Exhibit (e)(3)
--------------
PULASKI FURNITURE CORPORATION
EMPLOYMENT CONTINUITY AGREEMENT
-------------------------------
THIS AGREEMENT is between Pulaski Furniture Corporation, a Virginia
corporation (the "Company"), and _____________ (the "Executive").
The Company's Board of Directors (the "Board") acknowledges that
Executive's contributions to the past growth and success of the Company have
been and are expected to continue to be substantial. As a publicly held
corporation, the Board recognizes that there exists a possibility of a change in
control of the Company. The Board also recognizes that the mere possibility of
such a change in control or transaction often creates uncertainty on the part of
senior management and sometimes results in the departure of, the inability to
recruit, or at least the distraction of, senior management from their day to day
operating responsibilities.
Outstanding management is essential to advancing the best interests of the
Company and its shareholders. In the event of a threat or occurrence of a bid to
acquire or change control of the Company or to effect a business combination, it
is particularly important that the Company's business be continued with a
minimum of disruption. Likewise, the Board has concluded that the objective of
securing and retaining outstanding management is more likely achieved if the
Company's key management employees are given assurances of employment security
so they will not be distracted by personal uncertainties and risks created in
the event such circumstances were to arise.
The Board has approved entering into agreements with the Company's key
management executives in order to help assure that the foregoing objectives are
achieved. Executive is a key management executive of the Company. Accordingly,
the Company and Executive enter into this Agreement to induce Executive to
remain an employee of the Company and to continue to devote his full energies to
the Company's affairs.
1. Term.
This Agreement is effective from the date of its execution by the Company
("Effective Date") for a term of three years (the "Initial Term"). This
Agreement automatically continues in effect from year to year after
expiration of the Initial Term unless the Company notifies the Executive in
writing ninety (90) days before any anniversary of the Effective Date
following the Initial Term that the Agreement will terminate as of that
anniversary date. Notwithstanding the foregoing, no notice of termination
of this Agreement under the preceding sentence shall be effective during an
Employment Period as defined in Section 2 below.
2. Employment Period
a. Employment Period. An Employment Period begins on the occurrence of a
-----------------
Control Change Date and ends three years following the Control Change
Date.
b. Effect of Termination During an Employment Period. Executive is
-------------------------------------------------
entitled to receive Continued Compensation (as defined below)
according to the provisions of Section 3 if Executive's employment
with the Company terminates during the term of this Agreement and
during an Employment Period (as defined below) because of an event
described in either Section 3(a) or 3(b), but subject to Executive's
express offer to work that is rejected by the Company. If Executive's
employment terminates during an Employment Period and an event
described in Section 3(a) or 3(b) has not occurred, or in the event of
Executive's death or Disability during the term of this Agreement,
this Agreement terminates. For this purpose, "Disability" shall mean a
"total disability" as defined under the Company's Long Term Disability
Plan covering salaried employees.
c. Change in Control. For purposes of this Agreement, a Change of Control
-----------------
occurs if: (i) any Person or group (within the meaning of Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended) other than a Person who is not an Acquiring Person), at any
time becomes the Beneficial Owner of the then outstanding voting
securities of the Company entitled to vote generally in the election
of directors (the "Voting Securities"), other than (A) through an
acquisition of Voting Securities directly from the Company, (B) as a
result of the Company's repurchase of Voting Securities if,
thereafter, such Beneficial Owner purchases no additional Voting
Securities, or (C) pursuant to a Business Combination (as defined
below) that does not constitute a Change in Control pursuant to
Section 2(c)(iii); (ii) Continuing Directors cease to constitute a
majority of the members of the Board other than pursuant to a Business
Combination that does not constitute a Change in Control pursuant to
Section 2(c)(iii); (iii) the shareholders of the Company approve a
reorganization, merger, share exchange or consolidation (a "Business
Combination"), in each case, unless immediately following such
Business Combination, (A) all or substantially all of the Persons who
were the Beneficial Owners, respectively, of the Common Stock and
Voting Securities outstanding immediately prior to such Business
Combination Beneficially Own more than 80% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
the Company through one or more Subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination, of the Common Stock and Voting Securities, as
the case may be, (B) no Person (other than a Person who is not an
Acquiring Person) Beneficially Owns 50% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting
from such Business combination or the combined voting power of the
then outstanding voting securities of such corporation and (C) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination are Continuing
Directors; or (iv) the shareholders of the Company approve a complete
liquidation or dissolution of the Company or the sale or other
disposition of all or
2
substantially all of the assets of the Company, in each case, unless
immediately following such liquidation, dissolution, sale or other
disposition, (A) more than 80% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
Beneficially Owned by all or substantially all of the Persons who were
the Beneficial Owners, respectively, of the Common Stock and Voting
Securities outstanding immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of such Common
Stock and Voting Securities, as the case may be, (B) less than 20% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then Beneficially Owned by any Person
(other than any Person who is not an Acquiring Person), and (C) at
least a majority of the members of the board of directors of such
corporation are Continuing Directors immediately following such sale
or disposition; provided, however, that no Change of Control shall be
deemed to occur as a result of any transaction undertaken by Pine
Holdings, Inc. ("Parent"), Pine Acquisition Corp. ("Acquiror"), or any
of their Affiliates or Associates (as those terms are defined in the
Amended and Restated Rights Agreement referenced in the next
paragraph) pursuant to the Agreement and Plan of Merger, dated as of
March 29, 2000, by and among Parent, Acquiror and the Company.
For purposes of the foregoing definition, the terms Acquiring Person,
----------------
Beneficial Owner, Company, Continuing Director, and Person shall have
---------------- ------- ------------------- ------
the same definitions as set forth in the Company's Amended and
Restated Rights Agreement dated as of December 15, 1997, as amended.
d. Control Change Date. For purposes of this Agreement, a Control Change
-------------------
Date is the date on which a Change in Control occurs. If a Change in
Control occurs on account of a series of transactions, the Control
Change Date is the date of the last of such transactions
3. Termination of Employment.
a. Termination by the Company. Executive is entitled to receive Continued
--------------------------
Compensation, as defined below, if Executive's employment is
terminated by the Company during an Employment Period without Cause
("Cause" being limited to (i) Executive's acts of fraud,
misappropriation or willful misconduct that is demonstrably and
materially injurious to the property or business of the Company and/or
the Company's subsidiaries or affiliates, monetarily or otherwise, or
(ii) Executive's conviction of, or plea of no contest to, a felony or
crime involving moral turpitude).
For purposes of the definition of Cause, no act, or failure to act, on
the
3
Executive's part shall be deemed "willful" unless done, or omitted to
be done, by the Executive in bad faith and without reasonable belief
that the Executive's act, or failure to act, was in the best interest
of the Company or its subsidiaries or affiliates. Any act, or failure
to act, based upon authority given pursuant to a resolution duly
adopted by the Board, or upon the instructions of the Board (or a
committee thereof) or a more senior officer, or upon the advice of
counsel for the Company shall be conclusively presumed to have been
done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company and their subsidiaries and affiliates.
The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and
the Executive is given an opportunity, together with counsel, to be
heard before the Board) finding that, in the good faith opinion of the
Board, the Executive has acted in a manner constituting Cause, and
specifying the particulars thereof in detail, or one of the events set
forth in part (ii) of this Section 3(a) has occurred.
b. Voluntary Termination. Executive is entitled to receive Continued
---------------------
Compensation if Executive voluntarily terminates employment during an
Employment Period after (i) Executive does not receive salary
increases comparable to the salary increases that Executive received
in prior years or, if greater, that other executives in comparable
positions receive in the current year; or (ii) Executive's
compensation or employment related benefits are reduced; or (iii)
Executive's status, title(s), office(s), working conditions, or
management responsibilities are diminished (other than changes in
reporting or management responsibilities required by applicable
federal or state law); or (iv) Executive's place of employment is
relocated more than fifty (50) miles from Pulaski, Virginia, without
Executive's consent. Executive's voluntary termination under this
Section must occur within six months after an event described in part
(i), (ii), (iii), or (iv) of this Section 3(b), or within six months
after the last in a series of such events.
c. Continued Compensation. Continued Compensation means an amount equal
----------------------
to the Executive's annual base salary that would have been payable
during the remainder of the Employment Period following Executive's
termination (i) absent Executive's termination of employment and (ii)
disregarding any reductions in such annual base salary during the
Employment Period. Continued Compensation shall be paid in equal
monthly installments during the remainder of the Employment Period
following Executive's termination. Continued Compensation payments to
Executive shall commence on the later of the fifteenth business day
after Executive's employment termination or the first day of the month
following his employment termination. At the Company's sole
discretion, however, Continued Compensation payments may be commenced
on an earlier date or paid in accordance with the Company's normal
payroll practice relating to executives.
4
The Company may also elect to make a lump sum payment to Executive
equal to the present value of all monthly installments of Continued
Compensation due to Executive, on the later of the fifteenth business
day after Executive's employment termination or the first day of the
month following his employment termination (or such later time as
mutually agreed upon by the Company and Executive). For purposes of
the preceding sentence, a discount rate equal to 120 percent of the
applicable Federal rate (determined under Section 1274(d) of the
Internal Revenue Code of 1986, as amended) (the "Code") compounded
semiannually shall be used to calculate present value.
d. Benefits in Lieu of SERP Payments. If Executive becomes entitled to
---------------------------------
Continued Compensation, he shall also be entitled to the payment
described in this Section 3(d), which shall be in lieu of any amounts
payable under the Company's Executive Supplemental Retirement Plan
(the "SERP"). Executive shall be entitled to a benefit equal to the
present value of the benefit he would have received under the SERP had
he continued to work for the Company until age 65, divided by a
fraction, the numerator of which is the sum of (i) the number of his
actual years of Credited Service (as defined in the Pulaski Furniture
Corporation Pension Plan for Employees, as amended (the "Pension
Plan")) through the date of his termination and (ii) five, and the
denominator of which is the number of years of Credited Service (as
defined in the Pension Plan) he would have had if he had continued
working until age 65. The benefit described in the preceding sentence
shall be paid to Executive in a single sum on the date of his
termination of employment, and shall be determined using the actuarial
assumptions and methods in effect under the SERP as of the Control
Change Date.
e. Restricted Stock. If (i) Executive is employed by the Company on the
----------------
date of an event described in Section 2(c)(i), or (ii) or on the date
of the consummation of a Business Combination, liquidation,
dissolution or sale or disposition of assets described in Section
2(c)(iii) or (iv); or (ii) Executive's employment with the Company
terminates during the Employment Period because of an event described
in Section 3(a) or 3(b), but subject to Executive's express offer to
work that is rejected by the Company, then any shares of common stock
of the Company issued to Executive under the Company's 1991 Stock
Incentive Plan or any other stock incentive plans adopted by the
Company before or after the date of this Agreement, that are not then
transferable and nonforfeitable ("restricted stock"), shall become
transferable and nonforfeitable on the earlier of the dates identified
in parts (i) and (ii) of this Section 3(e), notwithstanding any
provision to the contrary in the agreement or plan governing the
restricted stock award.
f. Other Payments or Benefits. In addition to any payments provided for
--------------------------
under this Agreement, Executive is entitled to all payments or
benefits due to him under any other arrangement between Executive and
the Company.
5
4. Offsets Against Continued Compensation.
a. General. Continued Compensation to which Executive otherwise is
-------
entitled under this Agreement may be reduced under this Section, but
not below zero. Reductions in Continued Compensation must be made
under this Section in the manner described in Section 4(c), and the
Company must make any required determination or calculation in good
faith.
b. Actual Earnings from Other Employment. Executive is not required to
-------------------------------------
seek or accept any employment following a termination of employment
with the Company. If Executive obtains any employment during the
months remaining in Executive's Employment Period after his
termination date, however, Continued Compensation must be reduced by
all wages, salaries, professional fees and other amounts received by
Executive as compensation for such employment during those months.
c. Method of Reducing Continued Compensation. If Continued Compensation
-----------------------------------------
must be reduced under this Section 4, either (i) the Company must
reduce installment payments of Continued Compensation by the
appropriate amounts; or (ii) within ninety days after the Company
determines that this Section requires a reduction, Executive must
refund to the Company the amount required so that Executive retains a
total amount of Continued Compensation equal to the present value,
using a discount rate equal to 120 percent of the applicable Federal
rate (determined under Section 1274(d) of the Code) compounded
semiannually, of the amount he would retain if installment payments
were reduced under this sentence. To prevent hardship, repayment of
Continued Compensation under this Section may be made by Executive in
installments if and as permitted in the Company's sole discretion.
5. Reduction of Parachute Payments.
If any payment that Executive has the right to receive from the Company
(including Continued Compensation payments) or any affiliated entity or any
payment or benefit under any plan or agreement maintained by the Company or
any affiliated entity would otherwise constitute an "excess parachute
payment" (as defined in Code Section 280G), all such payments (other than
payments received under Section 7) must be reduced (but not below zero) to
the largest amount that will result in no portion of any such payment being
subject to the excise tax imposed by Section 4999 of the Code. The
determination of any reduction pursuant to this subsection must be made by
the Company in good faith, before any such payments are due and payable to
Executive.
6. Restriction on Executive's Conduct.
a. No Interference. For so long as the Executive is employed by the
---------------
Company, Executive shall not, whether for his own account or for the
account of any other individual, partnership, firm, corporation or
other business organization (other
6
than the Company or one of its affiliates), directly or indirectly,
intentionally solicit, endeavor to entice away from the Company (or
any of its affiliates), or otherwise interfere with the relationship
of the Company (or any of its affiliates) with any person who is
employed by or otherwise engaged to perform services for the Company
(or any of its affiliates) including, but not limited to, any
independent representatives or organizations, or any person or entity
that is a customer of the Company (or any of its affiliates);
provided, however, that if a customer of the Company (or any of its
affiliates) also engages in business in areas outside of Virginia that
are not served by the business of the Company (and/or any of its
affiliates) with which the Executive is involved, the Board may
determine, in an appropriate situation, that the solicitation of such
customer in such areas does not violate the restrictions of this
Section 6(a).
b. Confidential Information. The Executive covenants and agrees with the
------------------------
Company that he will not at any time, during or after employment with
the Company, except in performance of the Executive's obligations to
the Company or with the prior express written consent of the Board,
directly or indirectly, intentionally or unintentionally, disclose any
Confidential Information that he may learn or has learned by reason of
his employment or association with the Company or any of its
affiliates, or any predecessors to its business, or use any such
information for his own personal benefit or gain. The term
"Confidential Information" includes, without limitation, information
not previously disclosed to the public or to the trade by the
Company's management with respect to the products, facilities and
methods, trade secrets and other intellectual property, systems,
procedures, manuals, confidential reports, fee or rate information,
customer lists, financial information (including without limitation
the revenues, costs or profits associated with any of the Company's
(or any of its affiliates') activities or products), business plans,
prospects, opportunities or other information of the Company or any of
its affiliates. Confidential Information shall not include information
which (i) is or becomes generally available to the public other than
as a result of disclosure by the Executive in violation of this
Section 6(b) or (ii) the Executive is required to disclose under any
applicable laws, regulations or directives of any government agency,
tribunal or authority having jurisdiction in the matter or under
subpoena or other process of law. The Executive understands and agrees
that the rights and obligations set forth in this Section 6(b) extend
beyond the Employment Period.
c. Exclusive Property. The Executive confirms that all Confidential
------------------
Information is and shall remain the exclusive property of the Company
and its affiliates. All business records, papers and documents kept or
made by the Executive relating to the business of the Company (or any
of its affiliates) or any Confidential Information shall be and remain
the property of the Company and its affiliates. Upon termination of
employment or upon the request of the Company at any time, the
Executive shall promptly deliver to the Company and shall not without
the prior express written consent of the Company retain, any and all
copies of (i) any
7
written materials not previously made available to the public, or (ii)
records and documents made by the Executive or coming into his
possession concerning any Confidential Information regarding the
business or affairs of the Company or any predecessors to its
business, or any of its affiliates. The Executive understands and
agrees that the rights and obligations set forth in this Section 6(c)
extend beyond the Employment Period.
d. Covenant Not to Compete. During the Employment Period if Executive's
-----------------------
employment with the Company terminates other than as a result of an
event described in Section 3(a) or 3(b), the Executive shall not
compete, directly or indirectly, with the Company or its affiliates
within fifty (50) miles of any geographic area in which the Company or
its affiliates has material business interests with which the
Executive is involved at the time of the termination of the
Executive's employment. If it is judicially determined that this
provision, or any portion thereof, is unenforceable under applicable
law(s) (statutes, common law or otherwise), then it is hereby agreed
by the Executive and the Company that the unenforceable portion shall
be redrafted to the extent necessary to render it enforceable, while
leaving the remaining portions intact. By agreeing to this contractual
modification prospectively at this time, the parties intend to make
this provision enforceable under the law(s) of all applicable states
so that the entire agreement not to compete and/or this Agreement as
prospectively modified shall remain in full force and effect and shall
not be rendered void or illegal. Such modifications shall not affect
the payments made to the Executive under this Agreement. The Executive
acknowledges that his skills are such that he can be gainfully
employed in noncompetitive employment and that the agreement not to
compete will in no way prevent him from earning a living, that he has
the financial resources to enter into this undertaking and has
consulted with knowledgeable advisors before doing so.
e. Injunctive Relief. Without intending to limit the remedies available
-----------------
to the Company, the Executive acknowledges that a breach of any of the
covenants contained in Section 6(a), (b), (c), or (d) may result in
material irreparable injury to the Company or its affiliates for which
there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of
such a breach or threat thereof, the Company shall be entitled to
obtain a temporary restraining order and/or a preliminary or permanent
injunction restraining the Executive from engaging in activities
prohibited by these Sections or such other relief as may be required
to specifically enforce any of the covenants in these Sections.
7. Legal Fees and Expenses.
The Company must pay all legal fees and expenses, if any, incurred by
Executive in obtaining, enforcing, or defending any right or benefit
provided by this Agreement, whether successful or not, but only if any such
action by Executive was undertaken in good faith.
8
As indicated in Section 5, payments under this Section are not subject to
reduction under any other Section of this Agreement.
8. Governing Law.
This Agreement is construed according to the laws of the Commonwealth of
Virginia.
9. Amendment.
This Agreement may not be amended except by the written agreement of
Executive and the Company (with the Company acting by adoption of a
resolution by the Board of Directors).
10. Binding Effect.
The parties agree that this Agreement is enforceable under the laws of the
Commonwealth of Virginia. This Agreement is binding on the Company, its
successors, and assigns and on Executive and his personal representatives.
If the Company is consolidated or merged with or into another corporation,
or if another entity purchases all or substantially all of the Company's
assets, the surviving or acquiring corporation succeeds to the Company's
rights and obligations under this Agreement. This Agreement inures to the
benefit of and is enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If Executive dies while any amounts
are payable under this Agreement following a Control Change Date, all such
amounts, unless otherwise provided, must be paid in accordance with the
terms of this Agreement to Executive's spouse, or if none, to his devisee,
legatee, or other designee or, if there be no such designee, to his estate.
11. Notice.
For purposes of this Agreement, notices and all other communications must
be in writing and are effective when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to
Executive or his personal representative at his last known address. All
notices to the Company must be directed to the attention of the Chairman of
the Board or the President and Chief Executive Officer, if Executive is not
such officer, as applicable. Such other addresses may be used as either
party may have furnished to the other in writing. Notices of change of
address are effective only upon receipt.
12. Miscellaneous.
No provision of this Agreement may be modified, waived, or discharged
unless such waiver, modification, or discharge is agreed to in writing
signed by Executive and the Company. A waiver of any breach of or
compliance with any provision or condition of this Agreement is not a
waiver of similar or dissimilar provisions or conditions. The invalidity
or unenforceability of any provision of this Agreement does not affect the
validity or
9
enforceability of any other provision of this Agreement, which remains in
full force and effect.
13. No Assignment.
Executive may not assign, alienate, anticipate, or otherwise encumber any
rights, duties, or amounts that he might be entitled to receive under this
Agreement.
10
The parties have executed this Agreement effective as of this 29th day of
March 29, 2000.
Pulaski Furniture Corporation
By:
--------------------------------------------
Chairman of Board
-----------------------------------------------
11
