SEVERANCE COMPENSATION AGREEMENT
THIS AGREEMENT ("Agreement") between UNIFI, INC., a New York corporation
(the "Company"), and WILLIAM T. KRETZER ("Executive") dated the 20th day of
July, 1993.
WITNESSETH THAT:
WHEREAS, William T. Kretzer is presently the President and Chief
Executive Officer of the Company, to which he was elected in 1985, and has
been an Officer or Executive Officer since 1975; and
WHEREAS, the Company's Board of Directors considers the establishment
and maintenance of a sound and vital Management to be essential in protecting
and enhancing the best interests of the Company and its Shareholders and
recognizes that the possibility of a change in control exists and that such
possibility, and the uncertainty and questions which it may raise among
Management, may result in the departure or distraction of Management
personnel to the detriment of the Company and its Shareholders; and
WHEREAS, the Executive desires that in the event of any change in
control he will continue to have the responsibility and status he has earned;
and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication
of members of the Company's Management, including the Executive, to their
assigned duties without distraction in potentially disturbing circumstances
arising from the possibility of a change in control of the Company.
NOW, THEREFORE, in order to induce the Executive to remain in the
employment of the Company and in consideration of the Executive agreeing to
remain in the employment of the Company, subject to the terms and conditions
set out below, the Company agrees it will pay such amount, as provided in
Section 4 of this Agreement, to the Executive, if the Executive's employment
with the Company terminates under one of the circumstances described herein
following a change in control of the Company, as herein defined.
SECTION 1. TERM: This Agreement shall terminate, except to the extent
that any obligation of the Company hereunder remains unpaid as of such time,
upon the earliest of (i) three years from the date hereof if a Change in
Control of the Company has not occurred within such three year period; (ii)
the termination of the Executive's employment with the Company based on
death, Disability (as defined in Section 3(b), Retirement (as defined in
Section 3(c)), Cause (as defined in Section 3(d)) or by the Executive other
than for Good Reason (as defined in Section 3(e)); and (iii) two years from
the date of a Change in Control of the Company if the Executive has not
voluntarily terminated his employment for Good Reason as of such time.
SECTION 2. CHANGE IN CONTROL: No compensation shall be payable under
this Agreement unless and until (a) there shall have been a Change in Control
of the Company, while the Executive is still an employee of the Company and
(b) the Executive's employment by the Company thereafter shall have been
terminated in accordance with Section 3. For purposes of this Agreement, a
Change in Control of the Company shall be deemed to have occurred if (i)
there shall be consummated (x) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant
to which shares of the Company's Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's Common Stock immediately prior to the merger have
the same proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (ii) the Shareholders of
the Company approved any plan or proposal for the liquidation or dissolution
of the Company, or (iii) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of twenty percent (20%) or more of the
Company's outstanding Common Stock, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Company's Shareholders, of each new Director was approved by a vote of at
least two-thirds of the Directors then still in office who were Directors at
the beginning of the period.
SECTION 3. TERMINATION FOLLOWING CHANGE IN CONTROL: (a) If a Change in
Control of the Company shall have occurred while the Executive is still an
employee of the Company, the Executive shall be entitled to the compensation
provided in Section 4 upon the subsequent termination of the Executive's
employment with the Company by the Executive voluntarily for Good Reason or
by the Company unless such termination by the Company is as a result of (i)
the Executive's death, (ii) the Executive's Disability (as defined in Section
(3)(b) below); (iii) the Executive's Retirement (as defined in Section 3(c)
below); (iv) the Executive's termination by the Company for Cause(as defined
in Section 3(d) below); or (v) the Executive's decision to terminate
employment other than for Good Reason (as defined in Section 3(e) below).
(b) DISABILITY: If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for six months (including months
before and after the change of control) and within 30 days after written
notice of termination is thereafter given by the Company the Executive shall
not have returned to the full - time performance of the Executive's duties,
the Company may terminate this Agreement for "Disability."
(c) RETIREMENT: The term "Retirement" as used in this Agreement shall
mean termination in accordance with the Company's retirement policy or any
arrangement established with the consent of the Executive.
(d) CAUSE: The Company may terminate the Executive's employment for
Cause. For purposes of this Agreement only, the Company shall have "Cause"
to terminate the Executive's employment hereunder only on the basis of fraud,
misappropriation or embezzlement on the part of the Executive or malfiscence
or misfiscence by said Executive in performing the duties of his office.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Company's Board of
Directors at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Executive was guilty of
conduct set forth in the second sentence of this Section 3(d) and specifying
the particulars thereof in detail.
(e) GOOD REASON: The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement.
For purposes of this Agreement "Good Reason" shall mean any of the following
(without the Executive's express written consent):
(i) the assignment to the Executive by the Company of
duties inconsistent with the Executive's position,
duties, responsibilities and status with the Company
immediately prior to a Change in Control of the Company;
or a change in the Executive's titles or offices as in
effect immediately prior to a Change in Control of the
Company; or any removal of the Executive from or any
failure to reelect the Executive to any of the positions
held prior to the change of control, except in connection
with the termination of his employment for Disability,
Retirement, or Cause, or as a result of the Executive's
death; or by the Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive's base
salary as in effect on the date hereof or as the same may
be increased from time to time during the term of this
Agreement or the Company's failure to increase (within 12
months of the Executive's last increase in base salary)
the Executive's base salary after a Change in Control of
the Company in an amount which at least equals, on a
percentage basis, the average percentage increase in base
salary for all executive officers of the Company effected
in the preceding 12 months;
(iii) any failure by the Company to continue in effect
any benefit plan or arrangement (including, without
limitation, the Company's Profit Sharing Plan, group life
insurance plan and medical, dental, accident and
disability plans) in which the Executive is
participating at the time of a Change in Control of the
Company (or any other plans providing the Executive with
substantially similar benefits) (hereinafter referred to
as "Benefit Plans"), or the taking of any action by the
Company which would adversely affect the Executive's
participation in or materially reduce the Executive's
benefits under any such Benefit Plan or deprive the
Executive of any material fringe benefit enjoyed by the
Executive at the time of a Change in Control of the
Company;
(iv) any failure by the Company to continue in effect
any plan or arrangement to receive securities of the
Company (including, without limitation, Stock Option
Plans or any other plan or arrangement to receive and
exercise stock options, restricted stock or grants
thereof) in which the Executive is participating at the
time of a Change in Control of the Company (or plans or
arrangements providing him with substantially similar
benefits) (hereinafter referred to as "Securities Plans")
and the taking of any action by the Company which would
adversely affect the Executive's participation in or
materially reduce the Executive's benefits under any such
Securities Plan;
(v) any failure by the Company to continue in effect any
bonus plan, automobile allowance plan, or other
incentive payment plan in which the Executive is
participating at the time of a Change in Control of the
Company, or said Executive had participated in during the
previous calendar year;
(vi) a relocation of the Company's principal executive
offices to a location outside of North Carolina, or the
Executive's relocation to any place other than the
location at which the Executive performed the Executive's
duties prior to a Change in Control of the Company,
except for required travel by the Executive on the
Company's business to an extent substantially consistent
with the Executive's business travel obligations at the
time of a Change in Control of the Company;
(vii) any failure by the Company to provide the
Executive with the number of paid vacation days to which
the Executive is entitled at the time of a Change in
Control of the Company;
(viii) any breach by the Company of any provision of
this Agreement;
(ix) any failure by the Company to obtain the assumption
of this Agreement by any successor or assign of the
Company; or
(x) any purported termination of the Executive's
employment which is not made pursuant to a Notice of
Termination satisfying the requirements of Section 3(f).
(f) NOTICE OF TERMINATION: Any termination by the Company pursuant to
Section 3(b), 3(c) or 3(d) shall be communicated by a Notice of Termination.
For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate those specific termination provisions in
this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. For purposes of
this Agreement, no such purported termination by the Company shall be
effective without such Notice of Termination.
(g) DATE OF TERMINATION: "Date of Termination" shall mean (a) if
Executive's employment is terminated by the Company for Disability, 30 days
after Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive's
duties on a full-time basis during such 30 day period) or (b) if the
Executive's employment is terminated by the Company for any other reason, the
date on which a Notice of Termination is given; provided that if within 30
days after any Notice of Termination is given to the Executive by the Company
the Executive notifies the Company that a dispute exists concerning the
termination, the Date of Termination shall be the date the dispute is finally
determined, whether by mutual agreement by the parties or upon final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected) or (c)
the date the Executive notifies the Company in writing that he is terminating
his employment and setting forth the Good Reason (as defined in Section
3(e)).
SECTION 4. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT. If
the Company shall terminate the Executive's employment other than pursuant to
Section 3(b), 3(c) or 3(d) or if the Executive shall voluntarily terminate
his employment for Good Reason, then the Company shall pay to the Executive
as severance pay in a lump sum, in cash, on the fifth day following the Date
of Termination, an amount equal to 2.99 times the average of the aggregate
annual compensation paid to the Executive during the five calendar years
preceding the Change in Control of the Company by the Company and any of its
subsidiaries; provided, however, that if the lump sum severance payment under
this Section 4, either alone or together with other payments which the
Executive has the right to receive from the Company, would constitute a
"parachute payment" (as defined in Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code")), such lump sum severance payment shall be
reduced to the largest amount as will result in no portion of the lump sum
severance payment under this Section 4 being subject to the excise tax
imposed by Section 4999 of the Code. The determination of any reduction in
the lump sum severance payment under this Section 4 pursuant to the foregoing
proviso shall be made by the Company's Independent Certified Public
Accountants, and their decision shall be conclusive and binding on the
Company and the Executive.
SECTION 5. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER
CONTRACTUAL RIGHTS: (a) The Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
the Executive as the result of employment by another employer after the Date
of Termination, or otherwise.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely
as a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreement or other contract, plan or arrangement.
(c) The Company shall, upon the termination of the Executive's
employment other than by death, Disability (as defined in Section 3(b)),
Retirement (as defined in Section 3(c)) or Cause (as defined in Section
3(d)), or the termination of the Executive's employment by the Executive
without Good Reason, maintain in full force and effect, for the Executive's
continued benefit until the earlier of (a) two years after the Date of
Termination or (b) your commencement of full time employment with a new
employer, all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which you were entitled to participate
immediately prior to the Date of Termination, provided that your continued
participation is possible under the general terms and provisions of such
plans and programs. In the event the Executive is ineligible under the terms
of such plans or programs to continue to be so covered, the Company shall
provide substantially equivalent coverage through other sources.
SECTION 6. SUCCESSOR TO THE COMPANY: (a) The Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform
it if no such succession or assignment had taken place. Any failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession or assignment shall be a material breach of this Agreement and
shall entitle the Executive to terminate the Executive's employment for Good
Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or
assets as aforesaid which executes and delivers the agreement provided for in
this Section 6 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law. If at any time during the
term of this Agreement the Executive is employed by any corporation a
majority of the voting securities of which is then owned by the Company,
"Company" as used in Sections 3, 4 and 11 hereof shall in addition include
such employer. In such event, the Company agrees that it shall pay or shall
cause such employer to pay any amounts owed to the Executive pursuant to
Section 4 hereof.
(b) If the Executive should die while any amounts are still payable to
him hereunder, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's
legatee, or other designee or, if there be no such designee, to the
Executive's estate. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives or attorney -in-fact,
executors or administrators, heirs, distributees and legatees.
SECTION 7. NOTICE: For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, as
follows:
If to the Company:
Unifi, Inc.
P. O. Box 19109
Greensboro, NC 27419-9109
ATTENTION: Mr. William T. Kretzer
President and Chief Executive Officer
If to the Executive:
Mr. William T. Kretzer
3039 Lake Forest Drive
Greensboro, NC 27408
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
SECTION 8. MISCELLANEOUS: (a) The invalidity or unenforceability of
any provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
(b) Any payment or delivery required under this Agreement shall be
subject to all requirements of the law with regard to withholding (including
FICA tax), filing, making of reports and the like, and Company shall use its
best efforts to satisfy promptly all such requirements.
(c) Prior to the Change in Control of the Company, as herein defined,
this Agreement shall terminate if Executive shall resign voluntarily, retire,
become permanently and totally disabled, or die. This Agreement shall also
terminate if Executive's employment as an officer of the Company shall have
been terminated for any reason by the Board of Directors of the Company as
constituted prior to any Change in Control of the Company, as herein defined.
SECTION 9. COUNTERPARTS: This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
SECTION 10. LEGAL FEES AND EXPENSES: The Company shall pay all legal
fees and expenses which the Executive may incur as a result of the Company's
contesting the validity, enforceability or the executive's interpretation of,
or determinations under, this Agreement.
SECTION 11. CONFIDENTIALITY: The Executive shall retain in confidence
any and all confidential information known to the Executive concerning the
Company and its business so long as such information is not otherwise
publicly disclosed.
IN WITNESS WHEREOF, Unifi, Inc. has caused this Agreement to be signed
by the Chairman of the Company's Compensation Committee pursuant to
resolutions duly adopted by the Board of Directors and its seal affixed
hereto and the Executive has hereunto affixed his hand and seal effective as
of the date first above written.
UNIFI, INC.
BY: KENNETH G. LANGONE
Chairman of the Compensation
Committee
WILLIAM T. KRETZER
William T. Kretzer
President and
Chief Executive Officer