EXHIBIT 10.4
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT, dated as of August 5, 1996, by and between Glenoit
Universal, Ltd., a Delaware corporation, and X. Xxxxx Sears ("Executive"). The
term "Company" shall apply to Glenoit Universal, Ltd., a Delaware corporation,
as well as to Glenoit Xxxxx, Inc. and any other subsidiaries of Glenoit
Universal, Ltd.
RECITALS
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In order to induce Executive to agree to serve as Executive Vice President and
Chief Financial Officer of the Company, and the Company desires to provide
Executive with compensation and other benefits on the terms and conditions set
forth in this Agreement.
Executive is willing to enter into such employment and perform services for
the Company on the terms and conditions set forth in this Agreement.
It is therefore hereby agreed by and among the parties as follows:
1. Employment. (a) Subject to the terms and conditions of this
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Agreement, the Company agrees to employ Executive during the term hereof as
Executive Vice President and Chief Financial Officer. In his capacity as
Executive Vice President and Chief Financial Officer of the Company, Executive
shall have all of the customary powers, responsibilities and authorities of
chief financial officers of corporations of the size, type and nature of the
Company, as they exist from time to time. Executive's principal office shall be
at the executive offices of the Company in Tarboro, North Carolina.
(b) The Company shall, during the term hereof, use its best
efforts to cause the election and retention of Executive as Secretary of the
Board of the Company.
(c) Subject to the terms and conditions of this Agreement,
Executive hereby accepts employment as Executive Vice President and Chief
Financial Officer of the Company and agrees to devote his full working time and
efforts, to the best of his ability, experience and talent, to the performance
of services, duties and responsibilities in connection therewith. Nothing in
this Agreement shall preclude Executive from engaging, consistent with his
duties and responsibilities hereunder, in charitable and community affairs or
from managing his personal investments.
2. Term of Employment. Executive's term of employment under this
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Agreement shall commence on August 5, 1996 (or such other date as the parties
hereto may mutually agree) (the "Commencement Date") and, subject to the terms
hereof, shall terminate on December 31, 1999 (the "Termination Date"); provided,
however, that on December 31, 1999 and on each subsequent anniversary thereof,
the Termination Date shall automatically be extended for a period of one year,
unless either party shall have given written notice to the other party not less
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than six months prior to the Termination Date that the Termination Date shall
not be so extended.
3. Compensation.
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3.1 Initial Base Salary. The Company shall pay Executive a
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base salary ("Base Salary") at the rate of $165,000 per annum for the
period from the Commencement Date through December 31, 1996. The Base
Salary shall be payable in accordance with the ordinary payroll practices
of the Company.
3.2 Adjustments to Base Salary. Executive's annual rate of
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Base Salary shall be increased on January 1, 1997 and each succeeding
January 1 during the term of Executive's employment hereunder (each such
January 1 being referred to as an "Adjustment Date") by the greater of (i)
(A) 5% or (B) a percentage equal to the percentage increase in the
Consumer Price Index for the United States of America from the January 1
preceding the Adjustment Date to the Adjustment Date, or (ii) the amount
specified by the Company's Board of Directors. Once so increased the
increased amount shall constitute Executive's Base Salary hereunder.
3.3 Annual Bonus. In addition to his Base Salary, Executive
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shall be entitled to an annual cash bonus payment (the "Bonus") determined
as follows:
(a) On March 1, 1997 the Company will pay to Executive a cash bonus
of $50,000 in respect of the Fiscal Year ending December 31, 1996.
(b) On March 1, 1998 and on each succeeding March 1 through and
including the March 1 following the termination of Executive's employment
hereunder for any reason, the Company shall pay executive a cash bonus
equal to the lesser of 66.7% of the Executive's Base Salary or a fixed
percentage (the "Bonus Percentage") of the Company's consolidated income
before depreciation, interest, taxes and amortization ("EBITDA") for the
Company's Fiscal Year ending December 31 preceding such March 1. The
"Bonus Percentage" shall be equal to the quotient calculated by dividing
$50,000 by the Company's EBITDA for the Fiscal Year ending December 31,
1995.
(c) Except as otherwise specified below in this Agreement, in the
event of the termination of Executive's employment hereunder for any
reason prior to the end of a Fiscal Year, his Bonus in respect of such
Fiscal Year shall be reduced to equal the product of the amount which
would otherwise be payable to him in respect of such Fiscal Year pursuant
to the preceding subparagraph (a) multiplied by a fraction of which the
numerator is the number of calendar days from January 1 of such Fiscal
Year to the date of termination of Executive's employment hereunder and
the denominator is 365.
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3.4 Other Salary and Bonus Increases. In addition to any increase in
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the Base Salary specified in Section 3.2 hereof, the Company's Board of
Directors may, at any time and from time to time acting in its sole discretion,
increase Executive's Base Salary or Bonus.
3.5 Moving Reimbursement. The Company will pay all expenses of
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relocating Executive to the Tarboro, North Carolina area including but not
limited to direct costs of moving, househunting, Realtors fees, closing costs,
and the income tax effect on any of the foregoing.
3.6 Compensation Plans and Programs. Executive shall participate in
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any compensation plan or program annual or long-term, including stock plans,
maintained by the Company on terms no less favorable than those applicable to
other senior management personnel of the Company.
3.7 Supplemental Payment. On the Commencement Date the Company shall
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make a cash payment to Executive of $35,000.
4. Employee Benefits.
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4.1 Employee Benefit Programs, Plans and Practices. During the term
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of his employment hereunder, the Company shall provide to Executive coverage
under any employee benefit programs, plans and practices (commensurate with his
positions in the Company and to the extent possible under any employee benefit
plan), in accordance with the terms thereof, which the Company makes available
to its senior executive officers, including but not limited to (i) retirement,
pension and profit-sharing, and (ii) medical, dental, hospitalization, life
insurance, short and long-term disability, accidental death and dismemberment
and travel accident coverage. In addition, the Company shall provide Executive
at all times during his employment hereunder with life insurance benefits
payable to Executive's selected beneficiary(ies) in the amount of not less than
$500,000.
4.2 Vacation and Fringe Benefits. (a) Executive shall be entitled to
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a paid vacation each calendar year of no less than four weeks (consisting of
seven calendar days each). The Company may, in its sole discretion, grant
additional vacation time to Executive.
(b) In addition, Executive shall be entitled to all of the perquisites
and fringe benefits normally accorded the chief financial officer of the
Company, including but not limited to company-paid annual physical examinations.
5. Expenses. Executive is authorized to incur reasonable expenses in
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carrying out his duties and responsibilities under this Agreement, including
without limitation expenses for travel, continuing education required to
maintain professional certification and similar items related to such duties and
responsibilities, and the Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of an itemized account of such
expenditures.
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6. Termination of Employment.
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6.1 Termination Not for Cause or Termination for Good Reason. (a)
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The Company may terminate Executive's employment at any time, and Executive may
terminate his employment at any time. If Executive's employment is terminated
by the Company other than for Cause (as defined in Section 6.4 hereof) or due to
Executive's death or Permanent Disability (as defined in Section 6.2 hereof) or
Executive terminates his employment for Good Reason (as defined in Section
6.1(b) hereof) prior to December 31, 1999, Executive shall be entitled to
receive in a cash lump sum payment from the Company, in lieu of any other cash
compensation provided for herein but not in substitution for compensation
already paid or earned, payable within ten days of such termination, the sum of
(A) Executive's Base Salary at its then current annual rate and (B) the highest
annual Bonus paid to or accrued by the Company hereunder for the benefit of
Executive during the term of this agreement.
In addition, Executive shall:
(1) be entitled to receive on the date of termination a cash lump
sum equal to (A) any compensation payments deferred by Executive, together
with any applicable interest or other accruals thereon; (B) any unpaid
amounts, as of the date of such termination, in respect of the Bonus for
the Fiscal Year ending before the Fiscal Year in which such termination
occurs; and (C) an amount in respect of the Bonus for the Fiscal Year in
which such termination occurs calculated pursuant to Section 3.3(b) hereof
on the basis of the Company's, EBITDA for such Fiscal Year being equal to
the sum of (i) the Company's actual EBITDA for the period from the
beginning of such Fiscal Year through the end of the month preceding the
date of termination plus (ii) the Company's projected EBITDA for the
remainder of such Fiscal Year as set forth in the then current version of
the Company's operating budget for such Fiscal Year;
(2) for the period from the date of termination of Executive's
employment until the Termination Date (as then in effect), continue to be
covered under and participate in the Company's employee benefit programs,
plans and practices described in Section 4.1 hereof or under such other
plans of the Company which provide for equivalent coverage (on an after-tax
basis); and
(3) have such rights to payments under applicable plans or
programs, including but not limited to those described in Section 3.6
hereof, with the exception of stock plans, as may be determined pursuant to
the terms of such plans or programs.
(b) For purposes of this Agreement, "Good Reason" shall mean the
occurrence of any of the following events without Executive's express prior
written consent:
(i) the assignment to Executive by the Company of duties
inconsistent with Executive's positions, duties, responsibilities, titles
and offices as set
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forth in Section 1 hereof, or any material reduction by
the Company of Executive's duties or responsibilities or any removal of
Executive from or any failure to elect or re-elect Executive to any of such
positions (including but not limited to the removal of Executive as the
Executive Vice President or Chief Financial Officer), except in connection
with the termination of Executive's employment for Cause, as a result of
Permanent Disability (as defined in Section 6.2 hereof), as a result of
Executive's death or by Executive other than for Good Reason;
(ii) a reduction by the Company in Executive's Base Salary or
Bonus (other than by reason of the terms of Section 3.3 hereof) as in
effect at the commencement of employment hereunder or as the same may be
increased from time to time during the term of this Agreement;
(iii) a failure by the Company to continue in effect any benefit
or compensation plan or stock option plan (including any pension, profit
sharing, bonus, life insurance, health, accidental death or dismemberment
or disability plan) existing on the Commencement Date and in which
Executive participates after the Commencement Date (and, in the case of
plans adopted after the Commencement Date and providing a type of benefit
not provided by the Company on the Commencement Date, at the respective
dates of adoption of such plans) without providing for or establishing
plans or arrangements providing Executive with substantially similar
benefits, or the taking of any action by the Company which would adversely
affect Executive's participation in or reduce Executive's benefits under
any of such plans;
(iv) the taking of any action by the Company which would deprive
Executive of any material fringe benefit enjoyed by Executive on the
Commencement Date (or in the case of a fringe benefit not provided to
Executive by the Company on the Commencement Date, at the respective dates
of first providing such fringe benefits to any management personnel), or
the failure by the Company to provide Executive with the number of paid
vacation weeks to which Executive is entitled hereunder;
(v) the failure by the Company to obtain the specific assumption
of this Agreement by any successor or assign of the Company or any person
acquiring a substantial portion of the assets of the Company;
(vi) any material breach by the Company of any provision of this
Agreement; or
(vii) the occurrence of a Change of Control as hereinafter
defined; or
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(viii) any purported termination of Executive's
employment for Cause which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 6.4 hereof.
(c) For purposes of this Agreement, "Change of Control" shall mean the
occurrence of any of the following events:
(i) The acquisition by an entity of more than 50% of the outstanding
capital stock or assets of the Company; or
(ii) The approval by the shareholders of the Company after the
consummation of the merger or consolidation of the Company with any other
corporation, the sale of substantially all of the assets of the Company to
any third party, or the liquidation or dissolution of the Company, other
than such a merger or consolidation with, sale to or liquidation into a
company more 50% of whose outstanding capital stock on a fully diluted
basis is owned, after the transaction, by stockholders of the Company.
(iii) The sale of greater than 50% of the Company's stock in a public
offering will not be considered to be a "Change of Control" for the
purposes of this section.
(d) in the event Executive is required pursuant to Section 4999 of the
Code to pay (through withholding or otherwise) an excise tax on "excess
parachute payments" (as defined in Section 28OG(b) of the Code) made by the
Company pursuant to this Section 6.1, the Company shall pay Executive,
subject to Section 16 hereof, such additional amounts as are necessary to
place Executive in the same after-tax financial position that he would have
been in if he had not incurred any tax liability under Section 4999 of the
Code.
6.2 Permanent Disability. If (i) Executive shall fail for a period
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of six consecutive months during the term of his employment hereunder, because
of illness, physical or mental disability or other incapacity, to render the
services provided for by this Agreement or (ii) at such earlier time as
Executive submits satisfactory medical evidence that he has an illness, physical
or mental disability or other incapacity which is expected to prevent him from
returning to the performance of his work duties for six months or longer
("Permanent Disability"). the company or Executive may terminate Executive's
employment upon written notice thereof, setting forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Executive's employment under this Section 6.2, and Executive shall receive or
continue to receive, as the case may be:
(a) within thirty days of the date of termination of Executive's
employment pursuant to this Section 6.2, a cash lump sum equal to any
compensation payments deferred by Executive, together with any applicable
interest or other accruals thereon;
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(b) any unpaid amounts, as of the date of such termination, in respect
of the Bonus for the Fiscal Year ending before such termination, which shall be
payable on the date on which such Bonus is payable as specified in Section
3.3(a) hereof;
(c) on the March 1 following the end of the Fiscal Year during which
the termination of Executive's employment pursuant to this Section 6.2 occurs,
an amount in respect of the Bonus for such Fiscal Year calculated on the basis
specified in Section 3.3(b) hereof;
(d) until his attainment of age 65 (or if earlier, the end of his
Permanent Disability or his death), annual payments equal to no less than 60% of
Executive's then annual Base Salary, it being acknowledged that the Company may
obtain disability insurance as the vehicle to provide some or all of such
disability benefit;
(e) full coverage under the employee benefit programs, plans and
practices described in Section 4.1 hereof until his attainment of age 65 (or, if
earlier, the end of his Permanent Disability or his death); and
(f) such rights to payments under applicable plans or programs,
including but not limited to those described in Sections 3.6 and 4.1 hereof, as
may be appropriate pursuant to the terms of such plans or programs.
6.3 Death. In the event of Executive's death during the term of his
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employment hereunder, Executive's estate or designated beneficiaries shall
receive:
(a) within thirty days of the date of Executive's death, a cash lump
sum, equal to any compensation payments deferred by Executive, together with any
applicable interest or other accruals thereon;
(b) any unpaid amounts, as of the date of Executive's death, in
respect of the Bonus for the Fiscal Year ending before his death, which shall be
payable on the date on which such Bonus is payable as specified in Section
3.3(a) hereof;
(c) on the March 1 following the end of the Fiscal Year during which
Executive's death occurs, an amount in respect of the Bonus for such Fiscal Year
calculated on the basis specified in Section 3.3(b) hereof;
(d) any death benefits provided under the employee benefit programs,
plans and Practices described in Section 4.1 hereof, in accordance with their
terms; and
(e) such other payments under applicable plans or programs, including
but not limited to those described in Section 3.6 hereof, as may be appropriate
pursuant to the terms of such plans or programs.
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6.4 Voluntary Termination by Executive; Discharge for Cause. (a) In
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the event that Executive's employment is terminated by the Company for Cause, as
hereinafter defined, or by Executive other than for Good Reason or other than as
a result of Permanent Disability or death, prior to the Termination Date,
Executive shall be entitled to receive all salary and benefits to which
Executive is entitled up to and including the date of Executive's termination of
employment hereunder. Provided the Company follows the procedures specified in
Section 6.4(b) hereof in the case of the termination of Executive's employment
for Cause, the obligations of the Company under this Agreement to make any
further payments, or provide any benefits specified herein, to Executive shall
cease and terminate on the date on which Executive's employment is terminated by
the Company for Cause or by Executive other than for Good Reason or other than
as a result of Permanent Disability or death.
(b) As used herein, the term "Cause" shall be limited to (i) action by
Executive involving willful malfeasance or dishonesty in connection with his
employment having a material adverse effect on the Company, (ii) substantial and
continuing refusal by Executive in willful breach of this Agreement or written
instructions to perform the duties ordinarily performed by a chief financial
officer, or (iii) Executive being convicted of a felony, under the laws of the
United States or any State. Termination of Executive pursuant to Section 6.4
hereof shall be communicated by a Notice of Termination given within six months
after the Board of Directors of the Company both (i) had knowledge of conduct or
an event allegedly constituting Cause and (ii) had reason to believe that such
conduct or event could be grounds for Cause. For purposes of this Agreement, a
"Notice of Termination" shall mean delivery to Executive of a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board of Directors of the Company (excluding
Executive, if applicable) at a meeting of the Board called and held for the
purpose (after reasonable notice to Executive ("Preliminary Notice") and
reasonable opportunity for Executive, together with Executive's counsel, to be
heard before the Board prior to such vote), finding that in the good faith
opinion of the Board, Executive was guilty of conduct set forth in the first
sentence of this Section 6.4(b) and specifying the particulars thereof in
detail.
7. No Obligation to Mitigate Damages. Executive shall not be required to
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mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise, nor will any payments under Section 6
hereof be subject to offset in respect of any claims which the Company may have
against Executive.
8. Notices. All notices or communications hereunder shall be in writing,
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addressed as follows:
To the Company: Glenoit Xxxxx, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X'Xxxxxx
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with a copy to: CitiBank Venture Capital Partners
000 Xxxx Xxxxxx
00xx Xxxxx, Xxxx 4
New York, New York 10043
Attention: Xxxxxx Xxxxxxxx
To Executive: Xx. X. Xxxxx Sears
c/o Glenoit Xxxxx, Inc.
P. O. Box 1157
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Any such notice or communication shall be sent certified or registered
mail, return receipt requested, postage prepaid, addressed as above (or to such
other address as such party may designate in a notice duly delivered as
described above), and the actual date of mailing shall constitute the time at
which notice was given.
9 Separability; Legal Fees; Arbitration. If any provision of this Agreement
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shall be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions hereof,
which shall remain in full force and effect. Any controversy or claim arising
out of or relating to this Agreement or the breach of this Agreement (other than
Section 12 hereof) that cannot be resolved by Executive on the one hand and the
Company on the other, including any dispute as to the calculation of Executive's
benefits or any payments hereunder, shall be Submitted to arbitration in The
City of New York in accordance with New York law and the procedures of the
American Arbitration Association. The determination of the arbitrators shall be
conclusive and binding on the Company and Executive, and judgment may be entered
on the arbitrators' award in any court having jurisdiction.
10. Assignment. This contract shall be binding upon and inure to the benefit
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of the heirs and representatives of Executive and the assigns and successors of
the Company, but neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by Executive (except by will or
by operation of the laws of intestate succession) or by the Company, except that
the Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
businesses of the Company.
11. Amendment. This Agreement may only be amended by written agreement of
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the parties hereto.
12. Disclosure of Confidential Information Non-Competition. (a) Executive
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shall not, without the prior written consent of the Company, divulge, disclose
or make accessible to any other person, firm, partnership, corporation or other
entity any Confidential Information
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pertaining to the business of the Company except (i) while employed by the
Company, in the business of and for the benefit of the Company, or (ii) when
required to do so by a court of competent jurisdiction, by any governmental
agency having supervisory authority over the business of the Company, or by any
administrative body or legislative body (including a committee thereof) with
purported or apparent jurisdiction to order Executive to divulge, disclose or
make accessible such information. For purposes of this Section 12(a),
"Confidential Information" shall mean non-public information concerning the
Company's financial data, strategic business plans, product development (or
other proprietary product data), customer lists, marketing plans and other non-
public, proprietary and confidential information of the Company that is not
otherwise available to the public.
(b) During the period commencing on the date hereof and ending on
December 31, 1999, Executive agrees that, without the prior written consent of
the Company, he will not, directly or indirectly, either as principal, manager,
agent, consultant, officer, stockholder, partner, investor, lender or employee
or in any other capacity, carry on, be engaged in or have any financial interest
in, any business which is in material competition with the business of the
Company and/or its affiliates.
(c) For purposes of section 12(b) hereof, a business shall be deemed
to be in competition with the Company if it is significantly involved in the
purchase, sale or other dealing in any property or the rendering of any service
significantly purchased, sold, dealt in or rendered by the Company and/or its
affiliates. As used in the preceding sentence, the term "significantly" shall
be deemed to refer to activities generating gross annual sales of at least $5
million. Nothing in this Section 12 shall be construed so as to preclude
Executive from investing in any publicly held company provided Executive's
beneficial ownership of any class of such company's securities does not exceed
5% of the outstanding securities of such class.
(d) Executive and the Company agree that the foregoing covenant not to
compete is a reasonable covenant under the circumstances, and further agree that
if in the opinion of any court of competent jurisdiction such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of such covenant as to the
court shall appear not reasonable and to enforce the remainder of the covenant
as so amended. Executive agrees that any breach of the covenants contained in
this Section 12 would irreparably injure the Company. Accordingly, the Company
may, in addition to pursuing any other remedies they may have in law or in
equity, obtain an injunction against Executive from any court having
jurisdiction over the matter, restraining any further violation of this Section
12 by Executive.
13. Beneficiaries; References. Executive shall be entitled to select (and
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change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death, and may change such election, in either case by giving the
Company written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal
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representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.
14. Survivorship. The respective rights and obligations of the parties
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hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 14 are in addition to the survivorship provisions of
any other section of this Agreement.
15. Governing Law. This Agreement shall be construed, interpreted and
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governed in accordance with the laws of New York, without reference to rules
relating to conflicts of law.
16. Withholding. The Company shall be entitled to withhold from any payment
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hereunder any amount of withholding required by law.
17. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which will be deemed an original.
IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of
the day and year first above written.
Glenoit Xxxxx, Inc.
By:
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X. Xxxxx Sears, Executive Vice President
and Chief Financial Officer
