EX-10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the 19th day of March, 2001, is entered
into by and between Pillowtex Corporation, a Texas corporation (the "Company"),
and Xxxxxxx X. Xxxxxx ("Employee").
WHEREAS, the Company wishes to employ Employee, and Employee wishes to
accept employment with the Company, on the terms and conditions set forth below;
and
WHEREAS, the Company is a debtor in a bankruptcy case under Chapter 11
of the United States Bankruptcy Code, Case Number 00-4211(SLR), pending in the
United States Bankruptcy Court for the District of Delaware (the "Court"); and
WHEREAS, the Company will implement the KERP (as defined below)
pursuant to an Order Authorizing Debtors and Debtors in Possession to Implement
Key Employee Retention Program and Severance Plan issued by the Court on March
6, 2001 (the "Order").
NOW THEREFORE, in consideration of the mutual covenants contained
herein and for good and valuable consideration, including participation in the
KERP, the receipt of which is hereby acknowledged, it is agreed as follows:
ARTICLE 1
DEFINITIONS
The following terms will have the respective meanings set forth below,
unless the context clearly otherwise requires:
1.1 "Affiliate" means, with respect to the Company, any person or
entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Company.
1.2 "Cause" means the occurrence of any of the following: (a)
Employee's engaging in any personal misconduct involving willful dishonesty,
illegality, or moral turpitude that is demonstrably and materially detrimental
or injurious to the business interests, reputation or goodwill of the Company or
its Affiliates; (b) Employee's engaging in any act involving willful dishonesty,
disloyalty, or infidelity against the Company or its Affiliates; and (c)
Employee's willful and continued breach of or failure substantially to perform
under any of the material terms and covenants of this Agreement. For purposes of
this Section 1.2, no act, or failure to act, on Employee's part will be
considered "willful" unless done, or omitted to be done, by Employee in bad
faith and without reasonable belief that Employee's action or omission was in
the best interest of the Company. Prior to asserting any action or failure to
act as Cause for Employee's termination as set forth above, the Company will
provide Employee a written notice referencing this Section 1.2, setting out with
specificity the conduct asserted to constitute Cause and, if the conduct
asserted to constitute Cause is described in clause (c) of the first sentence of
this Section 1.2, providing Employee with a reasonable opportunity of not less
than 15 days to cure or cease and desist such conduct.
1.3 "Change in Control" means the occurrence of any of the following
events:
(a) the Company is merged, consolidated or reorganized into or
with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than a majority of the
combined voting power of the then-outstanding securities entitled to
vote generally in the election of directors ("Voting Stock") of such
corporation or person immediately after such transaction is held in the
aggregate by the holders of Voting Stock of the Company immediately
prior to such transaction;
(b) the Company sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal
person, and as a result of such sale or transfer less than a majority
of the combined voting power of the then-outstanding Voting Stock of
such corporation or person immediately after such sale or transfer is
held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale or transfer;
(c) there is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) other
than an "Excluded Person" as defined below has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of
securities representing 35% or more of the combined voting power of the
then-outstanding Voting Stock of the Company;
(d) during any period of 24 consecutive months, individuals
who at the beginning of any such period constitute the directors of the
Company cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this paragraph (d) each
director who is first elected, or first nominated for election by the
Company's stockholders, by a vote of at least two-thirds of the
directors of the Company (or a committee thereof) then still in office
who were directors of the Company at the beginning of any such period
will be deemed to have been a director of the Company at the beginning
of such period; or
(e) the Company's Chapter 11 case is converted into a case
under Chapter 7 of the Bankruptcy Code.
For purposes of this Section 1.3, the term "Excluded Person" means the
Company; any entity in which the Company directly or indirectly owns 50% or more
of the outstanding Voting Stock (a "Subsidiary"); or any employee benefit plan
sponsored by the Company or any Subsidiary.
Notwithstanding the foregoing provisions of this Section 1.3, (i) a
Change in Control described in Section 1.3(c) will not occur solely by reason of
the confirmation by the Bankruptcy Court of a plan of reorganization with
respect to the Company pursuant to which the Company emerges from bankruptcy;
and (ii) a merger, consolidation or reorganization of the Company effected in
connection with the confirmation of such plan of reorganization will not be a
Change
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in Control described in Section 1.3(a) or Section 1.3(b) if such merger,
consolidation or reorganization does not involve a sale of all or substantially
all of the assets of the Company to an unrelated third party, including, for
example, and not by way of limitation, a reincorporation of the Company in
another jurisdiction.
1.4 "Effective Date" means the date of this Agreement.
1.5 "Good Reason" means the termination of Employee's employment by
Employee after a Change in Control upon the occurrence of any of the following:
(a) the assignment to Employee of any duties inconsistent with
Employee's position, duties and status with the Company as existing
immediately prior to a Change in Control; a substantial alteration in
the nature or status of Employee's position or responsibilities from
those in effect immediately prior to a Change in Control; the failure
to provide Employee with substantially the same perquisites which
Employee had immediately prior to a Change in Control, including but
not limited to an office and appropriate support services; or a change
in Employee's titles or offices as in effect immediately prior to a
Change in Control, or any removal of Employee from or failure to
re-elect Employee to any such positions;
(b) a reduction by the Company in Employee's base salary in
effect immediately prior to a Change in Control;
(c) the requirement by the Company that Employee be based
anywhere other than the metropolitan area in which Employee's office is
located immediately prior to a Change in Control, except for required
travel on Employee's business to an extent substantially consistent
with Employee's business travel obligations immediately prior to a
Change in Control; or
(d) the taking of any action by the Company which would (i)
materially and adversely affect Employee's participation in or
materially reduce Employee's benefits under any employee benefit or
compensation plan in which Employee participates immediately prior to a
Change in Control or (ii) deprive Employee of any material fringe
benefit enjoyed by Employee, or to which Employee is entitled, as
existing immediately prior to a Change in Control.
1.6 "KERP" means the Key Employee Retention Program and Severance Plan,
as approved by the Order, which consists of (i) a retention incentive plan, (ii)
an emergence bonus plan and (iii) a severance plan.
1.7 "Trade Secrets" means proprietary and confidential information of
the Company or any Affiliate consisting of, but not limited to, financial
statements, processes, computer programs, compilations of information, records,
sales procedures, customer requirements, pricing techniques, customer lists,
methods of doing business and other confidential information used in the
operation of their businesses.
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ARTICLE 2
Employment, COMPENSATION AND duties
2.1 Employment. Subject to the terms of this Agreement, the Company
agrees to employ Employee as its Executive Vice President and Chief Financial
Officer. Employee will report to the Chief Executive Officer of the Company or,
in the absence of a Chief Executive Officer of the Company, to the President and
Chief Operating Officer of the Company. Employee's principal place of work will
be at the Company's offices in Kannapolis, North Carolina. Employee and the
Company agree that Employee is an at-will employee, and nothing contained in
this Agreement will prevent Employee from terminating employment with the
Company for any reason or for no reason or will prevent the Company from
terminating Employee's employment with the Company for any reason or for no
reason, subject to satisfaction of any applicable severance pay obligations
under Section 3.1.
2.2 Compensation. Employee's annual base salary will be $350,000,
payable in accordance with the Company's customary payroll practices and subject
to increases in accordance with Company policy. In addition, Employee will be
entitled to a bonus in the amount of $50,000 for his first year of employment,
payable on March 19, 2002, provided Employee continues to be employed by the
Company at that time. In the event Employee's employment by the Company is
terminated before March 19, 2002, under circumstances that would entitle
Employee to a severance benefit under the second sentence of Section 3.1,
Employee will receive a prorated amount of such bonus based on the number of
days Employee was employed by the Company during such year prior to termination
of employment. Such prorated bonus will be paid to Employee no later than five
days after Employee's termination of employment.
2.3 Duties. Employee will perform the customary duties of his position
as Chief Financial Officer plus such other duties as may reasonably be assigned
to him from time to time by the Chief Executive Officer of the Company or, in
the absence of a Chief Executive Officer of the Company, by the President and
Chief Operating Officer of the Company.
ARTICLE 3
BENEFITS
3.1 KERP Benefits. Employee will be eligible to participate in the
KERP, in accordance with its terms (except as otherwise provided in this Section
3.1), with respect to the emergence bonus plan and the severance plan. In
addition, in the event Employee's employment by the Company is involuntarily
terminated for reasons other than death, disability, retirement at or after the
earliest retirement age under any Company-sponsored pension plan in which
Employee participates or Cause, or in the event Employee terminates employment
for Good Reason no later than six months after the occurrence of an event
constituting Good Reason, the Company will pay to Employee in a single lump sum
no later than five days after such termination of employment a severance benefit
in an amount equal to Employee's annual base salary then in effect, reduced by
the amount of any severance benefit payable to Employee under the KERP. If,
however, Employee's employment by the Company is involuntarily terminated for
reasons other than death, disability, retirement at or after the earliest
retirement age under any Company-sponsored pension plan in which Employee
participates or Cause within one year after
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the commencement of employment, as the Company's Chief Executive Officer, of an
individual who is not an officer of the Company on the Effective Date, then,
notwithstanding any provision in the KERP to the contrary, the amount of such
severance benefit will be equal to two times Employee's annual base salary then
in effect, reduced by the amount of any severance benefit payable to Employee
under the KERP. In the event of any inconsistency between the provisions of this
Section 3.1 and the KERP, the provisions of this Section 3.1 will control.
3.2 Other Employee Benefits. Employee and Employee's eligible
dependents, as applicable, will be eligible for participation in and will
receive all benefits to which they are entitled under the terms of the Company's
other employee benefit plans, as in effect from time to time.
3.3 Stock Options. Employee will be eligible to participate in any
stock option plan adopted by the Company and made available generally to its
senior executives.
3.4 Vacation. Employee will be entitled to paid vacation in accordance
with Company policy in effect from time to time, or if greater, three weeks'
vacation.
3.5 Relocation Expenses. The Company will reimburse Employee for up to
six months' reasonable temporary living expenses in the Kannapolis, North
Carolina, area prior to his permanent relocation to that area. In addition, the
Company will reimburse Employee for reasonable relocation expenses, including
any real estate commissions and fees associated with the sale of Employee's
Jamestown, North Carolina, residence and the purchase of a new residence in the
Kannapolis, North Carolina, area (including closing costs, loan origination fees
and other fees associated with such purchase). The Company will also pay
Employee a one-time allowance of up to $5,000 to cover incidental relocation
expenses not otherwise subject to reimbursement.
3.6 Club Membership. The Company will reimburse Employee for the
initiation fee of one country club membership within 50 miles of his home or
Company office, as mutually agreed, in an amount not to exceed $25,000, and for
club dues and other charges incidental to membership. All country club expenses
incurred by Employee that are related to Company business will be reimbursed in
accordance with the Company's customary expense reimbursement policy.
3.7 Automobile Allowance. The Company will provide Employee with an
automobile allowance of $1,000.00 per month. The Company will also reimburse
Employee for mileage in accordance with Company policy.
3.8 Certain Tax Payments. The Company will make tax gross-up payments
to Employee in an amount that will be sufficient to cover the federal and state
income taxes incurred by Employee as a result of the payments made under Section
3.5, Section 3.6 and Section 3.7 (including federal and state income taxes
incurred as a result of such gross-up payments).
3.9 Physical Examination. The Company will reimburse Employee for the
cost of one examination by the physician of his choice completed no more than 60
days prior to the Effective Date.
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3.10 Legal Fees. The Company will reimburse Employee for all legal fees
and expenses he incurs in seeking to enforce or in defending his rights under
this Agreement, including, but not limited to, fees and expenses identified in
Section 5.3, without regard to whether Employee prevails in whole or in part,
provided that Employee has not acted in bad faith or with no colorable claim of
success. The Company will also reimburse Employee for legal fees and expenses
incurred in the negotiation of this Agreement, in an amount not exceeding
$6,000.
ARTICLE 4
CERTAIN OBLIGATIONS OF EMPLOYEE
4.1 Trade Secrets. During the term of Employee's employment, the
Company will provide Employee access to, and Employee will have access to and
become familiar with, various Trade Secrets. Employee acknowledges and agrees
that the Trade Secrets (a) are secret and not known in the Company's industry;
(b) are entrusted to Employee after being informed of their confidential and
secret status by the Company or its Affiliates and because of the fiduciary
position occupied by Employee with the Company; (c) have been developed by the
Company and its Affiliates for and on behalf of the Company and its Affiliates
through substantial expenditures of time, effort and money and are used in their
businesses; (d) give the Company and its Affiliates an advantage over
competitors who do not know or use the Trade Secrets; (e) are of such value and
nature as to make it reasonable and necessary to protect and preserve the
confidentiality and secrecy of the Trade Secrets; and (f) are valuable, special
and unique assets of the Company and its Affiliates, the disclosure of which
could cause substantial injury and loss of profits and goodwill to the Company
and its Affiliates. Employee will not use in any way or disclose any of the
Trade Secrets, directly or indirectly, either during the term of Employee's
employment or at any time thereafter, except as required in the course of
Employee's employment. All files, records, documents, information, data and
similar items relating to the business of the Company and its Affiliates,
whether prepared by Employee or otherwise coming into Employee's possession,
will remain the exclusive property of the Company and its Affiliates and will
not be removed from the premises of the Company and its Affiliates under any
circumstances without the prior written consent of the President of the Company
(except in the ordinary course of business during Employee's period of
employment), and in any event will be promptly delivered to the Company upon
termination of Employee's employment with the Company and its Affiliates.
Employee agrees that upon Employee's receipt of any subpoena, process or other
request to produce or divulge, directly or indirectly, any Trade Secrets to any
entity, agency, tribunal or person, Employee will timely notify and promptly
hand deliver a copy of the subpoena, process or other request to the President
of the Company.
4.2 Return of Property. Employee agrees that, upon termination of
Employee's employment with the Company and its Affiliates for any reason,
Employee will return to the Company, in good condition, all property of the
Company, including without limitation, the originals and all copies of all
management, training, marketing and selling manuals; promotional materials;
other training and instructional materials; financial information; vendor,
owner, manager and product information; customer lists; other customer
information; and all other selling, service and trade information and equipment.
If such items are not returned, the Company will have the right to charge
Employee for all reasonable damages, costs, attorneys'
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fees and other expenses incurred in searching for, taking, removing and/or
recovering such property.
4.3 Noncompetition. Employee acknowledges and agrees that the training
Employee will receive, the experience Employee will gain and the information
Employee will acquire regarding Trade Secrets while employed hereunder will
enable Employee to injure the Company and its Affiliates if Employee should
compete with the Company in a business that is competitive with the business
conducted or to be conducted by the Company and its Affiliates. For these
reasons, Employee hereby agrees that Employee will not, during the period of
employment with the Company, directly or indirectly, either as an individual, a
partner or a joint venturer, or in any other capacity, (a) invest (other than
investments in publicly-owned companies which constitute not more than 1% of the
voting securities of any such company and investments made through Equity
Capital Partners, provided Employee does not own directly or indirectly more
than 5% of the profits or capital interest of Equity Capital Partners) in any
business that is competitive with that of the Company or its Affiliates, (b)
accept employment with or render services to a competitor of the Company or any
of its Affiliates as a director, officer, manager or executive, (c) engage, for
Employee's self or any other person or entity in the sales, marketing, design or
manufacture of products competitive with any product sold, marketed, designed or
manufactured by the Company or its Affiliates, (d) contact, solicit or attempt
to solicit or accept business from any customers of the Company or its
Affiliates or any person or entity whose business the Company or its Affiliates
is soliciting, or (e) take any action inconsistent with the fiduciary
relationship of an employee to Employee's employer. For purposes of this
Agreement, a "competitor" specifically includes persons, firms, sole
proprietorships, partnerships, companies, corporations, or other entities that
market products and/or perform services in direct or indirect competition with
those marketed and/or performed by the Company or its Affiliates within the
United States, Canada and Mexico.
4.4 Nonsolicitation. During the period of employment with the Company
and for a period of 12 months thereafter, Employee will not, on Employee's own
behalf or on behalf of any other person, partnership, association, corporation
or other entity, hire or solicit or in any manner attempt to influence or induce
any employee of the Company or its Affiliates to leave the employment of the
Company or its Affiliates, nor will Employee use or disclose to any person,
partnership, association, corporation or other entity any information obtained
while an employee of the Company concerning the names and addresses of the
employees of the Company or its Affiliates
4.5 Damages. Notwithstanding anything in this Agreement to the
contrary, if Employee breaches the covenants contained in this ARTICLE 4, the
Company will have no further obligations to Employee pursuant to this Agreement
and may recover from Employee all such damages to which it may be entitled at
law or in equity. In addition, Employee acknowledges that any such breach may
result in immediate and irreparable harm to the Company for which money damages
are likely to be inadequate. Accordingly, the Company may seek whatever relief
it determines to be appropriate to protect the Company's rights under this
Agreement, including, without limitation, an injunction to prevent Employee from
disclosing any trade secrets or confidential information concerning the Company
to any person or entity, to prevent any person or entity from receiving from
Employee or using any such trade secrets or confidential information and/or to
prevent any person or entity from retaining or seeking to retain
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any other employees of the Company. Employee acknowledges good and sufficient
consideration for the noncompetition and nonsolicitation covenants of this
Section 4.5.
ARTICLE 5
MISCELLANEOUS
5.1 Assignment. This Agreement is personal in nature and neither of the
parties hereto will, without the written consent of the other, assign, transfer
or delegate this Agreement or any rights or obligations contained in this
Agreement except as expressly provided in Section 5.2. Without limiting the
generality or effect of the foregoing, Employee's right to receive payments
provided for in this Agreement will not be assignable, transferable or
delegable, whether by pledge, creation of a security interest, or otherwise,
other than by a transfer by Employee's will or by the laws of descent and
distribution, and if Employee attempts any assignment or transfer contrary to
this Section 5.1, the Company will have no liability to pay to any purported
assignee any amount Employee attempts to assign, transfer or delegate.
5.2 Successors and Binding Agreement.
--------------------------------
(a) The Company will require any successor to all or
substantially all of the businesses or assets of the Company (whether direct or
indirect, by purchase, merger, consolidation, reorganization, confirmed
reorganization plan or otherwise) expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This Agreement will
be binding upon and inure to the benefit of the Company and any successor to the
Company, including without limitation any persons acquiring directly or
indirectly all or substantially all of the businesses or assets of the Company
whether by purchase, merger, consolidation, reorganization, confirmed
reorganization plan or otherwise (and such successor will thereafter be deemed
"the Company" for the purposes of this Agreement).
(b) This Agreement will inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
5.3 Governing Law; Arbitration. This Agreement and all questions
arising in connection with it will be governed by and construed in accordance
with the laws of the State of North Carolina. Subject to the following sentence,
all disputes arising out of, or in connection with this Agreement, which are not
promptly settled by mutual agreement of the parties hereto, will be finally
settled by arbitration in accordance with the Commercial Rules of the American
Arbitration Association, the cost of which will be borne by the party against
whom an arbitration award is entered, specifically subject, however, to the
provisions of Section 3.10. Notwithstanding anything herein to the contrary, the
Company may, at its option, seek injunctive relief as contemplated in ARTICLE 4
either in lieu of or in addition to the arbitration remedies provided for in
this Section 5.3.
5.4 Severability. If any portion of this Agreement is held to be
invalid or unenforceable, such holding will not affect any other portion of this
Agreement.
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5.5 Entire Agreement. This Agreement comprises the entire agreement
between the parties hereto and, as of the Effective Date, supersedes any prior
written or oral agreements between the parties. This Agreement may not be
modified, renewed or extended except by a written instrument referring to this
Agreement and executed by the parties hereto.
5.6 Notices. Any notice or consent required or permitted to be given
under this Agreement will be in writing and will be effective (a) when given by
personal delivery, (b) one business day after being sent by overnight delivery
service or (c) five business days after being sent by certified or registered
mail, return receipt requested, to the Secretary of the Company at the Company's
principal place of business or to Employee at the last known address of Employee
as shown on the records of the Company.
5.7 Withholding Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, provincial, city or other taxes
or other amounts as will be required pursuant to any law or governmental
regulation or ruling.
5.8 Court Approval. The Company warrants that (i) on March 2, 2001, it
filed a motion with the Bankruptcy Court for authority to enter into an
employment agreement with Employee; (ii) the period for objecting to such motion
has expired without any objections having been filed; (iii) on March 16, 2001,
the Company filed with the Bankruptcy Court a certificate of no objections with
respect to such motion; and (iv) the Company's execution of and performance
under this Agreement does not violate or contradict the order submitted to the
Bankruptcy Court in connection with such motion, any provision of Title 11 of
the United States Bankruptcy Code, any other applicable statutes, or any orders
previously entered by the Bankruptcy Court in the Company's bankruptcy case.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
PILLOWTEX CORPORATION
By:
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Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief Operating Officer
EMPLOYEE
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Xxxxxxx X. Xxxxxx
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