EXHIBITY (10q)
SEVERANCE COMPENSATION AGREEMENT
THIS AGREEMENT ("Agreement") between UNIFI, INC., a New York corporation
(the "Company"), and XXXXXX X. XXXXX, III ("Executive") effective the 16th
day of July, 1998.
WITNESSETH:
WHEREAS, XXXXXX X. XXXXX, III is presently a Senior Vice President and
Chief Financial Officer for the Company, has been an Officer of the Company
since 1995, and is and has been an integral part of the Company's Management;
and
WHEREAS, the Company's Board of Directors considers the establishment and
maintenance of a sound and vital Management to be essential in protecting and
enhancing the best interests of the Company and its Shareholders, recognizes
that the possibility of a change in control exists and that such possibility,
and the uncertainty and questions which it may raise among Management, may
result in the departure or distraction of Management personnel to the
detriment of the Company and its Shareholders; and
WHEREAS, the Executive desires that in the event of any change in control
he will continue to have the responsibility and status he has earned; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication
of the Executive, as a member of the Company's Management, to his assigned
duties without distraction in potentially disturbing circumstances arising
from the possibility of a change in control of the Company.
NOW, THEREFORE, in order to induce the Executive to remain in the
employment of the Company and in consideration of the Executive agreeing to
remain in the employment of the Company, subject to the terms and conditions
set out below, the Company agrees it will pay such amount, as provided in
Section 4 of this Agreement, to the Executive, if the Executive's employment
with the Company terminates under one of the circumstances described herein
following a change in control of the Company, as herein defined.
Section 1. Term: This Agreement shall terminate, except to the extent
that any obligation of the Company hereunder remains unpaid as of such time,
upon the earliest of (i) July 20, 2001 if a Change in Control of the Company
has not occurred within such period; (ii) the termination of the Executive's
employment with the Company based on Death, Disability (as defined in Section
3(b), Retirement (as defined in Section 3(c)), Cause (as defined in Section
3(d)) or by the Executive other than for Good Reason (as defined in Section
3(e)); and (iii) two years from the date of a Change in Control of the Company
if the Executive has not voluntarily terminated his employment for Good Reason
as of such time.
Section 2. Change in Control: No compensation shall be payable under
this Agreement unless and until (a) there shall have been a Change in Control
of the Company, while the Executive is still an employee of the Company and (b)
the Executive's employment by the Company thereafter shall have been terminated
in accordance with Section 3. For purposes of this Agreement, a Change in
Control of the Company shall be deemed to have occurred if (i) there shall
be consummated (x) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's Common Stock would be converted into cash, securities
or other property, other than a merger of the Company in which the holders of
the Company's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (ii) the Shareholders of
the Company approved any plan or proposal for the liquidation or dissolution
of the Company, or (iii) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), shall become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of twenty percent (20%) or more of the Company's
outstanding Common Stock, or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constitute the entire Board of
Directors shall cease for any reason to constitute a majority thereof unless
the election, or the nomination for election by the Company's Shareholders, of
each new Director was approved by a vote of at least two-thirds of the
Directors then still in office who were Directors at the beginning of the
period.
Section 3. Termination Following Change in Control: (a) If a Change in
Control of the Company shall have occurred while the Executive is still an
employee of the Company, the Executive shall be entitled to the compensation
provided in Section 4 upon the subsequent termination of the Executive's
employment with the Company by the Executive voluntarily for Good Reason or by
the Company unless such termination by the Company is as a result of (i) the
Executive's Death, (ii) the Executive's Disability (as defined in Section
(3)(b) below); (iii) the Executive's Retirement (as defined in Section 3(c)
below); (iv) the Executive's termination by the Company for Cause(as defined
in Section 3(d) below); or (v) the Executive's decision to terminate
employment other than for Good Reason (as defined in Section 3(e) below).
(b) Disability: If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for six months (including months
before and after the change of control) and within 30 days after written
notice of termination is thereafter given by the Company the Executive shall
not have returned to the full- time performance of the Executive's duties, the
Company may terminate this Agreement for "Disability."
(c) Retirement: The term "Retirement" as used in this Agreement shall mean
termination in accordance with the Company's retirement policy or any
arrangement established with the consent of the Executive.
(d) Cause: The Company may terminate the Executive's employment for Cause.
For purposes of this Agreement only, the Company shall have "Cause" to
terminate the Executive's employment hereunder only on the basis of fraud,
misappropriation or embezzlement on the part of the Executive or malfeasance
or misfeasance by said Executive in performing the duties of his office, as
determined by the Board of Directors. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause unless and
until there shall have been a meeting of the Company's Board of Directors
(after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before the
Board), and the delivery to the Executive of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of
said Board of Directors stating that in the good faith opinion of the Board
the Executive was guilty of conduct set forth in the second sentence of this
Section 3(d) and specifying the particulars thereof in detail.
(e) Good Reason: The Executive may terminate the Executive's employment for
Good Reason at any time during the term of this Agreement. For purposes of
this Agreement "Good Reason" shall mean any of the following (without the
Executive's express written consent):
(i) the assignment to the Executive by the Company of duties inconsistent
with the Executive's position, duties, responsibilities and status with the
Company immediately prior to a Change in Control of the Company; or a change
in the Executive's titles or offices as in effect immediately prior to a
Change in Control of the Company; or any removal of the Executive from or
any failure to reelect the Executive to any of the positions held prior to the
change of control, except in connection with the termination of his employment
for Disability, Retirement, or Cause, or as a result of the Executive's Death;
or by the Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive's base salary as in effect
on the date hereof or as the same may be increased from time to time during
the term of this Agreement or the Company's failure to increase (within 12
months of the Executive's last increase in base salary) the Executive's base
salary after a Change in Control of the Company in an amount which at least
equals, on a percentage basis, the average percentage increase in base salary
for all executive officers of the Company effected in the preceding 12 months;
(iii) any failure by the Company to continue in effect any benefit plan or
arrangement (including, without limitation, the Company's Profit Sharing Plan,
group life insurance plan and medical, dental, accident and disability plans)
in which the Executive is participating at the time of a Change in Control of
the Company (or any other plans providing the Executive with substantially
similar benefits) (hereinafter referred to as "Benefit Plans"), or the taking
of any action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under any such
Benefit Plan or deprive the Executive of any material fringe benefit enjoyed
by the Executive at the time of a Change in Control of the Company;
(iv) any failure by the Company to continue in effect any plan or arrangement
to receive securities of the Company (including, without limitation, Stock
Option Plans or any other plan or arrangement to receive and exercise stock
options, restricted stock or grants thereof) in which the Executive is
participating at the time of a Change in Control of the Company (or plans or
arrangements providing him with substantially similar benefits) (hereinafter
referred to as "Securities Plans") and the taking of any action by the Company
which would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such Securities Plan;
(v) any failure by the Company to continue in effect any bonus plan,
automobile allowance plan, or other incentive payment plan in which the
Executive is participating at the time of a Change in Control of the Company,
or said Executive had participated in during the previous calendar year;
(vi) a relocation of the Company's principal executive offices to a location
outside of North Carolina, or the Executive's relocation to any place other
than the location at which the Executive performed the Executive's duties
prior to a Change in Control of the Company, except for required travel by the
Executive on the Company's business to an extent substantially consistent with
the Executive's business travel obligations at the time of a Change in Control
of the Company;
(vii) any failure by the Company to provide the Executive with the number of
paid vacation days to which the Executive is entitled at the time of a Change
in Control of the Company;
(viii) any breach by the Company of any provision of this Agreement;
(ix) any failure by the Company to obtain the assumption of this Agreement by
any successor or assign of the Company; or
(x) any purported termination of the Executive's employment which is not made
pursuant to a Notice of Termination satisfying the requirements of Section
3(f).
(f) Notice of Termination: Any termination by the Company pursuant to
Section 3(b), 3(c) or 3(d) shall be communicated by a Notice of Termination.
For purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. For purposes of this Agreement,
no such purported termination by the Company shall be effective without such
Notice of Termination.
(g) Date of Termination: "Date of Termination" shall mean (a) if Executive's
employment is terminated by the Company for Disability, 30 days after Notice
of Termination is given to the Executive (provided that the Executive shall
not have returned to the performance of the Executive's duties on a full-time
basis during such 30 day period) or (b) if the Executive's employment is
terminated by the Company for any other reason, the date on which a Notice of
Termination is given; provided that if within 30 days after any Notice of
Termination is given to the Executive by the Company the Executive notifies
the Company that a dispute exists concerning the termination, the Date of
Termination shall be the date the dispute is finally determined, whether by
mutual agreement by the parties or upon final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected) or (c) the date the Executive notifies
the Company in writing that he is terminating his employment and setting forth
the Good Reason (as defined in Section 3(e)).
Section 4. Severance Compensation upon Termination of Employment. If the
Company shall terminate the Executive's employment other than pursuant to
Section 3(b), 3(c) or 3(d) or if the Executive shall voluntarily terminate his
employment for Good Reason, then the Company shall pay to the Executive as
severance pay in a lump sum, in cash, on the fifth day following the Date of
Termination, an amount equal to 2.99 times the annualized aggregate
annual compensation paid to the Executive by the Company or any of its
subsidiaries during the five calendar years preceding the Change in Control of
the Company; provided, however, that if the lump sum severance payment under
this Section 4, either alone or together with other payments which the
Executive has the right to receive from the Company, would constitute a
"parachute payment" (as defined in Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code")), such lump sum severance payment shall be
reduced to the largest amount as will result in no portion of the lump sum
severance payment under this Section 4 being subject to the excise tax imposed
by Section 4999 of the Code. The determination of any reduction in the lump
sum severance payment under this Section 4 pursuant to the foregoing proviso
shall be made by the Company's Independent Certified Public Accountants, and
their decision shall be conclusive and binding on the Company and the
Executive.
Section 5. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights: (a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for
under this Agreement be reduced by any compensation earned by the Executive as
the result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided for hereunder,
shall not reduce any amounts otherwise payable, or in any way diminish the
Executive's rights under any employment agreement or
other contract, plan or employment arrangement with the Company.
(c) The Company shall, upon the termination of the Executive's employment
other than by Death, Disability (as defined in Section 3(b)), Retirement (as
defined in Section 3(c)) or Cause (as defined in Section 3(d)), or the
termination of the Executive's employment by the Executive without Good
Reason, maintain in full force and effect, for the Executive's continued
benefit until the earlier of (a) two years after the Date of Termination or
(b) Executive's commencement of full time employment with a new employer, all
life insurance, medical, health and accident, and disability plans, programs
or arrangements in which he was entitled to participate immediately prior to
the Date of Termination, provided that his continued participation is possible
under the general terms and provisions of such plans and programs. In the
event the Executive is ineligible under the terms of such plans or programs to
continue to be so covered, the Company shall provide substantially equivalent
coverage through other sources.
(d) The Executive's account and rights in and under Unifi, Inc.'s Profit
Sharing Plan and Trust, Unifi, Inc.'s Retirement Savings Plan and any other
retirement benefit or incentive plans, shall remain subject to the terms and
conditions of the respective plans as they existed at the time of the
termination of the Executive's employment.
Section 6. Successor to the Company: (a) The Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement expressly, absolutely and unconditionally
to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and
any successor or assign to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Section 6 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. If at any time during the term of this Agreement the
Executive is employed by any corporation a majority of the voting securities
of which is then owned by the Company, "Company" as used in Sections 3, 4 and
11 hereof shall in addition include such employer. In such event, the Company
agrees that it shall pay or shall cause such employer to pay any amounts owed
to the Executive pursuant to Section 4 hereof.
(b) If the Executive should die while any amounts are still payable to him
hereunder, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executive's legatee, or
other designee or, if there be no such designee, to the Executive's estate.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives or attorney-in-fact, executors or
administrators, heirs, distributees and legatees.
Section 7. Notice: For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
Unifi, Inc.
P. O. Xxx 00000
Xxxxxxxxxx, XX 00000-0000
ATTENTION: Xx. Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
If to the Executive:
Xx. Xxxxxx X. Xxxxx, III
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
Section 8. Miscellaneous: (a) The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability
of any other provision of
this Agreement, which shall remain in full force and effect.
(b) Any payment or delivery required under this Agreement
shall be subject to all requirements of the law with regard to withholding
(including FICA tax), filing, making of reports and the like, and Company
shall use its best efforts to satisfy promptly all such requirements.
(c) Prior to the Change in Control of the Company, as herein defined, this
Agreement shall terminate if Executive shall resign, retire, become
permanently and totally disabled, or die. This Agreement shall also terminate
if Executive's employment as an executive officer of the Company shall have
been terminated for any reason by the Board of Directors of the Company as
constituted more than three (3) months prior to any Change in Control of the
Company, as defined in Section 2 of this Agreement.
Section 9. Legal Fees and Expenses: The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the executive's interpretation of, or
determinations under, this Agreement.
Section 10. Confidentiality: The Executive shall retain in confidence any
and all confidential information known to the Executive concerning the Company
and its business so long as such information is not otherwise publicly
disclosed.
IN WITNESS WHEREOF, Unifi, Inc. has caused this Agreement to be signed by a
member of the Company's Compensation Committee who is an outside director
pursuant to resolutions duly adopted by the Board of Directors and its seal
affixed hereto and the Executive has hereunto affixed his hand and seal
effective as of the date first above written.
UNIFI, INC.
BY: XXXXXX X. XXXX (SEAL)
Compensation Committee
XXXXXX X. XXXXX, III (SEAL)
XXXXXX X. XXXXX, III
Vice President and Chief Financial Officer
