Exhibit 10.7
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 7th day of March, 1997 by and between Great
American Knitting Xxxxx, Inc. (the "Company") and Xxxxx X. Xxxxxxxx (the
"Employee").
In consideration of the mutual covenants contained herein, the parties
hereto agree as follows:
1. EMPLOYMENT. The Company shall employ the Employee upon the terms set
forth herein, and the Employee accepts such employment.
2. DUTIES. Subject to the provisions of Section 8 hereof, the Employee
shall serve as President and chief executive officer of the Company reporting to
the Chairman of the Company (the "Chairman"). The Employee shall perform such
duties and have such responsibilities as determined from time to time by the
Chairman. The Employee shall faithfully and diligently devote his full business
time, attention and skill to the performance of such duties and
responsibilities, and shall use his best efforts to promote the interests of the
Company. The Employee shall not, without the prior written approval of the
Company, engage in any other business activity which would interfere with the
performance of his duties and responsibilities hereunder or which is in
violation of policies established from time to time by the Company. The Company
agrees that the preceding sentence shall not limit the Employee from serving on
industry-related boards (for example, NAHM or AAMA) and the Company further
agrees that, notwithstanding the preceding sentence, Employee may serve as a
member of the board of directors of Ithaca Industries Inc. and of The Xxxx
Company unless such service as a member of these two boards requires a
significantly increased time commitment as compared to the time commitment
required at the time of execution of this Agreement.
3. EMPLOYMENT TERM. The term of employment under this Agreement (the
"Employment Term") shall commence on the date hereof and shall continue until
terminated as provided herein.
4. COMPENSATION. (a) SALARY. In consideration of the performance by the
Employee of the Employee's obligations during the Employment Term, the Company
shall pay the Employee a salary ("Salary") at an annual rate of $400,000,
payable in accordance with the normal payroll practices of the Company then in
effect.
(b) BONUS. The Employee shall be eligible to participate in the
Company's executive management incentive plan; it being understood by the
Employee that no minimum bonus amount is guaranteed.
(c) PAYMENT; TAXES. The Salary and any bonus shall be subject to all
applicable amounts required to be withheld by the Company pursuant to federal,
state or local law. The Employee shall be solely responsible for income and
earnings taxes imposed on the Employee by reason of any cash or non-cash
compensation and benefits provided hereunder.
(d) BENEFIT PLANS. In addition to the payment of Salary and any
bonus which may become payable as described above, the Employee shall be
entitled to participate in any employee benefit plans then in effect, to the
extent the Employee meets the eligibility requirements for any such plan, and to
receive any other fringe benefits that the Company then provides for its
executive employees generally, including medical and dental insurance, life
insurance, and disability insurance, but the Employee shall not be eligible to
participate in any severance or bonus or other long or short-term incentive
compensation plans, except as expressly provided in this Agreement. The
Employee shall be entitled to four weeks paid vacation annually.
(e) EXPENSES. The Company shall, in accordance with the Company's
standard policies then in effect, reimburse the Employee for all reasonable
business expenses incurred by the Employee.
5. TERMINATION. The Employee's employment with the Company shall
terminate upon the occurrence of any of the following events:
(a) The mutual agreement between the Company and the Employee on an
early termination date.
(b) The death of the Employee.
(c) The termination of employment by the Company for Cause.
Termination of employment for "Cause" shall mean termination based on the
Employee's material breach of this Agreement, or conduct by the Employee that is
dishonest, fraudulent or criminal, or gross negligence, willful misconduct or
willful disregard of the directives of the Chairman by the Employee, or regular
unauthorized absence by the Employee, or use of illegal drugs.
(d) The termination of employment by the Company for Disability. For
purposes of this Agreement, "Disability" means a physical or mental impairment
as a result of which the Employee is unable to perform his duties hereunder for
a period of 180 days (whether or not consecutive) out of any 365 consecutive
days.
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(e) The termination of employment by the Company other than for Cause
or Disability.
(f) The termination of employment by the Employee within ninety (90)
days of the occurrence of one of the following events:
(i) subject to the provisions of Section 8 hereof, the Company
materially diminishes the Employee's duties or responsibilities (except during
periods when the Employee is unable to perform all or substantially all of such
duties or responsibilities on account of illness or disability); or
(ii) the Company reduces the Employee's base salary below
$400,000, except as part of an across-the-board salary reduction for all senior
executives, including the Chairman; or
(iii) the Company requires the Employee to relocate from North
Carolina, it being understood, however, that the Employee will be required to
spend a significant amount of time in New York City.
(g) Voluntary resignation by the Employee upon ninety (90) days prior
written notice to the Company.
Upon termination of the Employee's employment with the Company, for whatever
reason, the Employee agrees to cooperate with the Company and to be reasonably
available to the Company with respect to continuing and/or future matters
arising out of the Employee's employment or any other relationship with the
Company, whether such matters are business related, legal or otherwise.
6. TERMINATION PAYMENTS. Upon termination of the Employee's employment
with the Company, for whatever reason, the Company shall pay the Employee any
Salary accrued to the date of termination but not paid to the Employee, in
accordance with the Company's normal payroll practices, plus the Employee shall
receive any accrued benefits through the date of termination. If the Employee's
employment with the Company is terminated pursuant to Section 5(e) or Section
5(f) hereof, the Company shall pay the Employee, as severance pay, an amount
equal to two times the sum of (i) $400,000 plus (ii) the Employee's "average
annual bonus", such amount (less applicable withholdings) to be payable within
thirty (30) days of the date of termination of the Employee's employment. For
purposes of this Section 6, Employee's "average annual bonus" shall be, if the
termination occurs in 1997, equal to his 1996 bonus; and if the termination
occurs in 1998, equal to the average of his 1996 and 1997 bonuses; and if the
termination occurs in 1999 or thereafter, equal to the average of the bonuses
paid for the last two calendar years preceding the
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date of termination; provided, however, that the average annual bonus for
purposes of calculating the severance payment in this Section 6 can not exceed
$200,000. Therefore, the maximum severance payment payable pursuant to this
Section 6 shall be two times the sum of $400,000 plus $200,000 or $1,200,000.
The foregoing payment shall constitute the exclusive payment due the Employee by
reason of the termination of his employment by the Company, including any
payments which may otherwise be payable pursuant to any other separation or
severance policy established or maintained by the Company, but shall have no
effect on any other benefits which may be due the Employee under any plan of the
Company which provides benefits (other than separation or severance pay) after
termination of employment. The foregoing payments shall be conditioned upon the
Employee's execution and delivery to the Company of the Company's standard
general release form.
7. EMPLOYEE COVENANTS. (a) The Employee understands and agrees that in
the Employee's position with the Company, the Employee has been and will be
exposed to and receive information relating to the confidential affairs of the
Company and its affiliates, including but not limited to business and marketing
plans, membership lists, strategies, customer information, other information
concerning the Company's and its affiliates' products, promotions, development,
financing, expansion plans, business policies and practices, and other forms of
information considered by the Company and its affiliates to be confidential and
in the nature of trade secrets. The Employee agrees that during the term of his
employment and thereafter the Employee will keep such information confidential
and will not disclose such information, either directly or indirectly, to
anyone, or use it for his own account, without the prior written consent of the
Company. This confidentiality covenant has no temporal, geographical or
territorial restriction. Upon termination of this Agreement, the Employee will
promptly supply to the Company all property, keys, notes, memoranda, writings,
lists, files, reports, customer lists, correspondence, tapes, disks, cards,
machines, technical data or any other tangible product or document which has
been produced by, received by or otherwise submitted to the Employee during or
prior to the term of his employment.
(b) By and in consideration of the substantial salary and benefits to
be provided by the Company hereunder, and further in consideration of the
Employee's exposure to the proprietary information of the Company, the Employee
agrees that the Employee will not, during the term of his employment with the
Company, directly or indirectly own, manage, operate, join, control, be employed
by, or participate in the ownership, management, operation or control of or be
connected in any manner, including but not limited to holding the position of
shareholder, director, officer, consultant, independent contractor, employee,
partner, or investor, with any Competing Enterprise (as defined below);
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provided, however, that the Employee may invest in securities of any person,
corporation, partnership or other entity (but without otherwise participating in
the business thereof) if (i) such securities are listed on any national
securities exchange or are registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended, and (ii) his investment does not exceed, in
the case of any class of the capital stock of any one issuer, 1% of the issued
and outstanding shares, or in the case of bonds or other securities, 1% of the
aggregate principal amount thereof issued and outstanding. For purposes of this
paragraph (b) the term "Competing Enterprise" shall mean any person,
corporation, partnership or other entity in the hosiery industry. The Employee
and the Company agree that the provisions of the covenant not to compete are
reasonable. Should a court determine, however, that any provision of the
covenant not to compete is unreasonable, either in period of time, geographical
area, or otherwise, the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such court deems
reasonable.
(c) The Employee agrees that he will not (i) while employed with the
Company and for the period of one year following the termination of employment
directly or indirectly solicit for employment, including without limitation
recommending to any subsequent employer the solicitation for employment of, any
employee who is employed by the Company or any affiliates, and (ii) while
employed by the Company or at any time after any termination of employment
publish any statement or make any statement (under circumstances reasonably
likely to become public or that he might reasonably expect to become public)
critical of the Company or any of its affiliates or otherwise maligning the
business or reputation of the Company or any of its affiliates.
(d) The Employee agrees that any breach by him of any of the
covenants and agreements contained in this Section 7 would result in irreparable
injury and damage to the Company for which the Company would have no adequate
remedy at law; the Employee therefore also agrees that in the event of said
breach or any threat of breach, the Company shall be entitled to an immediate
injunction and restraining order to prevent such breach or threatened breach by
the Employee and/or any and all entities acting for or with the Employee,
without having to prove damages, in addition to any other remedies to which the
Company may be entitled at law or in equity. The terms of this paragraph (d)
shall not prevent the Company from pursuing any other available remedies for any
breach or threatened breach hereof, including but not limited to the recovery of
damages from the Employee.
(e) The existence of any claim or cause of action by the Employee
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the
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enforcement by the Company of the covenants and agreements contained in this
Section 7.
8. FUTURE ACQUISITIONS. By this paragraph 8, the parties intend that the
Company shall have the flexibility, should the Company grow through an
acquisition or merger, to restructure the Company and/or to consolidate any one
or more of the operational or administrative functions that currently report to
the Employee (for example, sales, manufacturing, distribution, sourcing,
merchandising, finance, human resources) under a different reporting structure
without the Employee having the right to terminate his employment pursuant to
Section 5(f)(i) hereof. Therefore, if the Company grows through the acquisition
of one or more other hosiery companies or the merger with another company, the
Board of Directors of the Company shall have the right to change the Employee's
title and to modify the Employee's duties and responsibilities (for example,
from President and chief executive officer of the Company to President and chief
executive officer of the Company's GAKM Division) as part of a restructuring or
consolidation as long as the Board believes such restructuring or consolidation
will enhance the value of the Company and (i) the Employee continues to report
directly to the Chairman only, (ii) the Employee is elected to (and thereafter
maintained in) the position of Vice Chairman of the Company, (iii) the Employee
is elected (and thereafter maintained) as a member of the Board of Directors of
the Company, and (iv) the Employee's new duties and responsibilities are
consistent with those given to an executive who has a significant management
position. A modification of the duties or responsibilities of the Employee in
accordance with the preceding sentence shall not be considered a material
diminution of the Employee's duties or responsibilities and the Employee shall
not have the right in such event to terminate his employment pursuant to section
5(f)(i) hereof.
9. INDEMNITY. The Company agrees to indemnify the Employee against
expenses (including attorneys' fees), judgments and amounts paid in settlement
actually and reasonably incurred by the Employee in connection with the action
pending in the United States District Court for the Southern District of New
York captioned XXXXX XXXXXXXX XXXXXXXX X. XXXXXXXXX INDUSTRIES U.S.A., INC.,
BIDERMANN INDUSTRIES CORORATION, GREAT AMERICAN KNITTING XXXXX, XXXXXX XXX
XXXXXXX, AND XXXXX X. XXXXXXXX, 95 Civ. 1791 (RPP).
10. NOTICES. Every notice relating to this Agreement shall be in writing
and shall be deemed given upon receipt if sent by personal delivery, recognized
overnight courier or by certified mail, postage prepaid, return receipt
requested, sent to the following addresses (or to such other address as either
party may designate in writing to the other party):
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If to the Company, at:
Great American Knitting Xxxxx, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxx X. Xxxxxx, Chairman
If to the Employee, at:
Xxxxx X. Xxxxxxxx
000 Xxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxx Xxxxxxxx 00000
11. BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, executors,
personal representatives, estates, successors (including, without limitation, by
way of merger) and assigns. Notwithstanding the provisions of the immediately
preceding sentence, the Employee may not assign all or any portion of this
Agreement without the prior written consent of the Company.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
of the parties hereto with respect to the employment of the Employee and
supersedes all prior agreements, written or oral, between them as to such
subject matter. This Agreement may not be amended, nor may any provision hereof
be modified or waived, except by an instrument in writing duly signed by the
party against whom such amendment, modification, or waiver is sought to be
enforced. The Employment Agreement between the Company and the Employee dated
August 5, 1991, as amended, is terminated and of no further force and effect.
13. SEVERABILITY. If any provision of this Agreement, or any application
thereof to any circumstances, is invalid, in whole or in part, such provision or
application shall to that extent be severable and shall not affect other
provisions or applications of this Agreement.
14. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision or of a breach of any other provision of
this Agreement.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without reference to
the principles of conflict of laws.
16. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively
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by arbitration in New York City, New York in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. In any arbitration, the
winning party shall be entitled to recover its costs, including reasonable
attorneys' fees, from the losing party. The determination of such award of
costs shall be made by the arbitrator.
17. BANKRUPTCY COURT APPROVAL. On July 17, 1995, the Company filed a
voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code in
the United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court"). The parties agree and acknowledge that this Agreement is
expressly subject to approval by order of the Bankruptcy Court, without which
this Agreement is null and void and without force or effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
GREAT AMERICAN KNITTING XXXXX, INC. EMPLOYEE
By: /s/ Xxxxx X. Xxxxxx /s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxx, Chairman Xxxxx X. Xxxxxxxx
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