EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of April 11, 1997, is by and between Pillowtex
Management Services Company, a Delaware business trust ('Employer'), and Xxxxx
X. Xxxxxx ('Employee').
WITNESSETH:
WHEREAS, Employee desires to enter into the employment of Employer and
Employer desires to employ Employee in the capacity and on the terms set forth
below.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual agreements contained herein, the parties hereto agree as follows:
1. EMPLOYMENT AND SCOPE.
(a) Commencing on day after Employee terminates Employee's employment
with Employee's current employer (the 'Commencement Date') and continuing
throughout the Term of this Agreement, Employer agrees to employ Employee and
Employee agrees to serve as the employee of Employer with the title and capacity
of President of Employer's Sales and Marketing Division. As such, Employee's
duties shall include responsibility for all sales and marketing functions of
Employer and its affiliates, as well as such other responsibilities as are
consistent with the office of President of Employer's Sales and Marketing
Division and such other responsibilities may be assigned from time to time from
the Chief Executive Officer. Employee shall report to the Chief Executive
Officer of Employer.
(b) Employee's performance of services under this Agreement shall
occur primarily at Employer's principle executive offices at 0000 Xxxx Xxx,
Xxxxxx, Xxxxx, subject to such travel as is consistent with the office of
President of Employer's Sales and Marketing Division.
(c) Commencing no later than April 7, 1997 and continuing during the
Term of Employee's employment, Employee shall devote Employee's full business
time (at least 40 hours per week) exclusively to the performance of Employee's
duties as stated in this Agreement and to the furtherance of Employer's
business.
2. TERM.
(a) The term of this Agreement (the 'Term') shall begin on the
Commencement Date and shall continue through the third anniversary thereof,
subject to automatic extension as provided below and unless terminated earlier
in accordance with Section 4.
(b) Beginning with the second anniversary date of the Commencement
Date and continuing with each anniversary date thereof, the Term of this
Agreement shall automatically be extended in additional, successive one-year
increments, with the result that the Term will have a remaining duration of two
years upon each and every anniversary. Notwithstanding the foregoing sentence,
the Term shall not be extended if either party has previously given the other
party written notice of its intent not to extend the Agreement at least 15
months prior to the anniversary upon which the extension would otherwise occur.
3. COMPENSATION. During the Term of this Agreement, Employer shall
compensate Employee as set forth below:
(a) Upon Employee's execution of this Agreement, Employer will pay
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Employee a signing bonus in the amount of $300,000. If, prior to the first
anniversary of this Agreement, Employee terminates Employee's employment
Voluntarily (as defined in Section 4(h)(viii) below) or is terminated by
Employer for Cause (as defined in Section 4(v)(i) below), Employee shall be
required to repay Employer a pro-rata portion of this signing bonus equal to the
number of weeks remaining in the period between the date of Employee's
termination and such anniversary, divided by fifty-two, and multiplied by
$300,000.
(b) Employer shall pay to Employee a base salary of $300,000 per
year, payable in accordance with Employer's payroll policies in effect from time
to time for executive officers generally, subject to all appropriate
withholdings.
(c) Employee shall be eligible to participate in Employer's incentive
bonus plans as they may be amended from time to time to the same extent as
executive officers generally. During the first two years of the Term, Employer
shall pay Employee bonuses under Employer's bonus plans aggregating at least
$150,000 per year, excluding the signing bonus provided for in Section 3(a)
above.
(d) Employee shall be entitled to the greater of three-weeks of paid
vacation annually and that amount of vacation which Employee would be entitled
under Employer's vacation policy as it may be amended from time to time.
(e) Employee shall be entitled to participate in Employer's health,
benefit and welfare plans offered by Employer as they may be amended from time
to time to the same extent as executive officers of Employer generally.
(f) Employer shall reimburse Employee, on a grossed-up basis for
federal income tax purposes, for any incremental cost that Employee incurs on
behalf of Employee and Employee's family to continue health plan coverage under
COBRA until Employee and Employee's family are eligible to participate in
Employer's health plan.
(g) Employer shall provide Employee with a $500,000 term life
insurance policy.
(h) Employer will provide Employee with a supplemental retirement
benefit equal to the difference between (i) the monthly normal retirement
benefit that would be paid to Employee at age 65 under the Pillowtex Corporation
Pension Plan (the 'Pension Plan') if there were added to Employee's years of
benefit accrual service under the Pension Plan ten additional years of such
service, and (ii) the monthly normal retirement benefit that is payable to
Employee under the Pension Plan at age 65. The supplemental retirement benefit
will be paid to Employee in the same form, and at the same time, as Employee's
retirement benefit is paid under the Pension Plan, subject to the same
reductions and other adjustments for optional forms and early commencement of
benefits that are made to Employee's Pension Plan benefit.
(i) Employee shall also be eligible to participate in any
supplemental executive retirement plan that Employer may adopt, and will be
given credit for ten years of service for vesting purposes under any such
supplemental executive retirement plan that Employer may adopt.
(j) Upon Employee's commencement of Employee's duties under this
Agreement on a substantially full-time basis, Employer will grant Employee
options to acquire 40,000 shares of Pillowtex Common Stock under the Pillowtex
Corporation 1993 Stock Option Plan. Such options will be granted at fair market
value on the date of the grant. Employee's options will be granted as incentive
stock options to the full extent possible and any excess options will be granted
as non-qualified options.
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(k) Employer will provide the following to Employee with respect to
Employee's relocation to Dallas, Texas:
(i) Employer will pay for transportation, lodging, and meals for
Employee and Employee's family for four house hunting trips to Dallas, Texas.
(ii) If Employee chooses to sell Employee's current residence,
Employer will reimburse Employee, on grossed-up basis for federal income tax
purposes, for all real estate commissions and closing costs up to nine percent
of the total sales price of Employee's residence, and will additionally pay
Employee a premium on the closing of the sale of Employee's current residence
equal to five percent of the sales price of such residence. Alternatively, if
Employee chooses not to sell Employee's current residence, Employer will
purchase Employee's current residence for its appraised value, calculated as the
average of appraisals performed by an appraiser of Employee's choice and one
selected by Employer. In addition to the foregoing, regardless of whether
Employee chooses to sell Employee's residence or require Employer to purchase
the house, Employer will reimburse Employee for any loss which Employee sustains
on the sale of Employee's residence, which loss shall be determined as the
excess of (A) the purchase price of Employee's residence and the costs of all
improvements, remodeling, repairs and renovations made to the residence, over
the (B) the gross sales price received for the residence (whether or not the
residence is sold to Employer or a third party) before commissions and all other
selling and closing costs to the extent such costs are reimbursed by Employer as
set forth above. Employer shall additionally pay Employee an amount equal to
all federal and state income taxes arising with respect to any portion of the
loss reimbursement in the immediately preceding sentence which is taxable as
income to Employee.
(iii) Employer will reimburse employee for reasonable
temporary living expenses in Dallas, Texas for up to one year from the effective
date of this Agreement, or until this Agreement terminates, whichever occurs
earlier.
(iv) Employer will reimburse Employee for Employee's moving
expenses, including the cost of transporting Employee's household belongings and
automobiles to Dallas, Texas.
(v) Employer will additionally extend Employee an unsecured loan
of up to $100,000 to cover any additional relocation expenses that Employee may
incur. The loan will bear interest at Employer's incremental cost of funds and
will be due and payable in full upon the earlier of the termination of
Employee's employment or four years from the Commencement Date. Mandatory
prepayments of the loan equal to 25% of the original principal amount of the
loan will be due to the extent of bonuses otherwise payable to Employee under
Employer's bonus incentive plans under Section 3(c). Interest will be payable
under the loan annually to the extent of bonuses otherwise payable to Employee
under Employer's bonus incentive plans under Section 3(c), less mandatory
prepayments for the period. Upon the termination of Employee's employment, the
outstanding principal amount of and interest on the loan will be offset against
all amounts otherwise payable to Employee.
(l) Employer will acquire a club membership at a country club of
Employee's choice for the exclusive use of Employee during the Term at an
initiation fee of up to $25,000. The membership shall remain the property of
Employer subject to Employee's right to acquire it upon termination of
Employee's employment as set forth below. Employer will pay Employee's
membership dues and will reimburse Employee for all expenses and charges
incurred at the club for business purposes. Upon termination of Employee's
employment, Employee's privileges with respect to the membership shall cease and
employee shall transfer and assign all rights in the membership to Employer,
provided, however, that if Employee is terminated for any reason other than for
Cause (as defined in Section 4(h)(i)), Employee shall be entitled to acquire the
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membership from Employer for an amount equal to the lesser of the original
initiation fee or the then-prevailing market price of a comparable membership
and Employee's assumption of all future monthly dues and other costs and
expenses related to the membership.
(m) Employer will pay Employee a car allowance of $1,000 per month
plus an additional amount equal to all federal and state income taxes arising
with respect to any portion of the allowance taxable as income to Employee.
4. TERMINATION DURING TERM. Notwithstanding anything to the contrary in
Section 2 of this Agreement, Employee's employment under this Agreement may be
terminated during the Term as set forth below:
(a) Employer may terminate Employee's employment for Cause, in which
case the parties' rights and obligations shall be as set forth in Section 5(a)
below.
(b) Employer may terminate Employee's employment in the absence of
Cause and other than upon Employee's Retirement or Permanent Disability, in
which case the parties' rights and obligations shall be as set forth in either
Section 5(b), (e) or (f) below, as applicable.
(c) Employee's employment shall be terminated upon Employee's
Permanent Disability, in which case the parties' rights and obligations shall be
as set forth in Section 5(c) below.
(d) Employee's employment shall be terminated upon Employee's
Retirement, in which case the parties' rights and obligations shall be as set
forth in Section 5(d) below.
(e) Employee may Voluntarily terminate Employee's employment upon the
occurrence of a Potential Change of Control, in which case the parties' rights
and obligations shall be as set forth in Section 5(e) below.
(f) Employee may terminate Employee's employment for Good Reason, in
which case the parties' rights and obligations shall be as set forth in Section
5(f) below.
(g) Employee may Voluntarily terminate Employee's employment in the
absence of a Potential Change of Control or Good Reason, in which case the
parties' rights and obligations shall be as set forth in Section 5(g) below.
(h) The following definitions shall apply for purposes of the early
termination of the Term of this Agreement:
(i) 'Cause' shall mean the occurrence of any of the following:
(A) Employee's engagement in any personal misconduct involving willful
dishonesty, illegality, or moral turpitude that is demonstrably and materially
detrimental or injurious to the business interests, reputation or goodwill of
Employer or its affiliates; (B) Employee's engagement in any act involving
willful dishonesty, disloyalty, or infidelity against Employer or its
affiliates; (C) Employee's willful and continued breach or failure substantially
to perform under any of the material terms and covenants of this Agreement; and
(D) Employee's willful and continued breach or failure substantially to perform
under any material policy established by the Company with respect to the
operation of the Company's business and affairs, or the conduct of the Company's
employees. For purposes of this section, no act, or failure to act, on
Employee's part shall be considered 'willful' unless done, or omitted to be
done, by Employee in bad faith and without reasonable belief that Employee's
action or omission was in the best interest of Employer. Prior to asserting any
action or failure to act as Cause for Employee's termination as set forth above,
Employer shall provide Employee a written notice referencing this section,
setting out with specificity the conduct asserted to constitute Cause, and
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affording Employee the opportunity and a reasonable time period to cease the
conduct or otherwise cure the basis for Cause. For the purposes of this
section, a 'reasonable time period' shall be a time period of a duration deemed
by Employer's Board of Directors, acting in good faith, to be sufficient under
normal circumstances to correct the conduct. Employee shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to Employee a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of Employer's Board of
Directors at a meeting of the Board of Directors duly called and held for that
purpose (after reasonable notice to Employee and an opportunity for Employee,
together with Employee's counsel, to be heard before Employer's Board of
Directors) finding that, in the good faith opinion of Employer's Board of
Directors, Employee's conduct constitutes Cause and specifying the particulars
thereof in detail. Any disputes arising as to whether Cause existed for
Employee's termination shall be resolved through binding arbitration in
accordance with Section 9 of this Agreement.
(ii) 'Change of Control of Employer' shall be deemed to have
occurred if:
(A) any 'person' (defined, for purposes of this
Agreement, as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the 'Exchange Act'), other than an 'Excluded Person' (as
defined in Section 4(h)(iii)), is or becomes the 'beneficial owner' (defined,
for purposes of this Agreement, as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Employer representing
35% or more of the combined voting power of Employer's then-outstanding
securities with respect to the election of directors;
(B) during any period of 24 consecutive months, at
least a majority of the Board of Directors of Employer ceases to consist of
individuals who have served continuously on the Board since the beginning of
such 24-month period, unless the election of directors during such period, or
nomination for election by Employer's shareholders, was approved by a vote of at
least two-thirds of the directors then still in office who shall at that time
have served continuously on the Board since the beginning of such 24-month
period; or
(C) Employer consummates the sale of all or
substantially all of its assets or any merger, consolidation or other business
combination requiring shareholder approval.
(iii) 'Excluded Person' shall mean any of Xxxxxxx X. Xxxxxx, Xx.,
Xxxx X. Xxxxxxxxxxxx or the Xxxx X. Xxxxxxxxxxxx Estate or any person for which
any of Xxxxxxx X. Xxxxxx, Xx., Xxxx X. Xxxxxxxxxxxx or the Xxxx X. Xxxxxxxxxxxx
Estate are deemed to hold beneficial ownership of securities of Employer
registered in the name of such person.
(iv) 'Good Reason' shall mean termination by Employee, after a
Change of Control of Employer, upon the occurrence of any of the following:
(A) the assignment to Employee of any duties
inconsistent with Employee's position, duties and status with Employer as
existing immediately prior to a Change of Control of Employer; a substantial
alteration in the nature or status of Employee's responsibilities from those in
effect immediately prior to a Change of Control of Employer; the failure to
provide Employee with substantially the same perquisites which Employee had
immediately prior to a Change of Control of Employer, including but not limited
to an office and appropriate support services; or a change in Employee's titles
or offices as in effect immediately prior to a Change of Control of Employer, or
any removal of Employee from or failure to re-elect Employee to any of such
positions;
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(B) a reduction by Employer in Employee's base salary
as of the date hereof or as the same may be increased thereafter;
(C) the requirement by Employer that Employee be based
anywhere other than the metropolitan area in which Employee's office is located
immediately prior to a Change of Control of Employer, except for required travel
on Employer's business to an extent substantially consistent with Employee's
business travel obligations immediately prior to a Change of Control of
Employer;
(D) the taking of any action by Employer which would
(1) materially and adversely affect Employee's participation in or materially
reduce Employee's benefits under any benefit, retirement or compensation,
employee stock ownership, savings and profit sharing, stock option, life or
medical insurance or health and accident plan (the 'Plans') in which Employee
participates immediately prior to a Change of Control of Employer, or (2)
deprive Employee of any material fringe benefit enjoyed by Employee, or to which
Employee is entitled, as existing immediately prior to a Change of Control of
Employer; or
(E) a purported termination of Employee's employment
by Employer which is not effected pursuant to a Notice of Termination (as
defined in Section 8) satisfying the requirements of Section 8 hereof.
(v) 'Permanent Disability' shall mean any physical or mental
impairment rendering Employee unable to perform the essential functions of
Employee's job (as determined by Employer), with or without reasonable
accommodation that does not constitute undue hardship to Employer, and such
impairment is permanent or is likely to continue for a period exceeding six
consecutive months, unless an extension of this period would not be a hardship
to Employer. If Employee fails to notify Employer of Employee's need for
accommodation, Employer is not required to accommodate Employee and may hold
Employee to the same standards as persons without a disability. The
determination of whether Employee has a Permanent Disability shall be made as
set forth below. During any period in which the existence of a Permanent
Disability is being determined, Employee shall continue to receive Employee's
full base salary at the rate then in effect and all compensation and benefits
paid during such period, until a Permanent Disability is conclusively determined
and this Agreement is terminated in accordance with Section 8 hereof, provided
Employee (and Employee's personal and legal representatives) act in good faith
and with reasonable diligence in pursuing a determination. This definition is
not intended to either expand or limit any rights and protections granted to
Employee by law. Employer may require Employee to be examined by a physician,
at Employee's own expense, and receive a determination of whether Employee has a
Permanent Disability, if such examination is job-related and consistent with
business necessity. A determination of Permanent Disability shall be based on
the written opinion of the physician regularly attending Employee. If Employer
disagrees with the opinion of this physician ('First Physician'), it may engage,
at its own expense, another physician ('Second Physician') to examine Employee.
If the First and Second Physicians agree in writing that Employee has not
suffered a Permanent Disability, their written opinion shall, except as
otherwise set forth in this Section 4(f)(iv), be conclusive on the issue of
Permanent Disability. If the First and Second Physicians disagree on whether
Employee has suffered a Permanent Disability, they shall choose a third
consulting physician (whose expense shall be shared equally by Employer and
Employee) and the written opinion of a majority of these three physicians shall,
except as otherwise provided in this section, be conclusive as to the issue of
Permanent Disability. In conjunction with a Permanent Disability determination,
Employee hereby consents to any required medical examination and agrees to
furnish any medical information requested by any examining physician and to
waive any applicable physician-patient privilege that may arise because of such
examination. All physicians except the First Physician must be board-certified
in the specialty most closely related to the nature of the Permanent Disability
alleged to exist.
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(vi) 'Potential Change of Control of Employer' shall occur if (A)
Employer enters into an agreement the consummation of which would result in a
Change of Control of Employer, (B) any person (including Employer) publicly
announces an intention to take or to consider taking actions which if
consummated would constitute a Change of Control of Employer, (C) any person
(other than any Excluded Person) becomes the beneficial owner, directly or
indirectly, of securities of Employer representing 20% or more of the combined
voting power of Employer's then outstanding-securities with respect to the
election of directors or (D) the Board adopts a resolution to the effect that a
potential Change of Control of Employer for purposes of this Agreement has
occurred.
(vii) 'Retirement' shall mean termination by Employer or
Employee in accordance with Employer's retirement policy (including early
retirement, if included in such policy and elected by Employee in writing)
generally applicable to its salaried employees, or in accordance with any other
retirement agreement entered into by and between Employee and Employer.
(viii) 'Voluntary' termination of Employee's employment shall
mean termination by Employee other than upon Employee's Permanent Disability, or
Retirement, or Good Reason. Employee may terminate Employee's employment with
Employer in Employee's sole and absolute discretion, subject to the terms and
conditions of this Agreement.
5. COMPENSATION UPON TERMINATION. If Employee's employment is terminated
during the Term of this Agreement, Employee shall be entitled to compensation as
set forth below:
(a) If Employer terminates Employee's employment for Cause, Employer
shall pay Employee's undiscounted base salary through the date of Employee's
termination at the rate then in effect and all amounts to which Employee is
entitled upon termination of employment under Employer's health, benefit and
welfare plans.
(b) If Employer terminates Employee's employment without Cause, then
Employer shall pay Employee, not later than the fifth day following the date of
termination, a lump sum severance payment equal to the sum of (i) Employee's
undiscounted base salary through the date of Employee's termination at
Employee's then-current salary rate and all amounts to which Employee is
entitled upon termination of employment under Employer's health, benefit and
welfare plans; (ii) Employee's undiscounted base salary through the remaining
duration of the Term at the highest rate in effect during the 12 months
immediately preceding the date of Employee's termination; and (iii) the product
obtained by multiplying the greater of (A) (1) the highest annual amount paid to
Employee (or awarded to Employee, if such amount has not yet been paid) as bonus
compensation during or in respect of any of the three calendar years preceding
the year in which the termination occurs and (2) Employee's Bonus Opportunity
Level under the Pillowtex Corporation Management Incentive Plan (or functionally
similar target award level under any successor plan or program) as of the date
of Employee's termination by (B) a proration factor (the 'Bonus Proration
Factor') equal to the quotient obtained by dividing the number of months in the
period from the beginning of the most recent plan year for which a bonus has not
been paid (but is anticipated to be paid as of the date of the Employee's
termination) to the expiration of the Term, by 12. Notwithstanding the
foregoing, this section shall not apply if Employer terminates Employee without
Cause subsequent to a Potential Change of Control or a Change of Control.
(c) If Employee's employment is terminated upon Employee's Permanent
Disability, Employer shall pay Employee's undiscounted base salary through the
date of Employee's termination at the rate then in effect and all amounts to
which Employee is entitled upon termination of employment under Employer's
health, benefit and welfare plans. Employee's additional compensation and
benefits shall be determined in accordance with Employer's health, benefit and
7
welfare plans or other insurance programs, if any, then in effect.
(d) If Employee's employment is terminated upon Employee's
Retirement, Employer shall pay Employee's undiscounted base salary through the
date of Employee's termination at the rate then in effect and all amounts to
which Employee is entitled upon termination of employment under Employer's
health, benefit and welfare plans. Employee's additional compensation and
benefits shall be determined in accordance with Employer's retirement policy
applicable to its salaried employees or such other retirement agreement entered
into by and between Employee and Employer.
(e) If, after the occurrence of a Potential Change of Control of
Employer, Employee's employment is either Voluntarily terminated by Employee
other than for Good Reason or terminated by Employer without Cause, then
Employer shall pay Employee (i) Employee's undiscounted base salary through the
date of Employee's termination at the rate then in effect and all amounts to
which Employee is entitled upon termination of employment under Employer's
health, benefit and welfare plans, and (ii) an amount equal to the Severance
Payments described in Section 4(f) below hereof less the total amount of base
salary and incentive bonus payments, if any, paid to Employee during the period
from the date on which any Change of Control of Employer occurs through the date
of Employee's termination. Employer's obligation to make any payments under
this Section 5(e) shall be conditioned upon Employee's remaining in the employ
of Employer after the initial Potential Change of Control of Employer until the
earliest of (i) the date which is six months after the occurrence of such
Potential Change of Control of Employer, (ii) the termination of Employee's
employment by reason of a Permanent Disability or Retirement (as such terms are
defined in Section 4 hereof), (iii) Employer's termination of Employee's
employment without Cause, or (iv) the occurrence of a Change of Control of
Employer.
(f) If, after a Change of Control of Employer, Employee's employment
is either terminated by Employee for Good Reason or is terminated by Employer
without Cause, Employee shall be entitled to the compensation and benefits
provided below:
(I) Employer shall pay Employee's undiscounted base salary
through the date of Employee's termination at the rate then in effect;
(ii) Employer shall pay all amounts to which Employee is
entitled upon termination of employment under Employer's health, benefit and
welfare plans;
(iii) Employer shall pay as severance pay to Employee, not later
than the fifth day following Employee's termination, a lump sum severance
payment (together with the payments described in Sections 5(f) (iv) and (v), the
'Severance Payments') equal to the sum of (A) the greater of (1) two times
Employee's annual base salary at the highest rate in effect during the 12 months
immediately preceding Employee's termination and (2) Employee's then current
annual base salary times the number of years or fractions thereof remaining in
the Term, and (B) the product obtained by multiplying the greater of (1) the
highest annual amount paid to Employee (or awarded to Employee, if such amount
has not yet been paid) as bonus compensation during or in respect of any of the
three calendar years preceding the year in which the termination occurs and (2)
Employee's Bonus Opportunity Level under the Pillowtex Corporation Management
Incentive Plan (or functionally similar target award level under any successor
plan or program) based upon Employee's annual base salary at the highest rate in
effect during the 12 months immediately preceding Employee's termination, by the
Bonus Proration Factor (as defined in Section 5(b) above);
(iv) in lieu of shares of common stock, $0.01 par value, of
Employer (the 'Shares') issuable upon the exercise of options ('Options'), if
any, granted to Employee under the Option Plan (which Options shall be canceled
8
upon the making of the payment referred to below), Employer shall pay Employee
in one sum in cash, not later than the fifth day following the date of
employee's termination, an aggregate amount equal to the product of (A) the
difference (to the extent that such differences are a positive number) obtained
by subtracting the per Share exercise price of each Option held by Employee,
whether or not then fully exercisable, from the higher of (1) the closing price
of the Shares, as reported on the New York Stock Exchange on the Date of
Termination (or the last trading date prior thereto), or (2) the highest price
per Share actually paid in connection with any Change of Control of Employer,
and (B) the number of shares covered by each such Option;
(v) Employer shall pay Employee the retirement benefits to which
Employee is entitled under Employer's retirement policy or other retirement
agreement;
(vi) Employer shall reimburse Employee for all legal fees and
expenses incurred by Employee as a result of such termination (including all
such fees and expenses, if any, incurred in successfully contesting or disputing
any such termination or seeking to obtain or enforce any right or benefit
provided by this Agreement); and
(vii) If Severance Payments become subject to the excise tax
(the 'Excise Tax') imposed under section 4999 of the Internal Revenue Code of
1986, as amended (the 'Code'), Employer shall pay to Employee an additional
amount (the 'Gross-Up Payment') such that the net amount retained by Employee,
after deduction of any Excise Tax on the Severance Payments (and any federal,
state and local income tax and Excise Tax upon the payment provided for by this
section, shall be equal to the Severance Payments. For purposes of determining
whether any of the Severance Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (A) any other payment or benefit received or to be
received by Employee in connection with a Change of Control of Employer and
Employee's subsequent termination of employment (whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with Employer, any
person whose actions resulted in the Change of Control of Employer or any person
affiliated with Employer or such person) shall be treated as a 'parachute
payment' within the meaning of section 280G(b)(2) of the Code, and all 'excess
parachute payments' within the meaning of section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, unless in the opinion of tax counsel
selected by Employer's independent auditors and reasonably acceptable to
Employee such other payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of section 280G(b)(4)(A) of the Code, or
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of the 'base amount' (as such term is
defined in section 280G(b)(3) of the Code) allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax, (B) the amount of
the Severance Payments which shall be treated as subject to the Excise Tax shall
be equal to the lesser of (1) the total amount of the Severance Payments and (2)
the amount of excess parachute payments within the meaning of section 280G(b)(1)
of the Code (after applying clause (A) above), and (C) the value of any non-cash
benefit, deferred payment or other benefit shall be determined by Employer's
independent auditors in accordance with the principles of sections 280G(d)(3)
and (4) of the Code. For purposes of determining the amount of the Gross-Up
Payment, Employee shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of Employee's residence on
the date of Employee's termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes. If the Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of Employee's termination of
employment, Employee shall repay to Employer, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the Gross-Up
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Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by Employee to the extent that such
repayment results in a reduction in Excise Tax and/or a federal, state or local
income tax deduction) plus interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. If the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the termination
of Employee's employment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
Employer shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by Employee with respect to
such excess) at the time that the amount of such excess is finally determined.
Employee and Employer shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Severance
Payments.
(g) If Employee Voluntarily terminates Employee's employment under
circumstances in which Sections 5(e) and (f) do not apply, Employer shall pay
Employee's full base salary through the date of Employee's termination at the
rate then in effect and all amounts to which Employee is entitled upon
termination of employment under Employer's health, benefit and welfare plans.
6. INSURANCE. If Employee's employment is terminated under the
provisions of Section 4(f) of this Agreement, Employer shall maintain or cause
to be maintained in full force and effect for a period of two years from the
date of Employee's termination all health and dental insurance in which Employee
participated or was entitled to participate immediately prior to the Employee's
termination, provided that Employee's continued participation is possible under
the general terms and provisions of such plans and programs. If Employee's
participation in any such plan or program is barred, Employer shall arrange to
provide Employee, at Employer's sole cost and expense, with benefits
substantially similar to those which Employee is entitled to receive under such
plan or program. At the end of such two year period, Employee will be entitled
to take advantage of any conversion privileges applicable to the benefits
available under any such plans or programs.
7. FUTURE EMPLOYMENT. Employee shall not be required to mitigate the
amount of any payment provided for in Section 5 hereof by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Section 5 hereof be reduced by any compensation earned by Employee as the result
of employment by another employer after the date of employee's termination, or
otherwise.
8. NOTICE OF TERMINATION.
(a) Any purported termination by Employer or by Employee shall be
communicated by a written 'Notice of Termination' to the other party. A Notice
of Termination shall mean a notice indicating the specific termination provision
in this Agreement relied upon and setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Employee's
employment under the provision so indicated.
(b) The 'date of Employee's termination' shall be determined as
follows: (i) if Employee's employment is terminated upon Employee's Permanent
Disability, the date that is 30 days after the determination of Permanent
Disability pursuant to Section 4(f)(iv) of this Agreement (provided that
Employee shall not have regained the ability to perform the essential functions
of Employee's job during such 30-day period), (ii) if Employee's employment is
terminated for Cause, the date specified in the Notice of Termination, or (iii)
if Employee's employment is terminated for any other reason, the date specified
in the Notice of Termination, provided such date is not more than 60 days from
the date such Notice of Termination is given.
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9. ARBITRATION. All disputes or claims arising under this Agreement or
in connection with Employee's employment with Employer (including any claims
under any federal, state, or local law or ordinance), except for any dispute or
claim arising under Sections 10, 11, 12, 13, and 16 of this Agreement, shall be
subject to binding arbitration pursuant to the Commercial Arbitration Rules of
the American Arbitration Association, the cost of which shall be borne by the
party against whom an arbitration award is entered.
10. NONDISCLOSURE AGREEMENT. Employer, during the term of Employee's
employment under this Agreement, shall provide Employee access to, and Employee
shall have access to and become familiar with, various trade secrets and
proprietary and confidential information consisting of, but not limited to,
financial statements, processes, computer programs, compilations of information,
records, sales procedures, customer requirements, pricing techniques, customer
lists, methods of doing business and other confidential information
(collectively referred to herein as the 'Trade Secrets'), which are owned by
Employer and its affiliates and are regularly used in the operation of their
businesses, but in connection with which Employer and its affiliates take
precautions to prevent dissemination to persons other than certain directors,
officers and employees. Employee acknowledges and agrees that the Trade Secrets
(a) are secret and not known in Employer's industry; (b) are entrusted to
Employee after being informed of their confidential and secret status by
Employer or its affiliates and because of the fiduciary position occupied by
Employee with Employer; (c) have been developed by Employer and its affiliates
for and on behalf of Employer and its affiliates through substantial
expenditures of time, effort and money and are used in their businesses; (d)
give Employer and its affiliates an advantage over competitors who do not know
or use the Trade Secrets; (e) are of such value and nature as to make it
reasonable and necessary to protect and preserve the confidentiality and secrecy
of the Trade Secrets; and (f) are valuable, special and unique assets of
Employer and its affiliates, the disclosure of which could cause substantial
injury and loss of profits and goodwill to Employer and its affiliates.
Employee shall not use in any way or disclose any of the Trade Secrets, directly
or indirectly, either during the Term of this Agreement or at any time
thereafter, except as required in the course of Employee's employment under this
Agreement. All files, records, documents, information, data and similar items
relating to the business of Employer and its affiliates, whether prepared by
Employee or otherwise coming into Employee's possession, shall remain the
exclusive property of Employer and its affiliates and shall not be removed from
the premises of Employer and its affiliates under any circumstances without the
prior written consent of the Board of Directors of Employer (except in the
ordinary course of business during Employee's period of active employment under
this Agreement), and in any event shall be promptly delivered to Employer upon
termination of this Agreement. Employee agrees that upon Employee's receipt of
any subpoena, process or other request to produce or divulge, directly or
indirectly, any Trade Secrets to any entity, agency, tribunal or person,
Employee shall timely notify and promptly hand deliver a copy of the subpoena,
process or other request to the Chief Executive Officer of Employer. For this
purpose, Employee irrevocably nominates and appoints Employer (including any
attorney retained by Employer), as Employee's true and lawful attorney-in-fact,
to act in Employee's name, place and stead to perform any act that Employee
might perform to defend and protect against any disclosure of any Trade Secrets.
As used in this Agreement, 'affiliates' shall mean persons or entities that
directly, or indirectly through one or more intermediaries, control or are
controlled by, or are under common control with, Employer.
11. NON-COMPETITION AGREEMENT. Employee acknowledges and agrees that the
training Employee will receive, the experience employee will gain and the
information Employee will acquire regarding the Trade Secrets while employed
hereunder will enable Employee to injure Employer if Employee should compete
with Employer in a business that is competitive with the business conducted or
to be conducted by Employer and its affiliates. For these reasons, Employee
11
hereby agrees that, without the prior written consent of Employer, Employee
shall not, during the period of employment with Employer, directly or
indirectly, either as an individual, a partner or a joint venturer, or in any
other capacity, (a) invest (other than investments in publicly-owned companies
which constitute not more than 1% of the voting securities of any such company)
in any business that is competitive with that of Employer or its affiliates,
(b) accept employment with or render services to a competitor of Employer or any
of its affiliates as a director, officer, manager or executive, (c) engage, for
Employee's self or any other person or entity in the sales, marketing, design or
manufacture of products competitive with any product sold, marketed, designed or
manufactured by Employer or its affiliates, (d) contact, solicit or attempt to
solicit or accept business from any customers of Employer or its affiliates or
any person or entity whose business Employer or its affiliates is soliciting, or
(e) take any action inconsistent with the fiduciary relationship of an employee
to Employee's employer. For purposes of this Agreement, a competitor'
specifically includes persons, firms, sole proprietorships, partnerships,
companies, corporations or other entities that market products and/or perform
services in direct or indirect competition with those marketed and/or performed
by Employer or its affiliates within the United States, Canada and Mexico.
12. NONEMPLOYMENT AGREEMENT. During the period of employment with
Employer, Employee shall not, on Employee's own behalf or on behalf of any other
person, partnership, association, corporation or other entity, hire or solicit
or in any manner attempt to influence or induce any employee of Employer or its
affiliates to leave the employment of Employer or its affiliates, nor shall
Employee use or disclose to any person, partnership, association, corporation or
other entity any information obtained while an employee of Employer concerning
the names and addresses of the employees of Employer or its affiliates.
13. NONDISPARAGEMENT AGREEMENT. Employee shall not, either during the
Term of this Agreement or at any time thereafter, make statements, whether
orally or in writing, concerning Employer, any of its directors, officers,
employees or affiliates or any of its business strategies, policies or
practices, that shall be in any way disparaging, derogatory or critical, or in
any way harmful to the reputation of Employer, any such persons or entities or
business strategies, policies or practices.
14. SUCCESSORS; BINDING AGREEMENT.
(a) Employer will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Employer, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Employer would be
required to perform it if no such succession had taken place. Failure of
Employer to obtain such agreement prior to the effectiveness of any succession
shall be a breach of this Agreement and shall entitle Employee to compensation
from Employer in the same amount and on the same terms as Employee would be
entitled hereunder if Employer terminated Employee's employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the date of Employee's
termination. As used in this Agreement, 'Employer' shall mean Employer as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
14 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable
by Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should die
while any amount would still be payable to Employee hereunder if Employee had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Employee's devisee,
12
legatee or other designee or, if there is no such designee, to Employee's
estate.
15. SEVERABILITY. The parties hereto intend all provisions of Sections
11, 12, and 13 hereof to be enforced to the fullest extent permitted by law.
Accordingly, should a court of competent jurisdiction determine that the scope
of any provision of Sections 11, 12, and 13 hereof is too broad to be enforced
as written, the parties intend that the court reform the provision to such
narrower scope as it determines to be reasonable and enforceable. In addition,
however, Employee agrees that the non-competition agreements, nondisclosure
agreements, nonemployment agreements and nondisparagement agreements set forth
herein each constitute separate agreements independently supported by good and
adequate consideration and shall be severable from the other provisions of, and
shall survive, this Agreement. The existence of any claim or cause of action of
Employee against Employer, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Employer of the covenants
and agreements of Employee contained in the non-competition, nondisclosure,
nonemployment or nondisparagement agreements. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof, such provision shall be fully
severable and this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision never comprised a part of this Agreement; and
the remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
16. INVENTIONS. Employee shall promptly disclose, grant and assign to
Employer for its sole use and benefit any and all inventions, improvements,
technical information and suggestions relating in any way to the products of
Employer or any of its affiliates or capable of beneficial use by Employer or
any of its affiliates, which Employee has in the past conceived, developed or
acquired, or may conceive, develop or acquire during the term hereof (whether or
not during usual working hours), together with all patent applications, letters
patent, copyrights and reissues thereof that may at any time be granted for or
upon any such invention, improvement or technical information. In connection
therewith, Employee shall promptly at all times during and after the term
hereof:
(a) Execute and deliver such applications, assignments, descriptions
and other instruments as may be necessary or proper in the opinion of Employer
to vest title to such inventions, improvements, technical information, patent
applications and patents or reissues thereof in Employer and to enable it to
obtain and maintain the entire right and title thereto throughout the world.
(b) Render to Employer, at its expense, all such assistance as it may
require in the prosecution of applications for said patents or reissues thereof,
in the prosecution or defense of interferences which may be declared involving
any said application or patents and in any litigation in which Employer or its
affiliates may be involved relating to any such patents, inventions,
improvements or technical information.
17. AFFILIATES. Employee will use Employee's best efforts to ensure that
no relative of his or corporation of which Employee is an officer, director or
shareholder, or other affiliate of his, shall take any action that Employee
could not take without violating any provision of this Agreement.
18. REMEDIES. Employee recognizes and acknowledges that the ascertainment
of damages in the event of his breach of any provision of this Agreement would
be difficult, and Employee agrees that Employer, in addition to all other
remedies it may have, shall have the right to injunctive relief if there is such
a breach.
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19. NOTICES. Any notices, consents, demands, requests, approvals and
other communications to be given under this Agreement by either party to the
other shall be in writing and shall be either (i) delivered in person, (ii)
mailed by registered or certified mail, return receipt requested, postage
prepaid, (iii) delivered by overnight express delivery service or same-day local
courier service or (iv) delivered by facsimile transmission, to the addresses
set forth below.
If to Employer: Pillowtex Management Services Company
0000 Xxxx Xxx
Xxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
If to Employee: Xxxxx X. Xxxxxx
00000 Xxxxxxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Notices delivered personally, by overnight express delivery, local courier or
facsimile shall be deemed communicated as of actual receipt; mailed notices
shall be deemed communicated as of three days after mailing.
20. ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, either oral or written, between the parties hereto with respect to
the subject matter hereof, and contains all of the covenants and agreements
between the parties with respect thereto.
21. MODIFICATION. No change or modification of this Agreement shall be
valid or binding upon the parties hereto, nor shall any waiver of any term or
condition in the future be so binding, unless such change or modification or
waiver shall be in writing and signed by the parties hereto.
22. GOVERNING LAW AND VENUE. THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS
AGREEMENT AND THE OBLIGATIONS AND UNDERTAKINGS OF THE PARTIES HEREUNDER WILL BE
PERFORMABLE IN DALLAS, DALLAS COUNTY, TEXAS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. IF ANY
ACTION IS BROUGHT TO ENFORCE OR INTERPRET THIS AGREEMENT, VENUE FOR SUCH ACTION
SHALL BE IN DALLAS COUNTY, TEXAS. EACH OF THE PARTIES HERETO HEREBY AGREES
IRREVOCABLY AND UNCONDITIONALLY TO CONSENT TO SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF THE UNITED STATES OF
AMERICA LOCATED IN DALLAS, TEXAS FOR ANY ACTIONS, SUITS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND FURTHER AGREES THAT SERVICE OF PROCESS,
SUMMONS OR NOTICE BY U.S. REGISTERED MAIL TO THE APPLICABLE ADDRESSES SET FORTH
IN SECTION 19 HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS OF ANY ACTION, SUIT
OR PROCEEDING BROUGHT AGAINST SUCH PARTY IN ANY SUCH COURT.
23. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall constitute an original, but all of which shall constitute one
document.
24. COSTS. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which Employee or it may be entitled.
25. ESTATE. If Employee dies prior to the expiration of the term of his
employment hereunder, any monies that may be due Employee from Employer under
this Agreement as of the date of his death shall be paid to Employee's estate.
26. ASSIGNMENT. Employer shall have the right to assign this Agreement to
its successors or assigns. The terms 'successors' and 'assigns' shall include
any person, corporation, partnership or other entity that buys all or
substantially all of Employer's assets or all of its stock, or with which
Employer merges or consolidates. The rights, duties and benefits to Employee
14
hereunder are personal to Employee, and no such right or benefit may be assigned
by Employee.
27. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and assigns.
28. NO WAIVER. The failure by Employer to enforce at any time any of the
provisions of this Agreement or to require at any time performance by Employee
of any of the provisions hereof shall in no way be construed to be a waiver of
such provisions or to affect the validity of this Agreement, or any part hereof,
or the right of Employer thereafter to enforce each and every such provision in
accordance with the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PILLOWTEX MANAGEMENT SERVICES COMPANY
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
--------------------------
Xxxxxxx X. Xxxxxx, Xx.
Chairman of the Board and
Chief Executive Officer
EMPLOYEE
/s/ Xxxxx X. Xxxxxx
--------------------------
Xxxxx X. Xxxxxx
15
