Employment Agreement - Collins & Aikman Corp. and J. Michael Stepp
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of January 25, 2004, by and between COLLINS & AIKMAN CORPORATION, a Delaware
corporation (the "Company"), and J. MICHAEL STEPP ("Employee").
W I T N E S S E T H
WHEREAS, the Company wishes to retain Employee's services by providing
Employee the compensation and benefits set forth in this Agreement;
WHEREAS, Employee wishes to continue his employment with the Company
under the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ Employee,
and Employee hereby accepts employment, for a period of three (3) years,
commencing January 1, 2003 and ending December 31, 2005, subject to the terms
and conditions of this Agreement. At the end of such initial three (3) year
term, unless the Company shall have given Employee thirty (30) days prior
written notice of its intention to terminate this Agreement at the end of the
initial term hereof, the term of this Agreement shall automatically be extended
by an additional one year period. Thereafter, unless the Company shall have
given Employee thirty (30) days prior written notice of its intention to
terminate this Agreement at the end of the term then in effect, the term of this
Agreement shall automatically be extended by an additional one year period.
2. Position of Employment. During the term of this Agreement, Employee
shall be employed in the position of Vice Chairman and Chief Financial Officer
of the Company and Chief Financial Officer of Collins & Aikman Products Co., a
Delaware corporation ("Products") and shall perform such services for the
Company and Products and their affiliates as may be assigned to him from time to
time by the President and Chief Executive Officer of the Company. Employee shall
devote his entire business time and attention to the affairs of the Company and
Products and the performance of his duties hereunder and shall serve the Company
and Products diligently and to the best of his abilities.
Nothing in this Agreement shall prohibit Employee from participating in
civic or community organizations or from making passive investments using his
personal assets so long as such participation and investments do not interfere
with the performance of Employee's duties under this Agreement. In addition,
Employee may, with the prior written approval of the Compensation Committee,
serve as a member of the board of directors of any business that is not a direct
or indirect competitor of the Company, Products or their affiliates.
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3. Compensation.
(a) Base Salary. The Company shall pay to Employee base salary
at an annual rate of not less than Six Hundred Thousand Dollars
($600,000) during the term of his employment hereunder. Such amount
shall be reviewed annually by the President and Chief Executive Officer
of the Company and may be increased by the President and Chief
Executive Officer with the advice of the Compensation Committee.
(b) Bonus Plans. During the term of Employee's employment
hereunder, Employee shall be eligible to participate in the Company's
annual bonus plan, subject to the policies and procedures that the
Compensation Committee has adopted or shall, in its discretion, adopt
including, without limitation, policies regarding setting performance
objectives, targets amounts, evaluation, and the form and timing of
payments. The annual bonus target for Employee shall be One Hundred
Percent (100%) of Employee's base salary.
4. Other Benefits and Perquisites. Employee shall be entitled to such
fringe benefits and perquisites, and to participate in such pension, savings
plan and benefit plans, as are generally made available to similarly situated
executives of the Company during the term hereof, including consideration for
annual stock option awards, major medical, extended medical and disability
insurance, supplemental retirement income plan, group term life insurance and
appropriate annual holidays, sick days, perquisite account, and vacation time,
as such plans, policies and programs may exist from time to time, subject to the
terms and conditions of such plans, policies and programs.
5. Reimbursement of Expenses. The Company shall reimburse Employee for
all reasonable travel, entertainment and other reasonable business expenses
reasonably incurred by Employee in connection with the performance of his duties
hereunder, provided that Employee furnishes to the Company adequate records or
other evidence respecting such expenditures. The Company shall reimburse
Employee for the cost of legal counsel in connection with the review of this
Agreement on Employee's behalf, provided that such reimbursement shall not
exceed Five Thousand Dollars ($5,000).
6. Termination of Employment. Employee's employment under this
Agreement may be terminated:
(a) by the Company upon Employee's death (which shall be
referred to as a "Death Termination") or in the event of Employee's
absence from work for one-hundred and twenty (120) or more work days
out of any three hundred and sixty (360) day period on account of
Employee's physical or mental disability (which shall be referred to as
an "Inability Termination");
(b) by the Company for Cause, which means (i) fraud or
misappropriation with respect to the business of the Company or
intentional material damage to the property or business of the Company,
(ii) failure by Employee to perform his duties and responsibilities and
to carry out his authority, (iii) malfeasance or misfeasance or breach
of fiduciary duty or misrepresentation to the Company or its
stockholders, (iv) failure to act in accordance with any
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specific lawful instructions of the Board of Directors of the Company
or the President and Chief Executive Officer, (v) any grossly negligent
act or omission by Employee relating to the performance of his duties
hereunder which the Board, in its sole discretion, determines damages
the Company's reputation or future business prospects, (vi) any
intentional breach of the Company's written employment policies, or
(vii) any conviction of Employee of a felony (all of which shall be
referred to as a "For Cause Termination"); provided, however, that
Employee may, in the fourteen (14) day period following the date of any
written notice of termination as a result of the occurrence of any of
the events described in clauses (i) through (vi) above, provide written
evidence to the Committee that such determination was based on a
mistake of fact or that the circumstance giving rise to Cause has been
cured in such fourteen (14) day period. If the Committee finds that the
determination of Cause was based on a mistake of fact, or that the
Employee has given evidence satisfactory to the Committee in its sole
discretion that Cause has been cured within the fourteen (14) day
period, then the notice of termination may be revoked by the Committee.
If the Board or the Committee takes no action within such fourteen (14)
day period, the Termination Date shall be the date set forth in the
notice delivered to the Employee. The Committee may require Employee to
absent himself from the premises of the Company during any such
fourteen (14) day period. Failure of the Company to give notice of
Cause at the first instance of an event giving rise to Cause shall not
preclude Company from finding Cause in subsequent instances;
(c) by the Company at any time for any reason other than a For
Cause Termination, Death Termination or Inability Termination (which
shall be referred to as a "No Cause Termination");
(d) by Employee at any time for any reason other than a
"Constructive Termination" (as defined below) (which shall be referred
to as a "Voluntary Termination"); or
(e) by Employee within thirty (30) days after the occurrence
of one or more of the following: (i) any material reduction in
Employee's base salary, bonus opportunity, or health benefits, unless
such reduction is being made in conjunction with an across-the-board
reduction in the salaries of all similarly situated executives of the
Company or (ii) a material reduction in Employee's duties and
responsibilities or other breach of this Agreement by the Company,
(which shall be referred to as a "Constructive Termination"); provided,
however, that no event or circumstance described in clause (i) or (ii)
shall give rise to a "Constructive Termination" for purposes of this
Agreement unless Employee shall have given notice to the Company of
Employee's determination of the occurrence of an event or circumstance
described in clause (i) or (ii) and such event or circumstance shall be
continuing as of the end of forty-five (45) days after the giving of
such notice.
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7. Termination Procedure.
(a) Notice of Termination. Any termination of Employee's
employment by the Company or by Employee under Paragraph 6 hereof shall
be communicated by written Notice of Termination to the other party
hereto in accordance with Paragraph 13. For purposes of this Agreement,
a "Notice of Termination" shall mean notice that indicates the specific
termination provision in this Agreement relied upon and sets forth in
reasonable detail the facts and circumstances providing a basis for
termination of Employee's employment under the provision so indicated.
(b) Termination Date. "Termination Date" shall mean (i) if
Employee's employment is terminated pursuant to Paragraph 6(a) or (b)
above, the date on which a Notice of Termination is given or (ii) if
Employee's employment is terminated pursuant to Paragraph 6(c), (d) or
(e) above, thirty (30) days after the date on which a Notice of
Termination is given.
8. Benefits Upon Termination.
(a) Termination as a Result of Death, Inability, Voluntary or
For Cause Termination. If Employee's employment under this Agreement is
terminated prior to the expiration of the term of this Agreement as a
result of a Death Termination, an Inability Termination, a Voluntary
Termination or a For Cause Termination, the Company shall pay Employee
or, if applicable, Employee's estate or legal representative, (i)
Employee's unpaid base salary under Paragraph 3(a) accrued to the date
on which his employment terminates, (ii) any accrued but unused
vacation, and (iii) all vested and accrued benefits earned by Employee
under any employee benefit plans and programs sponsored by the Company
in which Employee participates, subject to the terms and conditions of
such plans and programs.
(b) Termination as a Result of No Cause Termination or
Constructive Termination. If Employee's employment under this Agreement
is terminated prior to the expiration of the term of this Agreement as
a result of a No Cause Termination or a Constructive Termination, the
Company shall pay and provide to Employee the following benefits:
(i) Employee's unpaid base salary accrued to the
Termination Date, any accrued but unused vacation, any
declared but unpaid bonus for the year preceding the
Termination Date;
(ii) base salary for twenty-four (24) months, based
on the rate of base salary in effect immediately preceding the
Termination Date;
(iii) an amount determined by multiplying Employee's
average actual, annual bonus under Section 3(b) for the prior
three (3) years (or such shorter term as Employee has
participated in a Company bonus program) by a fraction, the
numerator of which is
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the number of whole months of service by Employee during the
year in which occurs the Termination Date and the denominator
of which is twelve (12); and
(iv) continued participation in the benefit plans,
programs and arrangements described in Paragraph 4 during the
severance period described in Paragraph 8(b)(ii) above (other
than the vacation, holiday and sick pay policies, the annual
executive physical program, long-term disability plan and
supplemental retirement income plan); provided, however, that
participation in such benefit plans, programs and arrangements
shall cease prior to the expiration of the severance period to
the extent Employee has been offered or actually participates
in comparable benefit plans, programs or arrangements with
another employer during such period, and Employee shall report
any such offer or participation to the Company.
In addition, all outstanding stock options granted to Employee under
the Company's stock option plans will immediately vest upon a No Cause
Termination or a Constructive Termination prior to the expiration of
the term of this Agreement and will continue to be fully exercisable
until the earlier of ninety (90) days after the Termination Date or the
original expiration date of said options. The Company shall also cause
Employee to receive all vested and accrued benefits earned by Employee
under all employee benefit plans and programs sponsored by the Company
in which Employee participates.
(c) Method of Payment of Severance Compensation. The amount
due to Employee pursuant to Paragraph 8(b)(ii) above shall be paid on a
periodic basis in accordance with the Company's normal pay practice and
shall be subject to all customary withholding and tax deposit
requirements. The amount due to Employee pursuant to Paragraph
8(b)(iii) above shall be paid in a lump sum upon the expiration of the
severance period described in Paragraph 8(b)(ii), subject to all
appropriate withholding and tax deposit requirements.
(d) Employee's entitlement in the event of termination of
employment for any reason to benefits or payments under any retirement
or deferred compensation plans shall be determined in accordance with
and subject to the terms and conditions of such plans.
9. Covenants of Employee.
(a) Non-disparagement. Employee shall at all times refrain
from taking any action or making any statements, written or oral, which
are intended to and do disparage the goodwill or reputation 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 or its subsidiaries.
(b) Non-Competition. Employee shall not Compete (as
hereinafter defined) with the Company or any of its subsidiaries or
affiliates in any way
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during the term of his employment with the Company and for the
twenty-four (24) month period following the Termination Date (the
"Restricted Period"). "Compete" means to engage in any business
activity whatsoever related in any manner or fashion to any business of
the Company or any of its subsidiaries or affiliates. Without limiting
the generality of the foregoing, Employee shall not, during the
Restricted Period, directly or indirectly (whether for compensation or
otherwise), alone or as an agent, principal, partner, officer,
employee, trustee, director, shareholder or in any other capacity, own,
manage, operate, join, control or participate in the ownership,
management, operation or control of, or furnish any capital to, or be
connected in any manner with, or provide any services as an employee or
consultant for, any business which Competes with the Company or any of
its subsidiaries of affiliates; provided, however, that notwithstanding
the foregoing, nothing contained in the Agreement shall be deemed to
preclude Employee from owning not more than five percent (5%) of the
publicly traded securities of any entity which Competes with the
Company.
(c) Non-Solicitation. Employee covenants and agrees that he
will not, during the Restricted Period, (i) solicit, employ or
otherwise engage as an employee, independent contractor or otherwise,
any person who is or was an employee of the Company or any of its
subsidiaries or affiliates at any time during the twelve (12) month
period immediately preceding Employee's Termination, (ii) induce or
attempt to induce any employee of the Company or any of its
subsidiaries or affiliates to terminate such employment or (iii)
interfere with the relationship of the Company or any of its
subsidiaries or affiliates with any person, including any person who,
at any time during the twelve (12) month period immediately preceding
Employee's Termination Date, was an employee, contractor, supplier or
customer of the Company or any of its subsidiaries or affiliates.
(d) Confidential Information. Employee understands that in the
performance of services hereunder Employee may obtain knowledge of
"confidential information" (as hereinafter defined) relating to the
business of the Company (or of any of its subsidiaries or affiliates).
Employee shall not, without the prior written consent of the President
and Chief Executive Officer of the Company, either during Employee's
employment by the Company or at any time thereafter, (i) use or
disclose any such confidential information outside the Company (or any
of its subsidiary or affiliated companies) except as otherwise required
by law, (ii) publish any article with respect thereto, (iii) except in
the performance of services hereunder, remove from the premises of the
Company, or aid in such removal, any such confidential information or
any property or material related thereto or (iv) sell, exchange or give
away or otherwise dispose of any such confidential information now or
hereafter owned by the Company whether or not the same shall or may
have been originated, discovered or developed by Employee. It is
understood that for purposes of this Agreement the term "confidential
information" shall be construed broadly to include all information or
compilations of information which (i) is, or was designed to be, used
in the business of the Company (or any of its subsidiaries or
affiliates) or results from its (or their) research or development
activities, (ii) is private or confidential in that it
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is not generally known or available to the public and (iii) is intended
to give the Company (or any of its subsidiaries or affiliates) an
opportunity to obtain an advantage over competitors who do not know or
use it.
(e) Return of Materials. Upon the termination of Employee's
employment, Employee shall return to the Company all property of the
Company in or under Employee's possession or control, including without
limitation all tangible "confidential information" described in
Paragraph 9(d) above. Such return shall be made at such place in Troy,
Michigan as the Company shall specify and shall be made within five (5)
days after Employee's Termination Date.
(f) Cooperation. During Employee's employment by the Company
and thereafter, 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. Before the Termination Date and during any period for which
payments are received under Section 8, 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. If Employee is required to assist the Company
or any of its subsidiaries or affiliates with any Proceeding after the
Termination Date and the completion of any continuing payments under
Section 8, the Company shall pay Employee a reasonable per diem fee, in
addition to any expense reimbursement, for such assistance, based on
Employee's annual base salary rate immediately preceding the
Termination Date. 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 therefore.
(g) Acknowledgement Regarding Covenants. Executive
acknowledges and agrees that the promises and restrictive covenants set
forth in this Paragraph 9 are reasonable and necessary to protect the
interests of the Company and reasonably limited in time, scope and
territory. Executive acknowledges that, given his former position and
the information he possesses regarding the Company and its operations,
the business of the Company would be substantially and materially
damaged in the event of any violation of the promises and covenants
herein contained, and the Company shall be entitled (in addition to any
other remedy that may be available to it) to (i) a decree or order for
specific performance of any such promise or covenant and (ii) an
injunction restraining the violation or threatened violation of any
such promise or covenant. In addition, Employee shall immediately
forfeit all rights to any payments or benefits to which he may be
otherwise entitled under this Agreement in the event of a breach of any
of the covenants given in this Paragraph 9. The covenants of Employee
contained
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in this Paragraph 9 shall survive the expiration of this Agreement or
the termination of this Agreement by either party.
10. Release. In consideration of the compensation continuance available
in certain events pursuant to this Agreement, and as a condition to the receipt
of any such salary continuation and other benefits provided by this Agreement
following the Termination Date, Employee shall sign a written release by which
Employee shall unconditionally release and covenant not to sue the Company and
its affiliates and directors, officers, employees and stockholders thereof, and
release the Company and its affiliates and directors, officers, employees and
stockholders from any and all claims, liabilities and obligations of any nature
pertaining to termination of 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 implied contract of employment or termination contrary to public
policy.
11. Governing Law; Jurisdiction. The validity, interpretation and
performance of this Agreement shall be governed by the laws of Michigan,
regardless of the laws that might be applied under applicable principles of
conflicts of laws. Any legal proceeding filed in connection with a claim under
this Agreement shall be brought in a federal or state court in Michigan, and the
parties hereby submit to personal jurisdiction in those courts for such purpose.
12. Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the parties hereto with respect to the matters
referred to herein and supersedes all prior agreements and understandings
between the parties hereto with respect to the matters referred to herein.
13. Notice. Any written notice required to be given by one party to the
other party hereunder shall be deemed effective if mailed by certified or
registered mail:
To the Company: Collins & Aikman Products Co.
250 Stephenson Highway
Troy, MI 48083
Attention: Jay Knoll
General Counsel
To Employee: J. Michael Stepp
250 Stephenson Highway
Troy, MI 48083
or such other address as may be stated in notice given under this Paragraph 13.
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14. Severability. The invalidity, illegality or enforceability 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.
15. 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 Paragraph 10
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 of its subsidiaries or affiliates or to any purchaser of all
or a substantial portion of the assets of the Company or of any affiliated
company then employing Employee, and the employment of Employee by such
subsidiary or affiliate or by 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 Paragraphs 6, 7 and 8 or otherwise.
16. Amendment. This Agreement may be amended or canceled only by an
instrument in writing duly executed and delivered by each party to this
Agreement.
17. Headings. Headings contained in this Agreement are for or
convenience only and shall not limit this Agreement or affect the interpretation
thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
/S/ J. Michael Stepp
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J. Michael Stepp
COLLINS & AIKMAN CORPORATION
By: /S/ David A. Stockman
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Its: Chairman and Chief Executive Officer
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