Employment and Retention Agreement - Collins & Aikman Corp. and J. Michael Stepp
EMPLOYMENT AND RETENTION AGREEMENT
THE EMPLOYMENT AND RETENTION AGREEMENT (the "Agreement") is made and
entered into as of January 1, 1999, by and between COLLINS & AIKMAN CORPORATION,
a Delaware corporation (the "Company"), and J. MICHAEL STEPP ("Employee").
WITNESSETH
WHEREAS, Employee is currently employed by the Company; and
WHEREAS the Company wishes to retain Employee's services by providing
Employee with the benefits set forth in this Agreement.
NOW, THEREFORE, in consideration of the Employee's continued employment
and the mutual agreements contained herein, the parties agree as follows:
1. Term of Employment. The Company hereby agrees to continue to employ
Employee, and Employee hereby accepts employment, for a period commencing on the
date hereof and ending December 31, 1999, subject to the terms and conditions of
this Agreement.
2. Position of Employment. During the term of Employee's employment
hereunder, Employee shall be employed in the position of Executive Vice
President and Chief Financial Officer or Executive Vice President responsible
for the reorganization of the Company and the consolidation of its divisions.
Employee shall perform such services for the Company and its subsidiaries as may
be assigned to him from time to time by (i) the Chief Executive Officer of the
Company (the "CEO") (ii) the Board of Directors of the Company or (iii) by the
Co-Chairmen. Employee shall devote his full time and attention to the affairs of
the Company
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and its subsidiaries and his duties in such positions. Employee's compensation
under this Agreement shall be compensation for Employee's services to the
Company and its subsidiaries in all such positions and, except as expressly
provided herein, Employee shall not be entitled to any salary, bonus, benefit or
other compensation as a result of his services to the Company and its
subsidiaries.
3. Compensation and Benefits.
3.1 Base Salary. The Company shall pay Employee a base salary at an
annual rate of not less than $300,000 during the term of his employment
hereunder. Such amount shall be reviewed on a periodic basis by CEO and the
Board of Directors of the Company or an appropriate committee thereof (the
Company's Board of Directors or such committee being referred to herein as the
"Compensation Board"). During the term of Employee's employment hereunder the
Company may not decrease Employee's base salary below the amount set forth in
this Section 3.1.
3.2 Bonus Plans.
(a) During the term of Employee's employment hereunder, Employee shall
be eligible to participate in the Company's annual Executive Incentive
Compensation Plan (the "EIC Plan") in accordance with the applicable provisions
of the EIC Plan. The standard bonus for Employee under the EIC Plan shall not be
less than fifty percent of Employee's base salary.
(b) For the 1999 fiscal year of the Company only, the Company shall pay
a one-time Transition Bonus to Employee. The amount of the Transition Bonus paid
shall depend upon the achievement of targets related to the Company's transition
plan. The standard amount of the Transition Bonus shall be one hundred percent
of Employee's base salary.
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(c) Notwithstanding anything to the contrary contained herein or in the
EIC Plan, (i) Employee shall not be entitled to receive any cash bonus in
respect of any fiscal year if Employee's employment with the Company is
voluntarily terminated by Employee or if the Company terminates Employee's
employment with the Company for Cause (as defined in Section 5.2(d)), in either
event, prior to the last day of such fiscal year and (ii) if Employee is
employed hereunder for less than the whole of any fiscal year for any reason
other than a voluntary termination by Employee or a termination for Cause by the
Company, Employee shall be entitled to receive, in lieu of any bonus under
Sections 3.2(a) and 3.2(b) for such year, a pro rata portion (based on the
number of months of such fiscal year during which Employee was actually employed
hereunder over 12) of any such bonus.
3.3 Equity Plans.
(a) During the term of Employee's employment hereunder, Employee shall
be eligible to participate in and receive awards under the Collins & Aikman
Corporation Stock Option Plan and any other incentive equity compensation
plan(s) that might be adopted by the Company at a level and pursuant to such
terms and conditions as shall be determined by the Board of Directors of the
Company or its delegate, it its sole discretion.
(b) Upon the execution of this Agreement by Employee, subject to Section
18, Employee shall be granted an option to purchase 50,000 shares of the common
stock of the Company. The exercise price shall be the fair market value of the
common stock of the Company on the date this Agreement is executed by Employee.
The option shall become exercisable in full on December 31, 1999; provided,
however that if the employment of Employee is terminated in a manner so as to
entitle Employee to benefits under Section 5.2(b), the option shall become
immediately exercisable in full. The grant of the option shall be made
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pursuant to, and subject to the terms, conditions and restrictions set forth in,
the Collins & Aikman Corporation Stock Option Plan. The definitive terms of the
grant of the option shall be set forth in a written agreement no later than ten
business days after the date this Agreement is executed by Employee.
3.4 Other Benefits. Employee shall be eligible to participate during his
period of employment hereunder in all employee benefit programs of the Company
from time to time generally in effect for executive officers of the Company,
which currently include pension and other retirement plans, a profit sharing
plan, group life insurance, medical/dental insurance, sick leave, holidays and
long-term disability; provided, however, that the provisions of (i) Section
3.2(a) shall apply in lieu of any bonus plan of the Company or any of its
subsidiaries and (ii) Section 5 shall apply in lieu of any severance policy of
the Company or any of its subsidiaries. During the term of Employee's employment
hereunder, the Company shall not decrease the benefits available to Employee
pursuant to this Section 3.4 unless such reduction in the level of benefits is
generally applicable to senior executives of the Company.
3.5 Withholding. Employee agrees that the Company may deduct and
withhold from compensation payments the amounts the Company in good faith
believes are required to be deducted and withheld under the provisions of any
statute, law, regulation or ordinance heretofore or hereafter enacted.
4. Business Expenses. The Company shall reimburse Employee for all
reasonable expenses incurred by him in connection with the conduct of business
for the Company and its subsidiaries, including, without limitation, all
reasonable travel expenses incurred by Employee in connection with any travel by
Employee on business trips. Employee shall furnish receipts for such expenses in
accordance with the Company's policies.
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5. Termination of Employment.
5.1 Voluntary Termination. Employee may terminate his employment with
the Company at any time. In the event Employee terminates such employment
voluntarily, upon such termination the Company shall pay Employee his unpaid
base salary under Section 3.1 accrued to the date on which his employment
terminates (the "Termination Date") and any unpaid cash bonus for the prior
fiscal year that Employee may be entitled to receive pursuant to Section 3.2(a)
or Section 3.2(b), and no other salary, bonus, benefits or other compensation
other than accrued and vested benefits under employee benefit plans sponsored by
the Company.
5.2 Involuntary Termination.
(a) Employee's employment with the Company shall automatically
terminate upon Employee's death or, unless the Board of Directors of the Company
in its sole discretion shall otherwise elect, Employee's physical or mental
disability for any consecutive six-month period (measured from the first date on
which Employee is absent from work due to such disability to the same date in
the sixth succeeding calendar month, or, if there is no such date or such date
is not a business day, the next succeeding business day) or for shorter periods
aggregating six months in any twelve month period. In the event Employee's
employment with the Company is terminated due to Employee's death or physical or
mental disability, the Company shall pay to Employee or, if applicable, his
estate or legal representative (i) his unpaid base salary under Section 3.1
accrued to the Termination Date plus (ii) an amount equal to one year's base
salary plus (iii) any unpaid cash bonus for the prior fiscal year or the current
fiscal year that Employee may be entitled to receive pursuant to Section 3.2,
and no other salary, bonus, benefits or other compensation. The amount due to
Employee pursuant to this paragraph (a) shall be paid, at the sole election of
Employee or, if applicable, his estate or legal representative, at the time of
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termination, either in a lump sum or in a reasonable number of equal annual
installments to be specified by Employee or, if applicable, Employee's estate or
legal representative at the Termination Date.
(b) Unless the employment of Employee has been previously terminated
under Section 5.1, 5.2(a) or 5.2(c), on the earlier of (i) December 31, 1999;
(ii) the involuntary termination of Employee's employment with the Company by
the Company for any reason other than Employee's death or disability or
termination for Cause; (iii) the violation by the Company of Section 3.1 or 3.4
by reducing Employee's base salary or by materially reducing Employee's level of
benefits (unless such reduction in the level of benefits is generally applicable
to senior executives of the Company); (iv) the suffering by Employee, without
Employee's consent, of a significant change that is in violation of any term or
condition of his employment as set forth in Section 2 which is not remedied
within 10 calendar days after receipt by the Company of written notice from
Employee of such change or (v) the involuntary relocation of Employee to any
office or location more than thirty miles from the office or location at which
Employee is currently located or the material increase in Employee's travel
requirements (except to the extent such increase is attributable to a relocation
of the Company's headquarters); then, subject to Sections 6 and 7, this
Agreement shall terminate and the Company shall be obligated to pay or provide
Employee (I) his unpaid base salary under Section 3.1 accrued to December 31,
1999; (II) an amount equal to one times his base salary under Section 3.1; (III)
any unpaid cash bonus for 1999 that Employee may be entitled to receive pursuant
to Sections 3.2(a) and 3.2(b); (IV) continued coverage under the Company's
executive level health benefit plans for the two-year period following
Employee's Termination Date; (V) full vesting of Employee's benefits under all
retirement plans maintained by the Company and its affiliates other than the
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Supplemental Retirement Income Plan and (VI) full vesting of all outstanding
options granted to Employee under the Company's incentive equity compensation
plans and an extension of the period during which Employee may exercise said
options until the earlier of (A) the original expiration date of said options or
(B) one year after Employee's Termination Date. The provision of benefits under
Section 5.2(b)(IV) shall be reduced to the extent comparable benefits are
actually received by the Employee from another employer during the two-year
benefit continuation period; any such benefits actually received by the Employee
shall be reported by the Employee to the Company.
(c) The Company may at any time without notice terminate Employee's
employment with the Company for Cause. In the event Employee's employment with
the Company is terminated for Cause, Employee shall receive his unpaid base
salary under Section 3.1 accrued to the Termination Date and no other salary,
bonus, benefits or other compensation, including, without limitation, any unpaid
cash bonus for the prior fiscal year that Employee would otherwise be entitled
to receive pursuant to Section 3.2.
(d) As used herein, the term "Cause" means (i) fraud or misappropriation
with respect to any business of the Company or intentional material damage to
any property or business of the Company or an affiliate of the Company, (ii)
wilful failure by Employee to perform his duties and responsibilities and to
carry out his authority, (iii) wilful malfeasance or misfeasance or breach of
fiduciary duty or representation to the Company or its owners or an affiliate of
the Company, (iv) wilful failure to act in accordance with any specific lawful
instructions of the CEO or a majority of the Board of Directors of the Company
or (v) conviction of Employee of a felony.
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(e) Upon the termination of his employment with the Company, Employee
shall resign from any position he may hold as a director of the Company or any
subsidiary of the Company or as a member of any committee established by the
Board of Directors of the Company or any subsidiary.
5.3 Payment of Severance Benefits; Delivery of General Release. The
amount due to Employee pursuant to Section 5.2(b) shall be paid no later than 30
days after the Termination Date in a lump sum. Notwithstanding the foregoing,
the Company shall not be obligated to pay Employee any amount pursuant to
Section 5.2(b) unless Employee executes and delivers to the Company a release of
the parties set forth in Section 7 hereof, such release to be dated as of the
Termination Date and in the form attached as Exhibit A hereto.
5.4 Coordination of Agreements. If Employee should become entitled to
benefits under both this Agreement and Employee's Change in Control Agreement,
dated March 17, 1998 (the "Change in Control Agreement"), Section 6 of the
Change in Control Agreement shall apply; provided, however, (i) any amount that
Employee shall become entitled to receive under Section 3.2(b) of this Agreement
shall not reduce the payment due to Employee under Section 2 of, or any other
benefit under, the Change in Control Agreement, and (ii) all other cash payments
and benefits provided under this Agreement that are described by Section 6 of
the Change in Control Agreement shall be taken into account under Section 6 of
the Change in Control Agreement, including, without limitation, subject to
clause (i), the payments and benefits listed in Sections 5.2(b)(I) through
5.2(b)(VI) of this Agreement.
6. Representations and Covenants of Employee.
6.1 Conduct. Employee shall at all times refrain from taking any action
or making any statements, written or oral, which are intended to or do disparage
the goodwill or reputation
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of the Company or any of its subsidiaries or affiliates or any directors or
officers thereof or which could adversely affect the morale of employees of the
Company and its affiliates.
6.2 Non-Competition.
(a) Employee agrees that (i) in the event of any voluntary termination
by Employee or any involuntary termination for Cause of Employee's employment by
the Company, for the longer of one year after the Termination Date and the
expiration of the term of employment then in effect under Section 1 and (ii) in
any event, until the expiration of the term of employment then in effect under
Section 1, he shall not accept employment with, or render consulting or other
advisory services to, any of the companies listed on Exhibit B hereto, or to any
of their affiliates.
(b) Notwithstanding paragraph (a) of this Section 6.2, nothing in this
Agreement shall prohibit or penalize the ownership by Employee of the shares of
a business that are registered under Section 12 of the Securities Exchange Act
of 1934 and constitute, together with all such shares owned by any immediate
family member or affiliate of, or person acting in concert with, Employee, less
than 2% of the outstanding registered shares of such business.
6.3 Company Information. Employee agrees that, so long as he is employed
by the Company and following any termination of his employment (whether or not
the restrictions of Section 6.2 are or continue to be applicable), Employee
shall keep confidential all confidential information and trade secrets of the
Company or any of its subsidiaries or affiliates and shall not disclose such
information to any person without the prior approval of the Board of Directors
of the Company or use such information for any purpose other than in the course
of fulfilling his duties of employment with the Company pursuant to this
Agreement. Upon the termination of this Agreement, or the earlier request of the
Company, Employee shall return any documents, records, data, books or materials
of the Company or its subsidiaries or affiliates in his possession
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or control and any of his workpapers containing confidential information or
trade secrets of the Company or its subsidiaries or affiliates. It is understood
that for purposes of this Agreement the term "confidential information" is to be
construed broadly to include all material nonpublic or proprietary information.
This Section 6.3 shall survive any termination of this Agreement.
6.4 Cooperation. Employee shall promptly notify the Company of any
threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative
("Proceeding"), in which he may be involved, whether as an actual or potential
party or witness or otherwise, or with respect to which he may receive requests
for information, by reason of his future, present or past association with the
Company or any of its subsidiaries or affiliates. Employee shall cooperate fully
with the Company and its subsidiaries and affiliates in connection with any
Proceeding at no expense to the Company or any of its subsidiaries or affiliates
other than the reimbursement of Employee's reasonable out-of-pocket expenses.
This Section 6.4 shall survive any termination of this Agreement. Employee shall
not disclose any confidential or privileged information in connection with any
Proceeding without the consent of the Company and shall give prompt notice to
the Company of any request therefor.
7. Release. In consideration of the compensation continuance available
in certain events pursuant to this Agreement, Employee unconditionally releases
the Company and its subsidiaries and affiliates and directors, officers,
employees and stockholders thereof, from any and all claims, liabilities and
obligations of any nature pertaining to the terms of his employment or the
termination of his employment other than those explicitly provided for by this
Agreement including, without limitation, any claims arising out of alleged legal
restrictions on the Company's rights to terminate its employees, such as any
termination contrary to public policy or
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to laws prohibiting discrimination (including, without limitation, the Age
Discrimination in Employment Act).
8. Governing Law. The validity, interpretation and performance of this
Agreement shall be governed by the laws of the State of New York, regardless of
the laws that might be applied under applicable principles of conflicts of laws.
Each of the parties hereby waives any right such party may have to a trial by
jury. The parties agree that the language of this Agreement shall be construed
neutrally and not strictly for or against either of the parties.
9. Entire Agreement. This Agreement and the Change in Control Agreement
constitute the entire agreement and understanding between the parties hereto
with respect to the matters referred to herein and in the Change in Control
Agreement and supersede all prior agreements and understandings between Employee
and the Company or any affiliate of the Company with respect to the employment
of Employee and any other matters referred to herein and in the Change in
Control Agreement.
10. Notice. Any written notice required to be given by one party to the
other party hereunder shall be deemed effective if mailed by registered mail:
To the Company at:
Collins & Aikman Corporation
701 McCullough Drive
P.O. Box 32655
Charlotte, North Carolina 28232
Attn: Chief Executive Officer
To Employee at:
Mr. J. Michael Stepp
7021 Old Dairy Lane
Charlotte, North Carolina 28211
or such other address as may be stated in notice given under this Section 10.
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11. Severability; Enforceability. The invalidity, illegality or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity, legality or enforceability of the remainder of this
Agreement in such jurisdiction or the validity, legality or enforceability of
this Agreement or such provision in any other jurisdiction, it being the intent
of the parties hereto that all rights and obligations of the parties hereto
under this Agreement shall be enforceable to the fullest extent permitted by
law. The parties recognize that the services to be rendered under this Agreement
by Employee are special, unique and extraordinary in character, and that in the
event of the breach by employee of the terms and conditions of this Agreement to
be performed by him, then the Company shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of competent jurisdiction,
either in law or in equity, to obtain damages or such other relief deemed
appropriate, or to enforce the specific performance by Employee or to enjoin
Employee from violating any of the terms of this Agreement. Without limiting the
foregoing, the covenants of Employee set forth in Section 6.1 and 6.2 constitute
an agreement independent of any other provisions of this Agreement and Employee
acknowledges that his failure to comply with the provisions of Section 6.1 and
6.2 will result in irreparable and continuing damage for which there will be no
adequate remedy at law and that, in the event of a failure of Employee so to
comply, the Company shall be entitled, without the necessity of proving actual
damages or securing or posting any bond, to injunctive relief in addition to all
other remedies which may otherwise be available to the Company and to such other
and further relief as may be proper and necessary to ensure compliance with the
provisions of Section 6.1 and 6.2. If any covenants contained in Section 6.1 and
6.2 shall be deemed to be invalid, illegal or unenforceable as written by reason
of the extent, duration or geographical scope thereof, or otherwise, the
determining body or authority making such determination shall be empowered to
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reduce such covenants so as to be enforceable to the greatest extent possible
and, as so reduced, such covenants shall then be deemed to be rewritten and
enforced as reduced.
12. Arbitration. Subject to the provisions of Section 11, any dispute
between Employee and the Company arising out of this Agreement or the
performance or nonperformance hereof shall, upon the demand of a party, be
settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association and the provisions of this
Section. The arbitration shall be conducted in Charlotte, North Carolina, by a
panel of three neutral arbitrators selected in accordance with such Commercial
Arbitration Rules. In conducting the arbitration and rendering their award, the
arbitrators shall give effect to the terms of this Agreement, including the
choice of applicable law, shall give effect to any other agreement of the
parties relating to the conduct of the arbitration and shall give affect to
applicable statutes of limitations. The costs of the arbitration, including the
fees and expenses of the arbitrators and of the American Arbitration
Association, shall be allocated between Employee and the Company as, and in such
proportions as, the arbitrators shall determine to be just and equitable, which
determination shall be set forth in the award. Judgment upon the award of the
arbitrators may be entered by any court of competent jurisdiction.
13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their personal representatives,
and, in the case of the Company, its successors and assigns, and Section 7 shall
also inure to the benefit of the other persons and entities identified therein;
provided, however, that Employee shall not, without the prior written consent of
the Company, transfer, assign, convey, pledge or encumber this Agreement or any
interest under this Agreement. Employee understands that the assignment of this
Agreement or any benefits hereof or obligations hereunder by the Company to any
related entity of the
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Company or to any purchaser at all or a substantial portion of the assets or
stock of the Company, and the employment of Employee by any related entity of
the Company or any such purchaser or by any successor of the Company in a merger
or consolidation, shall not be deemed a termination of Employee's employment for
purposes of Section 5.2 or otherwise. If any of the Company's obligations under
this Agreement are expressly assumed any related entity of the Company or by any
purchaser of all or a substantial portion of the assets or stock of the Company,
the Company shall be released from such obligations.
14. Amendment. This Agreement may be amended or canceled only by an
instrument in writing duly executed and delivered by each party to this
Agreement.
15. Headings. Headings contained in this Agreement are for convenience
only and shall not limit this Agreement or affect the interpretation thereof.
16. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective as provided in Section 18 hereof.
17. Miscellaneous. In executing this Agreement, Employee has not relied
upon any statement, representation or promise, whether written or oral, of the
Company or any of its subsidiaries or affiliates, or of any representative or
attorney for the Company or any of its subsidiaries or affiliates, except for
statements expressly set forth in this Agreement. Each of the parties has read
this Agreement carefully, with the assistance of legal counsel selected by such
party, and knows and understands the contents hereof and thereof, including,
without limitation, in the case of Employee the release set forth in Section 7
hereof.
18. Effective Date of Agreement. Employee acknowledges that he was
advised that he had a period of 21 calendar days in which to consider and
execute this Agreement. Employee
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further acknowledges and understands that he has seven calendar days from the
date on which he executes this Agreement to revoke it. Accordingly, this
Agreement shall not become effective or enforceable until the revocation period
has expired. To the extent that it has not otherwise done so, the Company hereby
advises Employee to consult with an attorney prior to executing this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
EMPLOYEE:
/s/ J. Michael Stepp
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J. Michael Stepp
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Hannah
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Thomas E. Hannah
President & Chief Executive
Officer
APPROVED:
/s/ D. Stockman
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D. Stockman, Director
/s/ B. Barnes
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B. Barnes, Director
/s/ T. Hannah
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T. Hannah, Director
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EXHIBIT A
RELEASE (the "Release") dated as of April 20, 1999, by J. Michael
Stepp ("Employee") in favor of Collins & Aikman Corporation, a Delaware
corporation (the "Company").
WHEREAS, pursuant to that certain Employment and Retention Agreement
(the "Agreement") by and between the Company and Employee dated as of January 1,
1999, the Company agreed to provide Employee with certain severance and
retention benefits (the "Benefits") and Employee agreed to accept the Benefits,
all on the terms and conditions set forth in the Agreement; and
WHEREAS, pursuant to Section 5.3 of the Agreement, Employee shall
not be entitled to receive certain severance benefits unless Employee executes
and delivers to the Company a release of the parties as set forth in Section 7
of the Agreement, such release to be dated as of the Termination Date (as such
term is defined in the Agreement);
NOW THEREFORE, for good and valuable consideration in connection
with the receipt of the Benefits, Employee agrees as follows:
1. Release. Employee unconditionally releases the Company and its
subsidiaries and affiliates and directors, officers, employees and stockholders
thereof, from any and all claims, liabilities and obligations of any nature
pertaining to the terms of his employment or the termination of his employment
other than those explicitly provided for by the Agreement including, without
limitation, any claims arising out of alleged legal restrictions on the
Company's rights to terminate its employees, such as any termination contrary to
public policy or to laws prohibiting discrimination (including, without
limitation, the Age Discrimination in Employment Act).
2. Governing Law. The validity, interpretation and performance of this
Release shall be governed by the laws of the State of New York, regardless of
the laws that might be applied under applicable principles of conflicts of laws.
Employee hereby waives any right such party may have to a trial by jury.
3. Miscellaneous. In executing this Release, Employee has not relied
upon any statement, representation or promise, whether written or oral, of the
Company or any of its subsidiaries or affiliates, or of any representative or
attorney for the Company or any of its subsidiaries or affiliates, except for
statements expressly set forth in this Release. Employee has read this Release
carefully and knows and understands the contents hereof.
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IN WITNESS WHEREOF, Employee has executed this Release as of the
date and year first above written.
/s/ J. Michael Stepp
-----------------------
J. MICHAEL STEPP [L.S.]
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EXHIBIT B
American Sunroof
Guilford
Joan Fabrics
Lear
Johnson Controls
Milliken
Rieter/Magee