EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT effective as of September 10, 2003 (the
"Effective Date") between Cone Xxxxx Corporation, a North Carolina corporation
(the "Company"), and Xxxx X. Xxxxx (the "Executive").
WHEREAS, the Executive is presently employed as the Executive Vice
President and Chief Financial Officer of the Company and has made and is
expected to continue to make major contributions to the profitability, growth
and financial strength of the Company; and
WHEREAS, the Company desires to secure the services of the Executive
for the future;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein the parties hereto agree as follows:
1. Definitions. In addition to the other terms defined in this
Employment Agreement, the following terms shall have the definitions indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Change in Control" means the occurrence of any one of the
following events without the approval of a majority of the Continuing Directors:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act, is or becomes the beneficial owner (as
defined in Exchange Act Rules 13d-3 and 13d-5, except that for
purposes of this paragraph (i) such person shall be deemed to
have beneficial ownership of all shares that such person has the
right to acquire, whether such right is exercisable immediately
or only after the passage of time, directly or indirectly) of
more than 20% of the total voting power of the Company's Voting
Stock. For purposes of this clause (i), such person shall be
deemed to beneficially own any Voting Stock of a specified entity
held by a parent entity, if such person is the beneficial owner,
directly or indirectly, of more than 20% of the voting power of
the parent entity's Voting Stock;
(ii) Continuing Directors cease for any reason to constitute
a majority of the Board then in office;
(iii) the merger or consolidation of the Company with or
into another person or the merger of another person with or into
the Company, other than a transaction following which the holders
of securities that represented 100% of the aggregate voting power
of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, at least a majority of
the aggregate voting power of the Voting Stock of the surviving
person immediately after such transaction in substantially the
same proportion that such holders held the aggregate voting power
of the Voting Stock of the Company immediately prior to such
transaction; or
(iv) the sale of all or substantially all of the Company's
assets to another person.
(c) "Continuing Directors" means (i) the members of the Board in
office on the Effective Date, and (ii) any successor to any such member (or any
other member of the Board meeting the criteria of this clause (ii)) who after
the Effective Date (x) is nominated or elected to membership on the Board by a
majority of the Continuing Directors in office at the time of such nomination or
election, and (y) is not an "affiliate" or "associate" (as defined in Regulation
12B under the Exchange Act) of any person who is then a beneficial owner,
directly or indirectly, of securities representing 5% or more of the combined
voting power of the Company's Voting Stock.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(e) "for cause" means (i) the commission by the Executive of a willful
or grossly negligent act in the performance of his obligations under this
Employment Agreement which causes material harm to the Company, its subsidiaries
or affiliates, (ii) the commission by the Executive of any fraud,
misappropriation, embezzlement or like act of dishonesty which causes material
harm to the Company, its subsidiaries or affiliates, (iii) the Executive's
willful disregard of his obligations under this Employment Agreement, or (iv)
the Executive being convicted of, or pleading guilty or no contest to, a felony
or other crime having as its predicate element fraud, dishonesty or
misappropriation; provided, however, that in the case of clauses (i), (ii) or
(iii) above, the Executive shall have received written notice of such proposed
termination (which notice shall state the provision(s) of this Employment
Agreement pursuant to which such termination is being effected and a description
of the facts supporting such termination) and the Executive shall not have cured
the acts or omissions supporting such termination within fifteen (15) days after
receiving such notice. For purposes of this definition, no act or failure to act
by the Executive shall be considered "willful" unless done or omitted to be done
by the Executive in bad faith and without reasonable belief that the Executive's
action or omission was in the best interests of the Company.
(f) "good reason" means the occurrence of any of the following events:
(i) following a Change in Control, without the Executive's written consent, any
change in the duties, responsibilities or status (including reporting
responsibilities) of the Executive that is materially inconsistent with the
Executive's position(s), duties, responsibilities or status with the Company
immediately prior to such Change in Control (including any material diminution
of such duties, responsibilities or status); (ii) any other material breach of
this Employment Agreement by the Company, which shall include, but not be
limited to, any reduction by the Company of the Executive's rate of annual base
salary or annual bonus opportunity (including any adverse change in the formula
used to calculate such annual bonus); or (iii) a Change of Control.
(g) "Voting Stock" of a person means all classes of capital stock or
other interests, including partnership interests, of such person then
outstanding and normally entitled, without regard to the occurrence of any
contingency, to vote in the election of directors, managers, or trustee thereof.
2. Employment. The Company shall employ the Executive, and the
Executive accepts continued employment with the Company, upon the terms and
conditions set forth in this Employment Agreement for the period beginning on
the date hereof and terminating on December 31, 2005 (the "Initial Term") and
continuing thereafter until terminated as provided in Section 4 hereof (the
Initial Term and any additional term is herein referred to as the "Employment
Period"). The Executive shall be employed as Executive Vice President and Chief
Financial Officer. The Executive shall perform his duties principally at the
offices of the Company in Greensboro, North Carolina, with such travel to such
other locations from time to time as the Board may reasonably prescribe.
3. Compensation; Expenses; Benefits.
(a) The Company shall pay to the Executive during the Employment
Period a salary at the annual rate of $300,000 payable in accordance with the
payroll policy of the Company as in effect from time to time. The Company may,
in its sole discretion, increase (but it shall not, without the written consent
of the Executive, decrease) the annual salary payable to the Executive for his
services hereunder.
(b) The Company shall pay or reimburse the Executive for all
reasonable expenses actually incurred or paid by him in the performance of his
services under this Employment Agreement, upon presentation of expense
statements or vouchers or other supporting information as the Company may
reasonably require.
(c) The Executive shall be eligible to receive bonus compensation from
the Company in respect of each fiscal year of the Company (or portion thereof)
occurring during the Employment Period.
(d) The Executive may participate in all bonus, term life insurance,
major medical, hospitalization, pension or retirement, 401(k), sickness or
disability and other plans and benefits provided for executive employees of the
Company generally, as in effect from time to time (together, the "Benefits");
provided, however, that at no time following a Change in Control shall the terms
of the Executive's participation in such plans and the benefits provided to the
Executive thereunder be less favorable to the Executive than the Benefits
provided to the Executive immediately prior to such Change in Control
(disregarding any changes to such participation or benefits made in anticipation
of such Change in Control).
(e) The Executive shall be entitled to not less than twenty (20) paid
vacation days during each calendar year during the Employment Period.
4. Termination. (a) During the Employment Period, the employment of the
Executive and the obligations of the Company hereunder shall be (in the case of
subparagraph (i) below) or may be (in the case of subparagraphs (ii) and (iii)
below) terminated by the Company on the occurrence of any one of the following
events:
(i) The date of the death of the Executive.
(ii) At least thirty (30) days after the date on which the
Company shall have given the Executive written notice of termination
of his employment hereunder by reason of his physical or mental
incapacity on a permanent basis. The Executive shall be deemed to be
physically or mentally incapacitated on a permanent basis if the
Executive is determined by a physician reasonably acceptable to both
parties to be unable, by reason of any physical or mental incapacity,
for a period of 120 consecutive day or 180 days (whether or not
consecutive) during any twelve month period to perform his duties and
responsibilities hereunder.
(iii) The date on which the Company shall have given the
Executive written notice that the Executive has been terminated "for
cause."
(b) The Executive may terminate his employment without "good reason"
at any time by giving the Company advance written notice at least thirty (30)
days prior to the effective date of such termination.
(c) The Executive may terminate his employment for "good reason" under
the circumstances described in clause (ii) of Section 1(f) of this Employment
Agreement at any time by giving written notice to the Company, identifying such
termination as a termination by the Executive for "good reason." The Executive
may terminate his employment for "good reason" under the circumstances described
in clause (i) of Section 1(f) of this Employment Agreement at any time following
a Change in Control by giving written notice to the Company, identifying such
termination as a termination by the Executive for "good reason." The Executive
may terminate his employment for "good reason" under the circumstances described
in clause (iii) of Section 1(f) of this Employment Agreement by giving advance
written notice not later than the date six (6) months following a Change in
Control to the Company at least six (6) months prior to the effective date of
such termination, identifying such termination as a termination by the Executive
for "good reason." If the Executive is terminated under Section 4(d) of this
Employment Agreement following a Change in Control, the Executive shall have the
rights described in Section 4(e) hereof, as if the Executive had terminated his
employment under this Section 4(c).
(d) The Company may terminate the employment of the Executive other
than "for cause" at any time by giving advance written notice to the Executive
at least ninety (90) days, or upon such shorter period as the Company shall
specify in the notice, prior to the effective date of such termination, but the
Company shall remain obligated to make all payments and provide all benefits to
the Executive provided by Sections 5(a) and (b); provided, however, that if the
Company provides Executive with less than ninety (90) days advance written
notice pursuant to this Section 4(d), the end of the period during which the
Company shall be obligated to make payments and provide benefits to the
Executive pursuant to Sections 5(a) and 5(b) shall be calculated as if the date
of the Executive's termination was the date which is ninety (90) days following
delivery of such notice.
(e) In the event that the Executive's employment is terminated
pursuant to Section 4(c) hereof, the Executive shall have the option (i) to give
notice to the Company at any time after termination that he declines any
payments and benefits that the Company is obligated to pay or provide the
Executive thereafter under Sections 5(a) and (b) hereof and thereupon be
released from any further obligation under this Employment Agreement, except for
those obligations described in Sections 7, 8 and 9 hereof or (ii) to receive
payments and benefits under Sections 5(a) and (b) hereof and thereupon be
released from any further obligation under this Employment Agreement, except for
those obligations described in Sections 7, 8 and 9 and except for those
obligations described in Section 10 hereof as long as the Executive is actually
receiving payments and benefits under Sections 5(a) and (b) hereof.
(f) In the event that the Executive's employment is terminated
pursuant to Section 4(d) hereof, the Executive shall thereupon be released from
any further obligation under this Employment Agreement, except for those
obligations described in Sections 7, 8 and 9 hereof, and except for those
obligations described in Section 10 hereof as long as the Executive is receiving
payments and benefits under Sections 5(a) and (b) hereof or is eligible to
receive such payments and benefits and such payments and benefits are tendered
by the Company.
(g) In the event that the Executive's employment is terminated for any
reason, (i) the Company shall promptly following such termination pay to the
Executive any earned but unpaid salary and any accrued but unpaid bonuses in
respect any fiscal year of the Company ending prior to the date of such
termination, and (ii) any rights and benefits the Executive may have to the
Benefits shall be determined in accordance with the terms of the employee plans
and programs of the Company.
5. Salary Continuation.
(a) In the event that the Executive's employment is terminated
pursuant to Section 4(c) or Section 4(d) of this Employment Agreement, whether
during the Initial Term or thereafter, the Company shall continue to pay the
Executive his salary, as in effect on the date of termination, according to the
normal payroll policies of the Company, for a period of time equal to the
greater of (i) the remainder of the Initial Term (if any) or (ii) one year from
the date of such termination. In addition, the Executive shall receive annual
bonus payments in respect of the period beginning on the first day of the fiscal
year of the Company during which such termination occurs through the last date
in respect of which the Executive receives salary continuation payments pursuant
to this Section 5(a), payable at such times that the Company generally makes
annual bonus payments to its executive employees, calculated in accordance with
the methodology used immediately prior to such termination to calculate the
Executive's annual bonuses, based on the performance of the Company during such
period (pro rated to reflect any partial fiscal year of the Company during such
period.)
(b) During the period that the Executive receives payments under this
Section 5, the Executive shall be entitled to all of the Benefits to the extent
permitted by such benefit plans and applicable law; provided, however, that if
the Executive is prohibited at any time from participating in any such benefit
plan by the terms of such plan or applicable law, the Company shall make a
payment to the Executive in an amount necessary to replicate the benefits to
which the Executive would have been entitled but for such prohibition.
(c) The Executive shall be under no obligation to attempt to mitigate
the obligations of the Company hereunder by seeking other employment, nor will
any income from any other source be offset against any amounts due hereunder.
6. Acknowledgments. The Executive acknowledges that:
(a) the Company's services are highly specialized;
(b) the identity and particular needs of the Company's customers are
not generally known in the Company's industry;
(c) the Company has a proprietary interest in its customer lists; and
(d) documents and other information regarding the Company's sales
methods, pricing and costs as well as information pertaining to the Company's
customers, including, but not limited to, identity, location, service
requirements, and charges to the customers, are highly confidential and
constitute trade secrets.
7. Trade Secrets and Confidential Information. During the Employment
Period, the Executive may have access to, and become familiar with, various
trade secrets and confidential information belonging to the Company, including,
but not limited to, the documents and information referred to in Sections 6(c)
and 6(d) above and the New Discoveries (defined in Section 8 hereof). The
Executive acknowledges that such confidential information and trade secrets are
owned and shall continue to be owned solely by the Company. During the
Employment Period and thereafter, except as may be required of the Executive in
the performance of the Executive's obligations under this Employment Agreement,
the Executive agrees not to use, communicate, reveal or otherwise make available
such information for any purpose whatsoever, or to divulge such information to
any person, partnership, corporation or entity other than the Company or persons
expressly designated by the Company. The duty of confidentiality required hereby
will not apply to any information that (a) is, at the time of the disclosure, in
the public domain or available to the public or enters the public domain at a
later date by becoming available to the public through no fault of the
Executive, (b) is required to be disclosed by law or court order, or (c) is
disclosed by the Executive to his personal attorney.
8. New Discoveries. The Executive agrees that:
(a) The Company shall have the sole and exclusive right, title and
interest in and to all discoveries, ideas, information, innovations, inventions,
methods, processes, products, techniques, technologies, and improvements thereto
and physical manifestations thereof (whether or not patentable or copyrightable)
that are acquired, conceived, created, developed, or reduced to practice in
whole or part by the Executive (either alone or with others) during the
Employment Period (or during the Executive's employment with the Company prior
to the date hereof) that (i) relate in any way to the business of the Company or
(ii) result in anyway from the performance by the Executive of duties and
responsibilities as an employee of the Company ("New Discoveries"). The
Executive shall promptly and fully disclose to the Company all New Discoveries
and shall reduce such disclosures to writing at the request of the Company.
Except to the extent expressly authorized in writing by the Company, the
Executive shall treat all New Discoveries as confidential information under
Section 7 hereof.
(b) The Executive shall, at the request of the Company and without
further compensation, take all actions and execute all instruments reasonably
requested by the Company to secure and perfect the Company's (or its assigns')
sole and exclusive right, title, and interest in and to New Discoveries,
including but not limited to the execution of instruments assigning to others
designated by the Company all of the Executive's right, title, and interest in
and to New Discoveries, and the provision of assistance in preparing
applications, registration forms, and other documents relating to the
acquisition or maintenance of copyrights and patents in the United States and
other countries.
(c) The provision of this Section 8 do not apply to inventions that
qualify fully as inventions that cannot be required to be assigned under Section
66-57.1 of the North Carolina General Statutes.
9. Documents. Except in the performance of his duties hereunder, the
Executive shall not remove from the Company's office any of the Company's books,
records, documents, or customer lists, or any copies of such books, records,
documents, or customer lists for use outside of the Company's office, except as
specifically authorized in writing by the Company.
10. Noncompetition. Except as otherwise provided in Section 4(e) and
Section 4(f) of this Employment Agreement, the Executive agrees that:
(a) During the Employment Period and for a period of one year
thereafter (or such longer period as the Executive shall continue to receive
payments under Section 5), the Executive shall not directly or indirectly, for
the Executive's own account or as an employee, officer, director, partner, joint
venturer, shareholder, investor, consultant or otherwise (except as an investor
in a corporation whose stock is publicly traded and in which he holds less than
2% of the outstanding shares) engage in any business or enterprise, anywhere in
the United States or Mexico, that directly or indirectly competes with the
Business (as defined below) of the Company, as it exists at the termination of
the Employment Period. If the period of time, the geographical area or the scope
of the Business specified under this Section 10 should be determined to be
unreasonable in any judicial proceeding, then the period of time and area of the
restriction shall be reduced so that this Employment Agreement may be enforced
in such area and during such period of time as shall be determined to be
reasonable by such judicial proceeding.
(b) Without the prior written consent of the Company, the Executive
shall not, directly or indirectly, until the first anniversary of the
termination of the Employment Period (or until the Executive ceases to receive
payments under Section 5, whichever is longer):
(i) interfere with, disrupt or attempt to disrupt existing or any
then existing relationship, contractual or otherwise, between the
Company or its subsidiaries or affiliates and any of their customers,
suppliers, clients, executives or employees, or
(ii) employ, solicit for employment, attempt to employ or assist
any other entity in employing or soliciting for employment any
employee or executive who is at that time employed by the Company or
its subsidiaries or affiliates, or induce or attempt to induce, any
such employees or executives to discontinue services to the Company or
its subsidiaries or affiliates.
(c) As used herein, the term "Business" shall mean the business of
producing, manufacturing, marketing and selling denims and woven jacquard
fabrics, or other products manufactured, marketed or sold by the Company at the
termination of the Employment Period, or marketing and providing fabric dyeing
and printing services or any other services being offered by the Company at the
termination of the Employment Period.
(d) The covenants contained in this Section 10 shall inure to the
benefit of the Company, any successor of the Company and each subsidiary of the
Company.
11. Remedies. The Executive acknowledges and agrees that the rights of the
Company under Sections 7, 8, 9 and 10 of this Employment Agreement are of
specialized and unique character and that immediate and irreparable damage will
result to the Company if the Executive fails or refuses to perform the
Executive's obligations under such provisions. Accordingly, notwithstanding any
election by the Company to claim damages from the Executive as a result of such
failure or refusal, the Company may, in addition to any other remedies and
damages available, seek an injunction in a court of competent jurisdiction to
compel performance by the Executive with the Executive's obligations under this
Employment Agreement or to restrain any breach of this Employment Agreement by
the Executive. In the event of any action, suit or arbitration proceeding
arising out of or relating to this Employment Agreement or any breach or alleged
breach hereof, the party prevailing in any such action, suit or proceeding shall
be entitled to recover from the other party, in addition to all other damages
recoverable, such reasonable attorneys fees and other reasonable expenses of the
proceeding as the prevailing party may incur.
12. Termination for Material Breach.
(a) Upon any material breach by either party of this Employment
Agreement, the other party shall be released from his or its obligations
hereunder (except for the provisions of Sections 7, 8 or 9 hereof) and shall be
entitled to all rights provided hereunder or by law with respect to such breach.
(b) The Executive and the Company agree that it is impossible to
determine with any reasonable accuracy the amount of prospective damages to
either party upon breach of this Employment Agreement by the other. The
Executive and the Company further agree that the damages set forth in this
Section 12(b) are reasonable, and not a penalty, based upon the facts and
circumstances of the parties at the time of entering this Employment Agreement,
and with due regard to future expectations.
13. Arbitration. Any dispute or controversy arising between the parties to
this Employment Agreement involving the interpretation or application of any
provision of this Employment Agreement, or arising out of this Employment
Agreement, shall be submitted to arbitration at Greensboro, North Carolina
pursuant to the Commercial Rules (the "Rules") of the American Arbitration
Association ("AAA") by an arbitrator mutually agreed upon by the parties. Such
arbitrator shall be selected by the parties hereto no later than ten days after
AAA notifies each party that a demand for arbitration has been filed (the
"Arbitrator Designation Period"). In the event the Executive and the Company are
unable to agree on an arbitrator within the Arbitrator Designation Period, AAA
shall appoint a neutral arbitrator in accordance with the Rules no later than
ten days following the expiration of the Arbitrator Designation Period. The
designated arbitrator shall not be an agent, employee, shareholder or affiliate
of the Executive or the Company. The arbitrator may, in his or her discretion,
award to the prevailing party its costs of the proceeding, including attorney's
fees and expenses. The decision of the arbitrator shall be final and binding on
the parties, and judgment upon the decision may be entered in the state courts
or federal courts having jurisdiction over Guilford County, North Carolina.
14. Miscellaneous.
(a) The Company may withhold from amounts payable under this
Employment Agreement any and all federal, state, and local taxes that are
required to be withheld by any applicable laws and regulations. The Company may
also withhold any amounts necessary pursuant to the benefit plans, policies, or
arrangements of the Company or otherwise, in accordance with any applicable
Company policies, laws and/or regulations.
(b) This Employment Agreement contains the entire agreement between
the Company and the Executive and supersedes all prior arrangements or
understandings with respect to the Executive's terms of employment.
(c) This Employment Agreement will be binding on any successor or
assign of the Company, including without limitation any business, enterprise,
person, firm, corporation, partnership, association or other entity acquiring
(by purchase, merger or otherwise), directly or indirectly, the business and
substantially all of the assets of the Company or of the subsidiaries of the
Company; as a condition to any such assignment or acquisition, the Company shall
cause any such successor or assign to expressly assume this Employment
Agreement; and, upon such assumption, the Company shall be released of all of
its obligations under this Employment Agreement.
(d) This Employment Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
(e) The descriptive headings used in this Employment Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Employment Agreement.
(f) All notices or other communications which are required or
permitted pursuant to this Employment Agreement shall be in writing and
sufficient if delivered personally or by facsimile (with a confirmation copy
sent by mail) or sent by registered or certified mail, postage prepaid,
addressed as follows:
If to the Company:
Cone Xxxxx Corporation
000 Xxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: General Counsel
with a copy to:
Xxxxxx Xxxx Xxxxxx Xxxx & Xxxxxxxxxx P.L.L.C.
0000 Xxxxxxxxxxx Xxxxx
X.X. Xxx 00000 Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 Facsimile:
(000) 000-0000 Attention: Xxxxx X. Xxxx, Esq.
If to the Executive:
Xxxx X. Xxxxx
000 Xxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Any party may by written notice change the address to which notices to such
party are to be delivered or mailed.
(g) Any waiver of any term or condition, or any amendment or
supplementation, of this Employment Agreement shall be effective only if in
writing and signed by the parties hereto and, in the case of any waiver by the
Company and any amendment or supplementation consented to by the Company, if
approved by the Board.
(h) The performance by the Executive of his duties under this
Employment Agreement is the personal obligation of the Executive and may not be
delegated by the Executive; provided, however, that the Executive may delegate
duties and responsibilities to other employees or agents of the Company or its
subsidiaries incident to normal and customary management practices.
IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Employment Agreement as of the date first written above.
CONE XXXXX CORPORATION
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx
Chairman, President and CEO
/s/ Xxxx X. Xxxxx
Executive
