EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of March 16, 1999, is made between
SIGNAL APPAREL COMPANY, INC., an Indiana corporation with its principal offices
at 000-X Xxxxxxxxxxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 (the "Company"), and
Xxxxxxx Xxxxxx, residing at 0 Xxxx Xxxxx, Xxxxxxxx, Xxx Xxxxxx 00000 (the
"Executive").
RECITALS:
WHEREAS, on the date hereof the Company has acquired (the "Acquisition")
substantially all of the assets of Tahiti Apparel, Inc. ("Tahiti") pursuant to
an Asset Purchase Agreement, dated December 18, 1998 (the "Asset Purchase
Agreement");
WHEREAS, the Executive was the Vice President of Tahiti prior to the
Acquisition and the Company desires to employ the Executive in an executive
capacity;
WHEREAS, the Company intends to operate the business of Tahiti as part of
the Signal Branded Division of the Company or through a wholly owned subsidiary
of the Company (such division or subsidiary is hereafter referred to as the
"Signal Branded Division"); and
WHEREAS, the Company and the Executive have reached an understanding with
respect to the employment of the Executive by the Company and desire to set
forth their understanding with respect to such employment fully and completely
in writing.
NOW, THEREFORE, the parties agree as follows:
1. Employment. The Company shall employ the Executive as its Executive Vice
President of the Signal Branded Division, which shall include overseeing and
managing the activities of the Tahiti, Umbro, Big Ball and Signal Sports
divisions, and the Executive shall work for the Company in such capacity upon
the terms and conditions set forth herein and shall perform such duties, and
have such powers, authority, functions, duties and responsibilities for the
Company as are commensurate and consistent with such position and as may be
assigned to the Executive by the Company's Chief Executive Officer (the "CEO")
or Chairman (the "Chairman of the Board") of the Company's board of directors
(the "Board") from time to time. Notwithstanding the foregoing, the Employee,
together with Xxx Xxx-Xxxx, if Xxx Xxx-Xxxx is employed by the Company, shall
have the authority to manage and operate the day to day activities of the Signal
Branded Division subject to being in compliance with the annual budget of the
Signal Branded Division adopted by the Board. Without limiting the generality of
the foregoing, the Employee and Xxx Xxx-Xxxx do not require the approval or
consent of the Board for any day to day activities of the Signal Branded
Division, including purchases of raw materials, manufacturing of goods,
merchandising, sales, and hiring and firing of employees of the Signal Branded
Division. A new division or business (a "New Division") may only be added to the
Signal Branded Division with the prior written consent of the Executive. The
Company may not reassign the Tahiti division, New Division or Big Ball division
from the Signal Branded Division to another division, subsidiary or affiliate of
the Company without the prior written
consent of the Executive. The Company may reassign the Signal Sports division
from the Signal Branded Division to another division, subsidiary or affiliate of
the Company without the prior written consent of the Executive. The Company may
only reassign the Umbro division from the Signal Branded Division to another
division, subsidiary or affiliate prior to January 1, 2001 with the prior
written consent of the Executive. The Company may reassign, upon prior written
notice to the Executive, the Umbro division from the Signal Branded Division to
another division, subsidiary or affiliate after December 31, 2000 without the
prior written consent of the Executive. If the reassignment of the Umbro
division occurs within sixty (60) days of the end of the prior calendar year and
in the prior calendar year the Umbro division did not operate substantially
within the annual calendar year budget for the Umbro division reasonably adopted
by the Board for the prior calendar year (the "Budget"), then, the positive NOI
of the Umbro division shall be included in the NOI for the Signal Branded
Division for purposes of calculating the Bonus under Section 5(b) hereof during
the calendar year in which the reassignment occurs. In the event that the
Company reassigns the Umbro division at any time after December 31, 2000 either
(x) more than sixty (60) days after the end of a calendar year or (y) within
sixty (60) days after the end of a calendar year, notwithstanding that the Umbro
division operated substantially within Budget during the prior calendar year,
then the positive NOI of the Umbro division during the calendar year in which
the reassignment takes place and for an additional eighteen months shall be
included in the NOI of the Signal Branded Division for purposes of calculating
the Bonus under Section 5(b), not to exceed the later of the fiscal year ending
March 31, 2004 and the date that the term of this agreement is extended, if any.
Any notice of reassignment on the basis that the Umbro division did not operate
within the Budget shall be accompanied by a reasonably detailed statement (the
"Budget Statement") stating the basis for the conclusion that the Umbro division
did not operate within the Budget. Within thirty (30) days after the delivery of
the Budget Statement, the Executive may notify the Company of any objections
thereto, specifying in reasonable detail any such objections. If the Executive
does not notify the Company of any objections thereto or if within twenty (20)
days of the delivery of an objection notice the Executive and the Company agree
on the resolution of all objections, then such statements delivered by the
Company, with such changes as are agreed upon, shall be final and binding. If
the parties shall fail to reach an agreement with respect to all objections
within such twenty (20) day period, then all disputed objections shall, not
later than ten (10) days after the expiration of such twenty (20) day period, be
submitted for resolution to an impartial certified public accounting firm of
national standing which is reasonably acceptable to the parties (the
"Independent Auditor"). All of the parties shall use reasonable efforts to cause
such Independent Auditor, within sixty (60) days of its appointment, to use its
best judgment in resolving the disputes submitted to it. The statements
delivered by the Company, as adjusted by the parties or the Independent Auditor,
shall be final and binding. The fees and costs of such Independent Auditor shall
be paid by the Company if the Independent Auditor concludes that the Umbro
division did operate substantially within the Budget and by the Executive if the
Independent Auditor concludes that the Umbro division did not operate
substantially within the Budget. The Company agrees to permit the Executive and
his legal counsel and accounting firm and the Independent Auditor, if any, to
have reasonable access upon prior notice during normal business hours to its
books and records (including, without limitation, the work papers of its
accountants) and its representatives and accountants, in each case in connection
with the Executive's review of the Budget Statement. If the Independent Auditor
concludes that the Umbro division did operate within the Budget, the
reassignment shall be deemed to be under Except for Xxx Xxx-Xxxx, the
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Executive shall be the senior executive officer of the Signal Branded Division
and shall only report directly to the Board, and the CEO.
The principal location of the Executive's employment shall be within a 50
mile radius of New York County in the State of New York or New Jersey, although
the Executive understands and agrees that he shall be required to travel from
time to time for business reasons.
2. Exclusive Agreement.
(A) During the term of this Agreement, the Executive shall (i) devote all
of his working time, attention and energies to the affairs of the Company and
its subsidiaries, affiliates and divisions, (ii) use his best efforts to promote
its and their best interests, (iii) diligently perform his duties and
responsibilities hereunder and (iv) comply with, and be bound by the operational
policies, procedures and practices of the Company from time to time in effect
during the term, provided such procedures are not hereinafter enacted so as to
discriminate against the Executive's religious observance and, further provided,
such procedures are applied to all senior executive officers.
(B) Section 2(A) shall not be construed to prevent the Executive from
having other investments and personal ventures and being a member of the board
of directors of other entities and industry groups and doing charity work,
which, from time to time, may require minimal portions of his time, but which
ventures, investments, directorships, charity work, and/or the time associated
therewith shall not (i) interfere or be in conflict with his duties hereunder,
(ii) be in competition in any way with the business of the Company, (iii)
involve the Executive's active participation in such business investments or
ventures for more than minimal portions of his time or (iv) be in violation of,
or in conflict with, any of the restrictions set forth in Section 11 hereof.
3. Employment Term. Unless earlier terminated in accordance with the terms
of this Agreement, the Executive's term of employment by the Company (the
"Employment Term") shall be for the five (5) year period commencing on the date
hereof and ending on the earlier of March 31, 2004 (the "End Date") or the
effective closing date of the exercise by the Employee or Tahiti of their
repurchase option under Section 13.16 of the Asset Purchase Agreement (the
"Repurchase Date").
4. Confidential Information. The Executive acknowledges that any use of the
Confidential Information (as defined below) by the Executive, other than for the
sole benefit of the Company or its subsidiaries, affiliates and divisions, would
be wrongful and cause irreparable harm to the Company. Accordingly, the
Executive shall not, at any time during or within one (1) year subsequent to the
termination of his employment by the Company for any reason, without the express
written consent of the Company publish, disclose or divulge to any person, firm
or company, or use, directly or indirectly, for his own benefit or for the
benefit of any person, firm or company, for use other than for the Company or
its subsidiaries, affiliates and divisions, any of the Company's trade secrets
or Confidential Information.
For purposes of this Section 4, "Confidential Information" includes, but is
not limited to, all data, reports, interpretations, forecasts, records,
statements (written and oral) and
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documents of any kind relating to the Company's costs and financial information,
manufacturing methods or processes, market studies, products, existing and
potential customers, pricing methods and strategies, new product plans and
sources of supply acquired by the Executive during the Executive's employment by
the Company. In addition, all other information disclosed to the Executive or
which the Executive shall obtain during such employment with the Company which
the Executive has a reasonable basis to believe to be confidential, or which the
Executive has a reasonable basis to believe the Company treats as confidential,
shall be presumed to be Confidential Information.
The Executive's obligation under this Section 4 shall not apply to any
information which (i) is generally available to and known by the public other
than as a result of disclosure by the Executive in violation of this Agreement,
(ii) was or becomes available to the Executive on a non-confidential basis from
a third party not under an obligation of confidence in respect thereof or (iii)
the Executive is required to disclose as a matter of law or court order;
provided that the Executive give the Company prior notice of such disclosure so
that the Company may attempt to obtain a protective court order to prevent the
disclosure thereof.
5. Salary and Expenses.
(A) Base Salary. The Company shall pay the Executive an annual base salary
of Five Hundred Thousand ($500,000) Dollars in accordance with the normal
payroll practices of the Company, but no less frequently then bi-weekly.
(B) Bonus. The Executive shall be paid an annual bonus (the "Bonus") equal
to the product of the percentage set forth below multiplied by the "NOI" for the
Signal Branded Division for each fiscal year during the Employment Term
commencing with the fiscal year ending March 31, 2000. The term "NOI" means
earnings before interest expense on long term debt and income taxes increased or
decreased by any reasonable intercompany allocations of general and
administrative expenses. Notwithstanding the foregoing, for the purposes of
determining NOI for the year ending March 31, 1999, no net losses attributable
to either of the Umbro, Signal Sport or Big Ball divisions of the Signal Branded
Division shall be used to determine the NOI for such year.
Fiscal Years Commencing April 1, 1999 and Ending March 31, 2000
NOI Percentage
--- ----------
$0 - 4,500,000 0
$4,500,001 - $6,000,000 2.5% of amount in excess of $4,500,00
$6,000,001 - $8,000,000 2.5% of $6,000,000 plus
5% of amount in excess of $$6,000,000
$8,000,001 - $10,000,000 5% of $8,000,000 plus 7.5% of amount in
excess of $8,000,000
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over $10,000,000 7.5% of all NOI
Fiscal Years Ending March 31, 2000, 2002, 2003 and 2004
NOI Percentage
--- ----------
$0 - 5,000,000 0
$5,000,001 - $6,000,000 2.5% of amount in excess of $5,000,00
$6,000,001 - $8,000,000 2.5% of $6,000,000 plus
5% of amount in excess of $$6,000,000
$8,000,001 - $10,000,000 5% of $8,000,000 plus 7.5% of amount in
excess of $8,000,000
over $10,000,000 7.5% of all NOI
NOI shall be calculated in accordance with generally accepted accounting
principles as all such amounts are set forth in the internal unaudited financial
statements of the Company. The Bonus shall be paid within ten days of the
completion of the Company's quarterly periodic report on Form 10-Q, but in no
event later than May 30, of the year succeeding the calendar year for which the
Bonus is earned (the "Payment Date"). Together with the payment of the Bonus, or
if no Bonus is due, on the Payment Date, the Company shall deliver to the
Executive a detailed statement calculating NOI for the prior fiscal year and the
calculation of the Bonus, if any. Within thirty (30) days after the delivery of
the statement of NOI and Bonus calculation, the Executive may notify the Company
of any objections or changes thereto, specifying in reasonable detail any such
objections or changes. If the Executive does not notify the Company of any
objections or changes thereto or if within twenty (20) days of the delivery of
an objection notice the Executive and the Company agree on the resolution of all
objections or changes, then such statements delivered by the Company, with such
changes as are agreed upon, shall be final and binding. If the parties shall
fail to reach an agreement with respect to all objections or changes within such
twenty (20) day period, then all disputed objections or changes shall, not later
than ten (10) days after the expiration of such twenty (20) day period, be
submitted for resolution to an impartial certified public accounting firm of
national standing which is reasonably acceptable to the parties (the
"Independent Auditor"). All of the parties shall use reasonable efforts to cause
such Independent Auditor, within twenty (20) days of its appointment, to use its
best judgment in resolving the disputes submitted to it. The statements
delivered by the Company, as adjusted by the parties or the Independent Auditor,
shall be final and binding. The fees and costs of such Independent Auditor shall
be paid by the Executive if the adjustment to the amount of the Bonus by the
Independent Auditor is less than two (2%) percent and by the Company if the
adjustment to the amount of the Bonus by the Independent Auditor is greater than
two (2%) percent. The Company agrees to permit the Executive and his legal
counsel and accounting firm and the Independent Auditor, if any, to have
reasonable access upon prior notice during normal business hours to its books
and records (including, without limitation, the work papers of its accountants)
and its representatives and accountants, in each case in connection with the
Executive's review of the statement calculating the Bonus and NOI.
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The Bonus shall be deemed earned in full on March 31 of each year and shall be
paid notwithstanding a subsequent termination for any reason and, except as is
set forth in Sections 8(C)(ii) and 8(D)(g) shall not be paid in respect of any
fiscal year in which the Executive is terminated prior to March 31.
(C) The Company shall reimburse the Executive for all reasonable,
legitimate and documented business expenses incurred by him, on behalf of the
Company, upon submission of accounts in satisfactory form, subject to such
reasonable limitations as the Company may impose in its discretion on senior
executive officers from time to time as set forth in the Company's standard
practices and procedures. The Executive shall be provided with a Company credit
card to be used solely for business expenses if other senior executive officers
are provided with such a card. The Executive shall provide the Company with
detailed evidence reasonably satisfactory to the Company of all expenses charged
to the Company credit card.
(D) Signing Bonus. Upon the execution hereof, and in consideration for
entering into the Employment Agreement the Company shall pay to Executive the
sum of Two Hundred and Fifty Thousand ($250,000.00) Dollars and issue to the
Executive _____ shares of the Company's common stock, $.___ par value per share
(the "Bonus Shares"). The Bonus Shares shall be subject to the terms and
conditions of a Registration Rights Agreement and Stock Resale Agreement, both
of even date herewith.
6. Additional Benefits. In addition to the compensation described in
Section 5, the Executive shall be entitled during the Employment Term to receive
the following additional benefits:
(A) Health Insurance. The Executive shall participate during the Employment
Term in such life insurance, health, disability, dental and major medical
insurance plans, and in such other employee benefit plans and programs, for the
benefit of the senior executive officers of the Company, as may be maintained
from time during the Employment Term in each case to the extent and in the
manner available to other senior executive officers of the Company and subject
to the terms and provisions of such plans or programs.
(B) Retirement Plans. The Executive shall be eligible to participate in the
Company's 401(k) retirement plan and such other retirement plans as may be
established by the Company from time to time in accordance with the provisions
of the applicable plan and to the extent permitted under applicable law.
(C) Holidays and Vacations. The Executive shall be entitled to such paid
holidays as may be designated by the Company. In addition to holidays during
which the Company's offices are closed, the Executive shall be entitled to the
following paid holidays and to observe the Jewish Sabbath: Yom Kippur, Rosh
Hashanah (2 days), Succoth (first 2 days), Shemini Atzeret, Simchat Torah,
Passover (4 days), and Shavuoth (2 days). In addition, the Executive shall be
entitled to four (4) weeks of paid vacation for each calendar year during the
Employment Term; such vacation to be taken at such time or times as are
consistent with the business needs of the Company and the performance of the
Executive's duties and
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responsibilities hereunder. The Executive shall be entitled to accumulate, carry
forward and use for a period of six (6) months any vacation not used during a
calendar year.
(D) Sick leave. The Executive shall be entitled to sick leave in accordance
with Company practices related to senior executive officers as they may exist
from time to time.
(E) Automobile Allowance. The Company will reimburse the Executive, an
amount up to One Thousand Six Hundred Ninety Nine Dollars and Fifty Cents
($1,699.50) per month during the Employment Term for automobile expenses (car,
maintenance, gas, insurance) incurred by him in connection with the performance
of his duties hereunder during the Employment Term.
(F) Travel. The Executive shall travel on a first class basis during all
business trips required for Company business. All airline miles earned on such
trips shall be for the account of the Company. The Executive shall exercise
reasonable efforts to use such miles to obtain upgrades to first class.
7. Designees on the Board and Executive Committee. From and after the date
hereof and so long as the Executive is employed by the Company pursuant to the
terms of this Agreement the Company shall use its reasonable best efforts
(subject to the Board's fiduciary responsibilities) to cause the Executive and
Xxx Xxx-Xxxx to be appointed to the Executive Committee of the Board.
8. Termination Of Employment.
(A) The Executive's employment pursuant to this Agreement (i) shall
terminate upon the death of the Executive, (ii) may be terminated upon his
inability, by reason of a mental or physical illness, to perform his duties
hereunder for a period of one hundred twenty (120) consecutive days
("Disability") upon written notice of termination given by the Company to the
Executive, (iii) may be terminated for "Cause" (as defined below) by the Company
at any time prior to the End Date immediately upon written notice of termination
(except as provided otherwise below) given by the Company to the Executive
describing such Cause and (iv) may be terminated for a "Change in Control" (as
defined below) by the Executive immediately upon written notice of termination
(except as otherwise provided below) given by the Executive to the Company.
For purposes of this Agreement, "Cause" for termination shall be deemed to
exist if: (i) the Executive is convicted of, or enters a plea of guilty or nolo
contendre to a criminal felony; (ii) the Executive is convicted of, or enters a
plea of guilty or nolo contende to a serious criminal misdemeanor involving
theft, dishonesty or moral turpitude; (iii) the Executive engages in material
dishonesty or fraud involving the Company or any of its subsidiaries, affiliates
or divisions; (iv) the Executive breaches any of his material obligations as an
employee (or as an officer or director, as applicable) of the Company, or any
material obligations assigned to the Executive by the CEO or the Chairman of the
Board in accordance with the terms of this Agreement, or any fiduciary duties or
responsibilities to the Company or its stockholders; or (v) the Executive
breaches any material provisions of this Agreement, including, without
limitation, the provisions set forth in Section 4, 10 or 11.
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Any written notice of termination for Cause pursuant to this Section 8
shall be a written notice which (a) indicates the specific termination provision
relied upon, (b) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment, and
(c) if the date of termination is other than the date of receipt of such notice,
specifies the termination date. In the event that the Executive's employment is
terminated for Cause pursuant to subsection (iv) or (v) of the definition of
Cause above, the Executive shall have a period of thirty (30) days to cure the
breach of the Executive's obligations under this Agreement as described in the
notice of termination. In the event that the Executive cures such breach within
said thirty (30) day period, the notice of termination shall be considered
rescinded. In the event that the Executive fails to cure such breach, then this
Agreement shall terminate without further notice to the Executive as set forth
in the notice of termination, and the provisions of Section 8(B) shall be
applicable. The Executive shall not have the opportunity to cure any termination
for Cause pursuant to subsection (i), (ii) or (iii) of the definition of Cause
above. In the event that the Company terminates the Executive under subsection
(ii), the Executive may within fifteen (15) days of the effective date of the
notice of termination dispute in writing that the misdemeanor was "serious". In
the event such a timely dispute notice is given, the Executive shall be deemed
to be suspended with full pay and benefits and the issue of whether or not the
misdemeanor is serious shall be submitted to arbitration as provided in Section
16 hereof. In the event that the arbitrator determines that the misdemeanor was
"serious" the termination shall be effective as of the date of the confirmation
of the arbitrator's ruling by a court of competent jurisdiction. In the event
that the arbitrator determines that the misdemeanor is not "serious" the notice
of termination shall be deemed withdrawn and suspension vacated as of the date
of the confirmation of the arbitrator's ruling by a court of competent
jurisdiction and, the Executive's employment shall be reinstated hereunder as
the Executive Vice President of the Signal Branded Division as of such date. Any
termination for Cause or Disability must be approved by the affirmative vote of
a majority of the Board after giving the Executive notice of the meeting and an
opportunity, together with counsel, to be heard on such issue.
(B) In the event (i) the Executive's employment under this Agreement is
terminated for Cause as provided above, or (ii) the Executive voluntarily
terminates his employment with the Company other than as described in or
pursuant to Section 8(D), in each case prior to the End Date, the Company shall
promptly pay to the Executive (or to his beneficiaries or legal representatives)
the amount of any unpaid compensation in respect of the period prior to such
termination pursuant to Sections 5(A) and (B) plus the amount of any
reimbursable expenses. No other payments shall be due the Executive (or his
beneficiaries or legal representatives).
(C) In the event the Executive's employment under this Agreement is
terminated as a result of his death or his Disability pursuant to Section 8(A),
prior to the End Date, the Company shall promptly pay to the Executive (or to
his beneficiaries or legal representatives) (i) the amount of any unpaid
compensation attributable to periods prior to such termination pursuant to
Sections 5 (A) and (B) plus six (6) months base salary; and (ii) a pro rata
amount of the Bonus under Section 5(B) for the year in which the termination
occurs calculated as follows: an amount equal to the Bonus that would have been
paid had the Executive been employed on March 31 of the year in which he was
terminated multiplied by a fraction, the
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numerator of which is the number of days during the year prior to termination
and the denominator of which is 365, and (iii) the amount of any reimbursable
expenses. No other payments shall be due the Executive (or his beneficiaries or
legal representatives).
(D) In the event, prior to the End Date, (i) the Executive's employment is
terminated without Cause (it being understood that a purported termination for
Cause which is disputed and finally determined not to have been proper shall be
a termination by the Company without Cause) by the Company, or (ii) the
Executive loses his employment for any other reason other than pursuant to
Section 8(A) or by reason of his voluntary termination of employment, including,
but not limited to, the bankruptcy, closure, reorganization, buyout, merger or
consolidation of the Company, or (iii) the Executive's employment is terminated
by the Executive, by written notice to the Company, on the following grounds:
(A) the Executive, without the Executive's approval, receives a material
diminution in responsibilities, title, reporting requirements, authority, or
position from the level of the Executive's responsibilities, title, position,
authority or reporting requirements as of the commencement of the Employment
Term or as amended with the Executive's written consent, and the Executive
elects to terminate his employment in writing as a result of and within thirty
(30) days of written notice of such diminution, or (B) any breach by the Company
of the material provisions of this Agreement which breach shall continue
unremedied for ten (10) days after written notice thereof by the Executive to
the Company or (C) a relocation of the Executive's principal base of operation
to any location other than the locations described in Section 1 and the
Executive elects to terminate his employment in writing as a result of and
within ninety (90) days of such relocation or (D) a Financing Default by the
Company, as that term is defined in Section 13.16 of the Asset Purchase
Agreement; then the Executive shall be entitled to the following: (a) the amount
of any unpaid compensation attributable to periods prior to such termination
pursuant to Sections 5(A) and (B); (b) the amount of any reimbursable expenses;
(c) the Company shall pay to the Executive in cash, a lump sum payment amount
equal to his base salary for the period commencing on the date of termination
through the earlier of the two (2) year anniversary of the effective date of the
termination and the End Date (the "Post Termination Period"); (d) the Executive
shall continue to be entitled to and shall receive his benefits under Sections
6(A) and (E) hereof during the Post Termination Period; (e) the Company shall
also pay all amounts the Executive would have received under the Company's
pension plan, if any, if the Company had not terminated this Agreement without
Cause or the Executive's employment had not terminated this Agreement under this
Section 8(D), and had the Executive's employment continued through the End Date
at the rate of compensation specified herein; (f) the entire Bonus payable under
Section 5(b) as if the Executive was employed on March 31 of the year in which
the termination occurs; and (g) any incentive compensation and options granted
to Executive that have not vested as of the date of termination shall
immediately vest upon the date of termination. Neither the occurrence of a
termination, nor the vesting in any options as a result thereof shall require
Executive to exercise any options. In the event of a conflict between any
incentive compensation grant agreement or program or any option grant agreement
or plan and this Agreement, the terms of this Agreement shall control. No other
payments shall be due the Executive.
(E) Change in Control. The Executive shall have the right to terminate his
employment hereunder on or within three (3) months following a Change in
Control. For purposes of this Agreement "Change in Control" shall mean that any
of the following events has
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occurred: (A) any "person" or "group" of persons, as such terms are used in
Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than any employee benefit plan sponsored by the Company,
becomes the "beneficial owner", as such term is used in Section 13 of the
Exchange Act (irrespective of any vesting or waiting periods) of (i) common
stock of the Company (the "Common Stock") or any class of stock convertible into
Common Stock in an amount equal to thirty five (35%) percent or more of the
Common Stock (treating all classes of outstanding Common Stock or other
securities convertible into Common Stock as if they were converted into Common
Stock) issued and outstanding immediately prior to such acquisition as if they
were a single class and disregarding any equity raise in connection with the
financing of such transaction; or (B) the dissolution or liquidation of the
Company or the consummation of any merger or consolidation of the Company or any
sale or other disposition of all or substantially all of its assets, if the
shareholders of the Company taken as a whole and considered as one class
immediately before such transaction own, immediately after consummation of such
transaction, equity securities possessing less than fifty (50%) percent of the
surviving or acquiring entity taken as a whole. In the event that the Executive
terminates his employment because of a Change in Control, the Executive shall be
entitled to a lump sum payment equal to the Executive annual base salary.
Additionally, any incentive compensation and options granted to Executive that
have not vested as of the date of a Change in Control shall immediately vest
upon the date of the Change in Control. Neither the occurrence of a Change in
Control, nor the vesting in any options as a result thereof shall require
Executive to exercise any options. In the event of a conflict between any
incentive compensation grant agreement or program or any option grant agreement
or plan and this Agreement, the terms of this Agreement shall control.
(F) Excise Tax Gross Up. In addition, if it is determined by an independent
accountant mutually acceptable to the Company and Executive that as a result of
any payment in the nature of compensation made by the Company to (or for the
benefit of) Executive pursuant to this Agreement or otherwise, an excise tax may
be imposed on Executive pursuant to Section 4999 of the Code (or any successor
provisions) , the Company shall pay Executive in cash an amount equal to X
determined under the following formula: (the "Excise Tax Gross Up")
X = E x P
---------------------------
1 - [(FI x (1-SLI) + E+M]
where
E = the rate at which the excise tax is assessed under Section 4999
of the Code (or any successor (provisions)
P = the amount with respect to which such excise tax is assessed,
determined without regard to the Excise Tax Gross Up;
FI = the highest effective marginal rate of income tax applicable to
Executive under the Code for the taxable year in question
(taking into account any
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phase-out or loss of deductions, personal exemptions or other
similar adjustments);
SLI = the sum of the highest effective marginal rates of income tax
applicable to Executive under all applicable state and local
laws for the taxable year in question (taking into account any
phase-out or loss of deductions, personal exemptions and other
similar adjustments); and
M = the highest marginal rate of Medicare tax applicable to
Executive under the Code for the taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) Executive under the terms of this Agreement or otherwise and
on which an excise tax under Section 4999 of the Code (or any successor
provisions) may be assessed, the payment determined under this sub-paragraph
9(d) shall be paid to Executive at the time of the Change in Control but prior
to the consummation of the transaction with any successor. It is the intention
of the parties that the Company provide Executive with a full tax gross-up under
the provisions of this Section, so that on a net after-tax basis, the result to
Executive shall be the same as if the excise tax under Section 4999 of the Code
(or any successor provisions) had not been imposed. The Excise Tax Gross Up may
be adjusted if alternative minimum tax rules are applicable to Executive.
(G) In the event the Executive shall violate any of the provisions of
Section 4, 9, 10 or 11, all compensation and/or benefit continuations which he
is then receiving from the Company shall cease if such violation is not cured
within thirty (30) days of written notice thereof.
(H) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise.
Payments to the Executive provided for in this Agreement shall be made without
set off or reduction for compensation received for subsequent employment.
Payments being made pursuant to this Section 8 shall survive the death of the
Executive.
9. Duty Of The Executive Upon Termination. The Executive shall, upon
termination of this Agreement, return to the Company all of the Company's
records of any type and all literature, supplies, letters, written or printed
forms, and/or memorandum pertaining to the Company's business then in the
Executive's possession.
10. Covenant Not to Solicit. During the Employment Term and the applicable
Restricted Period, the Executive shall not, directly or indirectly, on the
Executive's own behalf or on behalf of any other person, company, partnership or
any other entity, whether as an employee, officer, director, proprietor,
partner, investor, consultant, advisor, agent or in any other capacity, (i)
induce or attempt to induce any customer of the Company to reduce its business
with the Company, (ii) divert from the Company any business or supplier thereto,
(iii) hire any employee of the Company (or any person who was an employee of the
Company at any time during the six (6) months immediately preceding the date of
hire) or (iv) solicit or attempt to solicit any employee of the Company to leave
the employ of the Company, nor shall the Executive affiliate or associate with
any party engaging in the above actions.
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11. Covenant Not To Compete. As a material inducement to the Company to
enter into this Agreement and into that certain Asset Purchase Agreement, dated
as of December 18, 1998 (the "Asset Purchase Agreement"), between the Company,
Tahiti and the stockholders of Tahiti, including the Executive, and in
consideration of the compensation to be paid hereunder and the purchase price
paid under the Asset Purchase Agreement, the Executive agrees, during the
Employment Term and during the applicable Restricted Period, not to compete,
directly or indirectly, in any manner with any business conducted by the
Company. The Executive further agrees, during the Employment Term and during the
applicable Restricted Period, not to enter, directly or indirectly, into the
employ of or render any service to or invest in, any person, corporation,
partnership or any other entity which competes with a any business conducted by
the Company at the time the Employment Term expires or was terminated. The
Executive expressly acknowledges that this covenant does not impose economic
hardship on him. Notwithstanding anything herein to the contrary, this Section
11 shall not prevent the Executive from acquiring securities representing not
more than two percent (2%) of the outstanding voting securities of any
publicly-held corporation.
For purposes hereof the term Restricted Period shall mean the following:
(i) In the event that the Executive's employment is terminated by the
Company without Cause or by the Executive under Section 8(D), the Restricted
Period shall be equal to a period of one (1) year, provided the Company
continues to make those payments required under this Agreement through the Post
Termination Period, and if by reason of the Executive's Disability, there shall
be no Restricted Period.
(ii) In the event that the Executive voluntary terminates his employment or
is terminated by the Company for Cause, the Restricted Period shall be the
lesser of one (1) year and the period ending on the End Date, provided, however,
that if the Restricted Period is less than one (1) year, the Restricted Period
shall continue for a period after the End Date so that the Restricted Period
equals one (1) year if the Price and Liquidity Conditions set forth in (iii)
below are satisfied on the End Date.
(iii) In the event that the Executive's employment terminates on the End
Date, the Restricted Period shall be one (1) year only if the average Closing
Price of the Company's Common Stock for the sixty (60) day period immediately
preceding the End Date is at least $5.00 per share (the "Stock Price") and the
average daily trading volume for the sixty (60) day period immediately preceding
the End Date is 150,000 shares per day (the "Price and Liquidity Conditions").
The Stock Price shall be adjusted for all stock splits, reverse stock splits,
stock dividends, and similar transactions. The term Closing Price shall mean on
any day when used with respect to the Common Stock the reported last sale price
regular way on composite tape, or, if the shares of Common Stock are not quoted
on the composite tape, the reported last sale price on the New York or the
American Stock Exchange or, if the shares of Common Stock are not listed or
admitted to trading on either such Exchange, as reported on The Nasdaq Stock
Market, or if the shares of Common Stock are not quoted on such system, the
average of the closing bid and asked prices as reported by the OTB Bulletin
Board or the National Quotation Bureau, Inc.
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(iv) In the event that (a) the Executive terminates his employment upon a
Change in Control under Section 8(e) or (b) the Executive's employment
terminates on the Repurchase Date, there shall be no Restricted Period.
(v) The provisions of Sections 10 and 11 hereof shall be void and not
effective if the Company breaches Section 8 (D), (E) or (F).
12. Severability. In the event any clause or provision of this Agreement
shall be held to be invalid or unenforceable, the same shall not affect the
validity or enforceability of any other provision herein, and this Agreement
shall remain in full force and effect in all other respects. If a claim of
invalidity or unenforceability of any provision of this Agreement is predicated
upon the length of the term of any covenant or the area covered thereby, such
provision shall not be deemed to be invalid or unenforceable; rather, such
provision shall be deemed to be modified to the maximum area or the maximum
duration as any court of competent jurisdiction shall deem reasonable, valid and
enforceable.
13. Injunctive Relief. It is understood and agreed by the parties hereto
that a breach by the Executive under Section 4, 10 or 11 will cause the Company
substantial and irreparable injury and damage which cannot reasonably or
adequately be compensated in damages in any action at law. In recognition
thereof, the Company and the Executive hereby agree that, notwithstanding the
provisions of Section 16 below, in the event of any such breach or threatened
breach, the Company will be entitled to the remedies of injunction, specific
performance, and other equitable relief to prevent a breach or threatened breach
of this Agreement. The parties further agree that this Section 13 shall not in
any way limit remedies at law or in equity otherwise available to the Company.
14. Entire Agreement. The parties understand and agree that this Employment
Agreement constitutes the entire agreement between the parties regarding the
terms and conditions of the Executive's employment by the Company, and there are
no other agreements. The terms of this Agreement may not be varied, modified,
supplemented or in any other way changed by extraneous verbal or written
representations by the Company or its agents to the Executive, unless by
amendment to this Agreement executed in writing by both parties.
15. Governing Law; Forum. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of New York. Subject to
the provisions of Section 16 below, each of the parties hereto hereby
irrevocably and unconditionally submits to the exclusive jurisdiction of any
court of the City and State of New York or any federal court sitting in the City
and State of New York for purposes of any suit, action or other proceeding
arising out of this Agreement (and agrees not to commence any action, suit or
proceeding relating hereto except in such courts). Each of the parties hereto
agrees that service of any process, summons, notice or document by U.S.
registered mail at its address set forth herein shall be effective service of
process for any action, suit or proceeding brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement, which is brought by or against it, in the courts of the State
of New York or any federal court sitting in the
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City and of State of New York and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
16. Arbitration. Except as expressly provided herein, each party agrees not
to bring suit against the other party in the courts of any jurisdiction in
connection with any dispute which might be the subject of a civil action arising
from the interpretation or application of this Agreement. Each party agrees that
any such dispute shall be finally resolved by submission to compulsory
commercial arbitration to be held in New York, New York according to the
American Arbitration Association rules, by one or several arbitrators appointed.
The parties agree to be bound by the decision of the arbitration and that a
judgment of any court of competent jurisdiction may be rendered upon the award
made pursuant to said submission to arbitration.
17. Survival. Subject to Section 11(v) the covenants of Sections 4, 9, 10,
11, 12, 13, 14, 15 and 16 shall survive any termination or expiration of this
Agreement.
18. Notice. All notices or other communications which may be or are
required to be given, served, or sent pursuant to this Agreement shall be in
writing and shall be mailed by first class, registered or certified mail, return
receipt requested, postage prepaid, or transmitted by facsimile or hand
delivery, addressed as first set forth above, or to such other address as a
party may subsequently specify in writing. All such notices and communications
shall be deemed to have been received on the third business day after the
mailing thereof, on the date that the facsimile is confirmed as having been
received, or on the date of personal delivery, as the case may be.
19. Miscellaneous.
(A) Any reference to the Company in Section 4, 9, 10 or 11 shall also
include the Company's subsidiary and/or affiliated companies and divisions.
(B) This Agreement shall be binding upon and inure to the benefit of the
Company and may not be assigned by the Company except to a successor of the
Company. This Agreement is personal to the Executive and may not be assigned or
otherwise transferred by the Executive. This Agreement shall also inure to the
benefit or, and be enforceable by, the Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
divisees and legatees.
20. Attorney's Fees. In the event of any legal proceeding between the
parties hereto arising out of the subject matter of this Agreement, including
any such proceeding to enforce any right or provision hereunder which proceeding
shall result in the rendering by a court of competent jurisdiction a decision in
favor of a party hereto, the non-prevailing party shall pay to the prevailing
party all reasonable costs and expenses incurred therein by the prevailing
party, including, without limitation, reasonable attorney's fees, which costs,
expenses and attorneys' fees shall be included in and be a part of any award or
judgment rendered in such legal proceeding.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first set forth above.
SIGNAL APPAREL COMPANY, INC.
Dated: March 16, 1999 By: /s/ Xxxxxx X. XxXxxx
----------------------------
Its: CEO
----------------------------
Dated: March 16, 1999
/s/ Xxxxxxx Xxxxxx
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XXXXXXX XXXXXX
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