EXHIBIT 10.5
EMPLOYMENT AGREEMENT dated as of December 22, 1998, by and between
Worldtex, Inc. ("Employer"), a Delaware corporation whose business address is
000 00xx Xxxxxx, X.X., Xxxxxxx, Xxxxx Xxxxxxxx 00000, and Xxxxx Xxxxxxxx, whose
address is 0000 Xxxxxxxxx Xxxx Xxxxx, Xxxxxx, Xxxxxxx 00000 ("Employee").
Employer desires to engage Employee to perform services as an executive of
Employer, and Employee desires to perform such services, on the terms and
conditions hereinafter set forth.
Accordingly, Employer and Employee agree as follows:
1. TERM
----
Employer agrees to employ Employee to perform services for Employer for a
period commencing with the date of this Agreement and continuing until
terminated in accordance with Section 10 or Section 11 (the "Employment
Period").
2. NATURE OF SERVICES
------------------
Employee shall be employed as chief financial and accounting officer of
Employer and shall perform such duties as shall be assigned to him by, and in
the performance of his duties shall be subject to the direction of, the Board of
Directors of Employer or its designees and the chief executive officer of
Employer. Employee's duties shall include the supervision of the financial and
accounting affairs of Employer, including matters involving raising capital,
cash management, budgeting and forecasting, SEC reporting, preparation of
financial statements and dealing with securities analysts. Employee shall be
elected as a Senior Vice President of Employer.
3. AGREEMENT TO SERVE
------------------
Employee agrees to his employment as described in Section 2, and agrees to
devote his full business time and efforts to the performance of his duties under
this Employment Agreement. Employee agrees that, in the course of his
employment, he will faithfully observe and carry out all of the duties and
responsibilities customarily owed by an employee to his employer.
4. COMPENSATION; EXPENSES; VACATIONS; FRINGE BENEFITS
--------------------------------------------------
(a) In consideration of his services hereunder, Employer shall pay
Employee such salary during the Employment Period as shall be fixed from time to
time by the Compensation Committee of the Board of Directors of Employer (the
"Compensation Committee"), which shall be no less than at a rate of $15,000 per
month (or a pro rata amount for any portion of a month), payable on the last
business day of each month during the Employment Period. Employee's performance
shall be reviewed no less than annually by the Compensation Committee or the
chief executive officer.
(b) Employee shall be entitled to: (i) reimbursement for reasonable
travel, entertainment and other expenses properly incurred in the performance of
his duties hereunder upon submission of vouchers in accordance with the
Employer's standard procedures as in effect from time to time; (ii) reasonable
vacations in accordance with Employer's regular practices governing employees
having duties generally comparable to Employee, which shall not be less than
four weeks per year; (iii) an automobile reimbursement allowance of $750 per
month; and (iv) group insurance, retirement and other group benefits provided
from time to time by Employer to its employees. In addition, Employer will pay
the charges of the moving van company to transport Employee's personal property
from Duluth, Georgia, to the Hickory, North Carolina area.
(c) Employer will grant to Employee, within 30 days after the date
of this Agreement, options to purchase 100,000 shares of Worldtex common stock
at an exercise price per share equal to the closing price per share on the NYSE
Composite Tape on the date of grant and otherwise substantially in accordance
with the grant letter attached as Exhibit A hereto.
(d) Employer shall pay to Employee incentive bonus compensation with
respect to each fiscal year during the Employment Period (commencing with the
1999 fiscal year), in an amount equal to 0.5% of Marginal Net Income of Employer
and its subsidiaries (the "Worldtex Group") for such fiscal year (which bonus
shall in no event be less than $50,000 for the 1999 fiscal year). "Marginal Net
Income of the Worldtex Group" shall be the net income of the Worldtex Group
before all taxes and after interest charges (but at an assumed interest rate of
4.5% per annum without regard to the actual rate), if any, which exceed 12% of
Net Assets Employed by the Worldtex Group for the particular fiscal year. "Net
Assets Employed by the Worldtex Group," with respect to a particular fiscal year
(the "Applicable Year"), shall be the mean between (i) the tangible net worth of
the Worldtex Group as of the end of the Applicable Year and (ii) the tangible
net worth of the Worldtex Group as of the end of the immediately preceding
fiscal year. Marginal Net Income of the Worldtex Group and Net Assets Employed
by the Worldtex Group shall be determined in accordance with generally accepted
accounting principles by Employer's Compensation Committee following the end of
each such fiscal year and payment of any amount due to Employee shall be made
not later than 30 days following the completion of the annual audit for such
fiscal year. In the event the Employment Period is terminated during a fiscal
year, the amount payable to Employee pursuant to the foregoing provisions of
this Section 4(d) with respect to such fiscal year shall be in the same ratio to
the amount which would have been payable for the full fiscal year as the ratio
of the number of days in such fiscal year up to the date of termination to 365;
and the amount due shall be paid at the time prescribed for payment with respect
to a full fiscal year.
(e) Employee shall be entitled to indemnification as provided in
Article TENTH of Employer's Certificate of Incorporation and to coverage under
Employer's directors' and officers' insurance on the same basis as the other
officers of Employer.
5. NON-COMPETITION
---------------
(a) Employee agrees that he will not, directly or indirectly
(individually or for, with or through any other person, firm or corporation),
compete with Employer or any of the subsidiaries of Employer (i) during the
Employment Period with respect to any business carried on by Employer or any of
the subsidiaries of Employer or (ii) for a period of one year after the end of
the Employment Period with respect to any business carried on at the end of the
Employment Period by Employer or any of the subsidiaries of Employer. If,
however, Employer wrongfully terminates the Employment Period, the foregoing
provisions of this Section 5(a) shall cease to apply from and after such
wrongful termination. Notwithstanding the foregoing, Employee shall be permitted
to own not in excess of one percent of any class of securities of any publicly
traded company, PROVIDED Employee is not part of any controlling group and is
solely a passive investor.
(b) The parties intend that the covenant contained in the Section
5(a) shall be construed as a series of separate covenants, once for each county
and city included within each state or other jurisdiction and, except for
geographic coverage, each such separate covenant shall be deemed identical. If,
in any judicial proceeding, a court shall refuse to enforce any separate
covenant, then the unenforceable covenant shall be modified in order to make it
acceptable to the court and enforced accordingly, or, if necessary, deemed
eliminated to the extent necessary to permit the remaining separate covenants to
be enforced.
6. PATENTS; INVENTIONS
-------------------
All of Employee's interest in patents, patent applications, inventions,
technological innovations, copyrights, developments and processes now or
hereafter during the Employment Period owned or developed by Employee relating
to the business of Employer or any subsidiary or other affiliate shall belong to
the Employer, and without further compensation, but at Employer's expense,
forthwith upon request of Employer, Employee shall execute any and all such
assignments and other documents and take any and all such other action as
Employer may reasonably request in order to vest in the Employer all of
Employee's right, title and interest in and to such patents, patent
applications, inventions, technological innovations, copyrights, developments or
processes, free and clear of liens, charges and encumbrances.
7. CONFIDENTIAL INFORMATION
------------------------
All confidential information which Employee may now have or may obtain
during the Employment Period relating to Employer or any subsidiary or other
affiliate of Employer shall not be disclosed to any other person during and
after the termination of the Employment Period without the prior written
permission of Employer, and Employee shall return all tangible evidence of such
confidential information to Employer prior to or at the termination of the
Employment Period. Such information shall not include any information otherwise
publicly known without assistance from Employee.
8. SPECIFIC PERFORMANCE
--------------------
Employee acknowledges that the restrictions contained in Sections 5, 6 and
7 above are a reasonable and necessary protection of the immediate interests of
Employer, that any violation of these restrictions would cause substantial
injury to Employer and that Employer would have not entered into this Employment
Agreement with Employee without receiving the additional consideration offered
by Employee in binding himself to these restrictions. In the event of a breach
or threatened breach by Employee of these restrictions, Employer shall be
entitled to apply to any court of competent jurisdiction for an injunction
restraining Employee from such breach or threatened breach; PROVIDED, HOWEVER,
that the right to apply for an injunction shall not be construed as prohibiting
Employer from pursuing any other available remedies for such breach or
threatened breach.
9. WITHHOLDING OF TAXES
--------------------
Any payments to Employee or his designated beneficiary or beneficiaries
pursuant to the terms of this Employment Agreement shall be reduced by such
amounts as are required to be withheld with respect thereto under all present
and future federal, state and local tax laws and regulations and other laws and
regulations.
10. TERMINATION
-----------
Notwithstanding anything herein contained:
(a) If Employee shall die during the Employment Period, the
Employment Period shall terminate on the date of death and his estate shall be
entitled to receive his salary at the rate provided in Section 4(a) to the end
of the calendar month in which his death occurs.
(b) If, during the Employment Period, Employee shall become
physically or mentally incapacitated or disabled for a period of six consecutive
months (a "Disability"), then Employer shall have the right to give immediate
notice of termination of Employee's services hereunder, whereupon Employee shall
be entitled to receive his salary at the rate provided in Section 4(a) to the
end of the calendar month in which termination occurs.
(c) Employer shall have the right by written notice to Employee to
terminate the Employment Period for Cause as of a date specified in such notice,
whereupon Employee shall be entitled to receive his salary at the rate provided
in Section 4(a) to the date of termination. For purposes of this provision,
"Cause" shall mean any of the following: (1) the Employee's material breach of
this Agreement (continuing for ten (10) days after receipt of written notice
from Employer that specifically identifies such breach); (2) the Employee's
gross negligence in the performance or intentional nonperformance (in either
case continuing for ten (10) days after receipt of written notice from Employer
that specifically identifies the manner in which Employer believes that the
Employee has failed to perform such duties and responsibilities) of any of the
Employee's material duties and responsibilities hereunder; (3) the Employee's
dishonesty, fraud or misconduct with respect to the business or affairs of
Employer; (4) the Employee's conviction of, or pleading guilty or no contest to,
a felony crime; or (5) chronic alcohol abuse or illegal drug abuse by the
Employee.
(d) Employer shall have the right to terminate the Employment Period
for any reason other than those set forth above in this Section 10 effective not
less than 30 days after notice of termination is given to Employee, and upon
effectiveness of such termination Employee shall be entitled to receive in a
lump sum an amount equal to his salary at the rate provided in Section 4(a) for
the period from such date of termination through the second anniversary of the
date of such termination.
(e) Employee shall have the right to terminate the Employment Period
for any reason other than those set forth above in this Section 10 effective not
less than 30 days after notice of termination is given to Employer, whereupon
Employee shall be entitled to receive his salary at the rate provided in Section
4(a) to the effective date of such termination, subject to earlier termination
as provided above.
11. TERMINATION AFTER A CHANGE IN CONTROL EVENT
-------------------------------------------
Upon the occurrence of a Change in Control Event, unless the Employment
Period shall previously have been terminated, the Employment Period shall
continue until the third anniversary of the date of the Change in Control Event
subject to termination as provided in Section 10 (but without giving effect to
Section 10(d)) and as hereafter provided in this Section 11.
(a) "Change in Control Event" shall mean:
(1) the date that any person or group deemed a person under
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, other than Employer and its subsidiaries as determined
immediately prior to that date, in a transaction or series of
transactions has become the beneficial owner, directly or indirectly
(with beneficial ownership determined as provided in Rule 13d-3, or
any successor rule, under such Act) of 20% or more of the
outstanding securities of Employer having the right under ordinary
circumstances to vote at an election of the Board of Directors;
(2) the date on which one-third or more of the members of the
Board of Directors shall consist of persons other than Current
Directors (for these purposes, a "Current Director" shall mean any
member of the Board of Directors as of October 1, 1998 and any
successor of a Current Director whose nomination or election has
been approved by a majority of the Current Directors then on the
Board of Directors); or
(3) the date of approval by the stockholders of Employer of an
agreement providing for (x) the merger or consolidation of Employer
with another corporation where the stockholders of Employer,
immediately prior to the merger or consolidation, would not
beneficially own, immediately after the merger or consolidation,
shares entitling such stockholders to 50% or more of all votes
(without consideration of the rights of any class of stock to elect
directors by a separate class vote) to which all stockholders of the
corporation issuing cash or securities in the merger or
consolidation would be entitled in the election of directors or
where the members of the Board of Directors of Employer, immediately
prior to the merger or consolidation, would not, immediately after
the merger or consolidation, constitute a majority of the Board of
Directors of the corporation issuing cash or securities in the
merger or consolidation or (y) the sale or other disposition of all
or substantially all the assets of Employer.
(b) "Severance Benefit" shall mean a lump sum cash amount equal to
2.99 times Employee's "base amount" (as defined in Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")); PROVIDED, however, that
if any payment by Employer or its affiliates to or for the benefit of Employee
(whether payable pursuant to the terms of this Employment Contract or otherwise)
would not be deductible by Employer or its affiliates for Federal income tax
purposes solely by reason of Section 280G of the Code, the amount referred to in
this clause (b) shall be reduced to such lesser amount as shall permit all, or
the maximum possible amount, of the payments by Employer or its affiliates to or
for the benefit of Employee to be so deductible in accordance with such Section
280G. The determination of any reduction in the amount referred to in the
preceding sentence shall be made by Employee in good faith with reasonable
advice of Employee's tax advisor, and as so made shall be conclusive and binding
on Employer, its affiliates and Employee.
(c) If (i) Employer gives notice of termination of the Employment
Period or takes other action which effectively terminates the Employment Period
(other than for death, Disability or Cause) during the period commencing upon
the occurrence of a Change in Control Event and ending on the third anniversary
of the date of the Change in Control Event (the "Post-Change Period") or (ii)
Employee gives notice of termination of the Employment Period during the
Post-Change Period after Employee determines in good faith that there has been
any of the following occurrences
(1) an assignment to Employee of duties or responsibilities,
or a change in reporting responsibilities or titles, which is
inconsistent with his status immediately prior to the Change in
Control Event, or any other action by Employer which results in a
diminution in such status, excluding any action which is both
inadvertent and immaterial and is remedied by Employer promptly
after receipt of notice thereof from Employee,
(2) a reduction in salary, or reduction in ratio of
supplemental compensation or fringe benefits to salary, from that in
effect immediately prior to the Change in Control Event,
(3) a material increase in the amount of travel required of
him or a requirement that he perform significant regular services
outside the Hickory, North Carolina area or transfer to a location
necessitating a change in his principal residence or
(4) a failure by Employer to have a successor corporation
assume Employer's obligations under this Employment Contract as
specified in Section 14,
then the Employment Period shall be deemed terminated upon the giving of such
notice or taking of such action and not later than 15 days thereafter Employer
shall pay to Employee the Severance Benefit. Payment of the Severance Benefit
shall be in lieu of any damages Employee might otherwise assert for breach of
this Employment Contract.
(d) If Employee gives notice of termination of the Employment
Period, for any reason, during the 30-day period commencing on the 181st day
following the date of the Change in Control Event, then the Employment Period
shall be deemed terminated upon the giving of such notice and not later than 15
days thereafter Employer shall pay to Employee the Severance Benefit.
(e) The payment of benefits under any employee benefits program or
plan of Employer to which Employee shall have become entitled shall be
unaffected by a Change in Control Event and shall be made in accordance with the
particular program or plan.
(f) If Employer wrongfully terminates the Employment Period prior to
the occurrence of any Change in Control Event but after (i) Employer enters into
an agreement or arrangement the consummation of which would result in a Change
in Control Event or (ii) any person (including Employer) publicly announces an
intention to take or consider taking actions which if consummated would result
in a Change in Control Event, then Employee's damages for such wrongful
termination shall be not less than the amount of the Severance Benefit if a
Change in Control Event occurs within the three-year period following such
termination.
12. ENTIRE AGREEMENT
----------------
This Employment Agreement sets forth the entire understanding of the
parties with respect to the subject matter herein and may be modified only by a
written instrument duly executed by each party.
13. NOTICES
-------
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by registered mail, return
receipt requested, transmitted by telecopier or similar means, sent by overnight
delivery service such as Federal Express or delivered against receipt to the
party to whom it is to be given (i) at such party's address set forth in the
preamble to this Employment Agreement or (ii) to such other address as the party
shall have furnished in writing in accordance with the provisions of this
Section 13. Any notice or other communication shall be deemed to have been given
as of the date so delivered or transmitted by telecopier or similar means, the
next business day after mailed by overnight delivery service or five days after
the date so mailed.
14. ASSIGNMENT
----------
In the event of a future disposition of (or including) the properties and
business of Employer, substantially as an entirety, by sale of assets or
otherwise, then Employer may elect to assign this Employment Agreement and all
of its rights and obligations hereunder to the acquiring or surviving
corporation, provided that such corporation shall assume in writing all of the
obligations of Employer hereunder and upon such assumption Employer shall be
relieved from all of its obligations hereunder. Employee's rights under this
Employment Agreement shall not be transferable by assignment or otherwise.
15. BINDING EFFECT; CERTAIN DEFINED TERMS
-------------------------------------
This Employment Agreement shall be binding upon and inure to the benefit
of Employer, its successors and those who are its assigns under Section 14. The
terms "subsidiary" and "affiliate" as used herein shall have the meanings
provided in Rule 405 under the Securities Act of 1933.
16. INVALID PROVISIONS
------------------
If any provision hereof is held to be illegal, invalid or unenforceable
under present or future laws effective during the term hereof, such provision
shall be fully severable; this Employment Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. In lieu of such illegal,
invalid or unenforceable provision there shall be added automatically as part
hereof a provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
17. EXECUTION IN COUNTERPARTS
-------------------------
This Employment Agreement may be executed in counterparts, each of which
shall be deemed an original, but both of which shall constitute one and the same
instrument.
18. ARBITRATION
-----------
Except as provided in Section 8, any controversy or claim arising out of
or in connection with this Employment Agreement shall be settled by arbitration
by a single arbitrator held in Charlotte, North Carolina, in accordance with the
rules of the American Arbitration Association then in effect, and judgment upon
the award rendered may be entered in any court having jurisdiction. The fees and
expenses of the arbitrator shall be borne by Employer. In addition, Employer
shall reimburse Employee for all reasonable legal fees and costs incurred with
respect to any controversy or claim arising under this Agreement (i) as to which
Employee's position shall prevail in any proceeding or (ii) after the occurrence
of a Change in Control Event, in the case of any action brought by Employee
against Employer.
19. GOVERNING LAW
-------------
This Employment Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the date first above written.
WORLDTEX, INC.
By _________________________________________
Title:
_____________________________________________
Xxxxx Xxxxxxxx
EXHIBIT A
WORLDTEX, INC.
000 00XX XXXXXX, X.X.
XXXXXXX, XXXXX XXXXXXXX 00000
[DATE]
[NAME]
c/o Worldtex, Inc.
000 00xx Xxxxxx, X.X.
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Dear [NAME]:
We are pleased to inform you that the Compensation Committee of the Board
of Directors of Worldtex, Inc. (the "Company") has today granted you an option
pursuant to the Company's 1992 Stock Incentive Plan, as amended (the "Plan"), to
purchase an aggregate of [____________] shares of the Common Stock of the
Company on the following terms and conditions:
1. The purchase price per share of the shares of Common Stock subject to
this option is [____________] per share.
2. This option shall expire at the close of business on
[________________]. [Tenth anniversary] Subject to acceleration in the event of
a Change of Control (as defined in the Plan), you must remain in the employ of
the Company or a Related Company (as defined in the Plan) for one year from the
date hereof before you can exercise any part of this option. Thereafter this
option will become exercisable in installments as follows: [____________] shares
on [_______________]; an additional [______________] shares on
[_________________]; an additional [_______________] shares on
[________________]; an additional [______________] shares on [_______________];
and the final [______________] shares on [_______________]. [20% per year]
3. This option is not intended to qualify as an "Incentive Stock Option"
within the provisions of Section 422 of the Internal Revenue Code.
4. The option price shall be payable by you at the time this option is
exercised, either (i) in cash or (ii) by delivering shares of Common Stock of
the Company which you have owned for a least six months prior to such exercise,
or a combination of cash and such shares, having an aggregate value equal to the
aggregate option price of the shares as to which this option is exercised
(basing the value of any such shares of Common Stock on the fair market value of
the Common Stock on the date of exercise). No shares of Common Stock shall be
issued pursuant to exercise of this option until full payment therefor has been
made.
5. In tandem with this option, the Company has also granted you today a
limited Stock Appreciation Right, which entitles you to elect to receive within
sixty days following the occurrence of a Change of Control, in lieu of
exercising this option, a payment equal in value to the product of the number of
shares of Common Stock as to which you elect to exercise this limited Stock
Appreciation Right multiplied by the excess of the Change of Control Price (as
defined in the Plan) over $[____________] [strike price]. If the Change of
Control occurs more than six months from today this payment will be made to you
in cash. Otherwise, payment will be made in shares of Common Stock.
6. This option and related Stock Appreciation Right may be exercised only
by you and may not be transferred except by will or the laws of descent and
distribution. In the event of your death, your legal representatives may
exercise this option as to the shares of Common Stock which were immediately
purchasable by you at the date of death, within 12 months following the date of
death (even if such date is later than [_________________]. [Tenth anniversary.]
7. Upon termination of your employment (upon retirement in accordance with
the Company's retirement policy or for any reason beyond your control other than
your death), your option privileges shall be limited to the shares of Common
Stock which were immediately purchasable by you at the date of such termination
and such option privileges shall expire unless exercised within three months
after the date of such termination and prior to the close of business on
[_________________]. [Tenth anniversary.] If your employment is terminated for
reasons within your control, including, without limitation, cause and voluntary
resignation, all rights under this option shall expire on the date of such
termination.
8. Notwithstanding anything in this letter, the Company shall not be
obligated to issue any shares of Common Stock upon any exercise of this option
or related Stock Appreciation Right if such issuance would violate any
applicable law, including the Securities Act of 1933.
9. Nothing herein shall restrict the right of the Company or any Related
Company to terminate your employment at any time, with or without cause.
10. This option and related Stock Appreciation Right is subject to all of
the other terms, provisions and conditions of the Plan, a copy of which has been
furnished to you and other copies of which may be obtained by you from the
Company.
Very truly yours,
WORLDTEX, INC.
By_____________________________
