requirements set forth in Section
13(d)(1) in regard to registration and also without regard to Section
13(d)(b)(3)), directly or indirectly, of 35% or more of the common voting stock
of the Company or its successors, other than an underwriter or group of
underwriters owning shares of common voting stock in connection with a bona fide
public offering of such shares and the sale of such shares to the public;
(ii) there shall be any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or as a result of which
the holders of 35% or more of the voting capital stock (if any) of the surviving
corporation were not holders of voting capital stock of the Company immediately
prior to the transaction;
(iii) there occurs the sale or transfer of all or substantially all of the
assets of the Company or the liquidation or dissolution of the Company; or
(iv) individuals who constitute the Board as of the effective date of this
Agreement (the "Incumbent Board"), cease for any reason (including but not
limited to a change mandated by any statute or regulation) to constitute a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date of this Agreement whose election or nomination
for election was approved by a vote of at least a majority of the Incumbent
Board shall be a member of the Incumbent Board; except that any individual whose
initial assumption of office occurs as a result of any actual or threatened
election contest that is subject to the provisions of Rule 14a-11 of the General
Rules and Regulations under the Securities Exchange Act of 1934, shall not be
deemed to be a member of the Incumbent Board. 6. Window Period. "Window Period"
shall mean the thirty-day period immediately following elapse of six months
after the occurrence of any Change of Control.
B. Payments upon Change of Control.
If
(i) a Change of Control occurs while this Agreement is in
effect; and
(ii) (A) Employee's employment is terminated in anticipation
of a Change of Control, or (B) Employee is employed by the
Company or an affiliate thereof at the time such Change of
Control occurs, and at any time during the three-year period
following such Change of Control,
(1) Employee is given notice of non-renewal of this
Agreement pursuant to Section E hereof, or Employee's employment
is terminated by the Company or an affiliate thereof for any
reason other than for death, Disability or Cause, or
(2) Employee terminates his employment during the Window
Period, for any reason other than death or Disability, or
Employee terminates his employment for Good Reason,
the Company (or its successors) shall pay Employee, or his beneficiary in
the event of his subsequent death, subject to applicable federal and state
income, social security and other employment tax withholdings, an amount
(the "Change of Control Payment") equal to 1.99 times Employee's Total
Compensation in effect at the date of termination of employment.
The Change of Control Payment is in addition to the payment for the covenant not
to compete provided for under Section D of this Agreement. The Change of Control
Payment shall be paid in equal monthly installments over the thirty-six month
period following termination, or at Employee's option, shall be paid to Employee
in a lump sum at the time of termination without any reduction for commutation
to present value.
Notwithstanding anything in this Agreement to the contrary, if a Change of
Control occurs and if Employee is entitled under any agreement or arrangement to
receive compensation that would constitute a parachute payment (including,
without limitation, the vesting of any rights) within the meaning of S-280G of
the Internal Revenue Code (the "Code") but for the operation of this sentence,
the Change of Control Payment shall be reduced to the extent necessary to cause
the aggregate present value of all payments in the nature of compensation to
Employee that are contingent on a change in the ownership or effective control
of the Company or in the ownership of a substantial portion of the assets of the
Company, not to exceed 2.99 times the Base Amount, all within the meaning of
Code S-280G. The parties intend for the preceding sentence to be interpreted and
applied to prevent Employee from receiving, with respect to a Change of Control
occurring, an excess parachute payment within the meaning of Code S-280G.
C. Confidential Information. Employee acknowledges that during, and as a
result of, his employment with the Company, he will acquire, be exposed to and
have access to, material, data and information of the Company and/or its
customers or suppliers that is confidential or proprietary. At all times, both
during and after the period of Employee's employment hereunder, Employee shall
keep and retain in confidence and shall not disclose, except as required in the
course of his employment with the Company, to any person or entity, or use for
his own purposes, any of this proprietary or confidential information. For
purposes of this Section C, such information shall include, but shall not be
limited to: (i) the Company's standard operating procedures, processes, know-how
and technical and product information, any of which is of value to the Company
and not generally known by the Company's competitors or the public; (ii) all
confidential information obtained from third parties and customers concerning
the business of the Company, including any customer lists or data; and
(iii) confidential business information of the Company, including marketing and
business plans, strategies, projections, business opportunities, customer lists,
sales and cost information and financial results and performance. Such
information shall not include information that is disclosed pursuant to issuance
of legal process or regulatory action. Employee acknowledges that the
obligations pertaining to the confidentiality and non-disclosure of information
shall remain in effect indefinitely, or until the Company has released any such
information into the public domain, in which case Employee's obligation
hereunder shall cease with respect only to such information so released.
D. Noncompetition.
(1) Noncompetition. Employee shall not take any of the following
actions during the applicable Noncompetition Period (as defined
below):
(i) Become employed by (as an officer, director, employee,
consultant or otherwise), involved or engaged in, or otherwise
commercially interested in or affiliated with (other than as a less
than 5% equity owner of any corporation traded on any national,
international or regional stock exchange or in the over-the-counter
market) any person or entity that competes with the Company or an
affiliate thereof in the business of designing, manufacturing,
marketing and selling upholstery fabrics and mattress ticking
primarily for use in the furniture (residential, commercial and
juvenile) and bedding industries.
(ii) Solicit or attempt to solicit, for competitive purposes, the
business of any of the clients or customers of the Company or an
affiliate thereof, or otherwise induce such customers or clients or
prospective customers or clients to reduce, terminate, restrict or
alter their business relationship with the Company or an affiliate
thereof in any fashion; or
(iii) Induce or attempt to induce any employee of any Company or
an affiliate thereof to leave the Company for the purpose of engaging
in a business operation that is competitive with the Company.
(2) Noncompetition Period. For purposes of this Section D "Noncompetition
Period" shall mean the period commencing on the date of termination of
employment (but only following a Change in Control) and ending twelve months
thereafter.
(3) Geographic Scope. The restrictions on competition and solicitation set
forth in this Section D shall apply to the forty-eight contiguous states of the
United States of America.
(4) Providing Copy of Agreement. Employee agrees to provide a copy of this
Agreement to any person or entity with whom he interviews that is in competition
with the Company during the Noncompetition Period.
(5) Obligations Survive. Employee's obligations under this Section D shall
survive any termination of employment with the Company.
(6) Payment for Noncompetition. In addition to the payments to Employee
provided by Section B, Employee shall be paid for not competing with the Company
as above provided his Total Compensation in effect at the time of termination of
employment for a period of one year, such payment to be made in equal monthly
installments during the Noncompetition Period with no option on Employee's part
to receive a lump sum payment.
(7) Company's Right to Obtain an Injunction; Other Remedies. Employee
acknowledges that the Company will have no adequate means of protecting its
rights under Sections C and D of this Agreement other than by securing an
injunction. Accordingly, Employee agrees that the Company is entitled to enforce
this Agreement by obtaining a preliminary and permanent injunction and any other
appropriate equitable relief in any court of competent jurisdiction. Employee
acknowledges that the Company's recovery of damages will not be an adequate
means to redress a breach of this Agreement. Nothing contained in this Section D
shall prohibit the Company from obtaining any appropriate remedies in addition
to injunctive relief, including recovery of damages. All benefits and payments
under Sections B and D of this Agreement shall be forfeitable and shall be
discontinued in the event Employee breaches or fails to perform his obligations
under Sections C and D of this Agreement, and all benefits and payments under
this Agreement shall immediately cease from and after the date of such breach or
failure of performance.
E. Term of Agreement. The term of this Agreement shall commence immediately
upon the date hereof and shall continue until the third anniversary of the date
hereof, unless terminated earlier (the "Term"); provided, however, that on each
anniversary date of this Agreement, the Term shall be extended for one year (so
that on each anniversary date the Term will be three years) unless at least 60
days prior to any such anniversary date either party gives to the other notice
in writing of non-renewal.
F. General Provisions.
(1) Entire Agreement. This Agreement contains the entire understanding
between the parties relating to the subject matter hereof and supersedes any and
all prior agreements and discussions between the Company and Employee relating
to the subject matter hereof.
(2) Assignability. Neither this Agreement nor any right or interest
hereunder shall be assignable by Employee, his beneficiaries or legal
representatives, without the Company's prior written consent; provided, however,
that nothing shall preclude (i) Employee from designating a beneficiary to
receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators or other legal representatives of Employee or his estate from
assigning any rights hereunder to the person or persons entitled thereunto.
(3) Binding Agreement. This Agreement shall be binding upon, and inure to
the benefit of, Employee and the Company and permitted successors and assigns.
(4) Amendment of Agreement. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
(5) Insurance. The Company, at its discretion, may apply for and procure in
its own name and for its own benefit, life insurance on Employee in any amount
or amounts considered advisable; and Employee shall have no right, title or
interest therein. Employee agrees to submit to any medical or other examination
and execute and deliver any applications or other instruments in writing as may
be reasonably necessary to obtain such insurance.
(6) Severability. If any provision contained in this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. If a court
determines that this Agreement or any covenant contained herein is unreasonable,
void or unenforceable, for any reason whatsoever, then in such event the parties
hereto agree that the duration, geographical or other limitation imposed herein
should be such as the court, or jury, as the case may be, determines to be fair
and reasonable, it being the intent of each of the parties hereto to be subject
to an agreement that is necessary for the protection of the legitimate interest
of the Company and its successors or assigns and that is not unduly harsh in
curtailing Employee's legitimate rights.
(7) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of North Carolina.
(8) Expenses in Enforcing Agreement. If there is a dispute concerning this
Agreement, all reasonable expenses (including, without limitation, legal fees
and expenses) incurred by Employee in connection with, or in prosecuting or
defending, any claim or controversy arising out of or related to this Agreement
shall be paid by the Company.
(9) Dispute Concerning Termination. If there is a dispute between the
Company and Employee following a Change of Control concerning termination of
this Agreement by the Company for Cause or termination of this Agreement by
Employee for Good Reason or termination by Employee during the Window Period,
the Company shall continue to pay to Employee his Total Compensation in effect
at the time the dispute arises until the date on which the dispute is finally
resolved, either by mutual written agreement of the parties or by a final
judgment, order or decree of an arbitrator or a court of competent jurisdiction
(which is not appealable or with respect to which the time for appeal therefrom
has expired and no appeal has been perfected). Amounts paid under this section
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
(10) Mitigation. The Company agrees that upon termination of Employee's
employment following or in contemplation of a Change of Control, Employee is not
required to seek other employment or to attempt in any way to reduce any amounts
payable pursuant to this Agreement, and the amount of any payment or benefit
provided for in this Agreement shall not be reduced by any compensation earned
by Employee as the result of employment by another employer, by retirement
benefits, be offset against any amount claimed to be owed by Employee to the
Company, or otherwise, except as expressly provided to the contrary herein.
(11) Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the validity, interpretation, enforceability or breach
thereof, which is not settled by agreement among the parties, shall be settled
by arbitration in Greensboro, North Carolina, in accordance with the Rules of
the American Arbitration Association, and judgment upon the award rendered in
such arbitration may be entered in any court having jurisdiction. All expenses
(including, without limitation, legal fees and expenses) incurred by Employee in
connection with, or in prosecuting or defending, any claim or controversy
arising out of or relating to this Agreement following a Change of Control shall
be paid by the Company.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first above written.
▇▇▇▇, INC.
By:_________________________________
______________________________(SEAL)
