EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made between SIGNAL
APPAREL COMPANY, INC., an Indiana corporation, with its
principal offices at 200-A Manufacturers Road, Chattanooga,
Tennessee (the "COMPANY") and JOHN W. PRUTCH (the
"EMPLOYEE").
RECITALS:
The Company and the Employee have reached an
understanding with respect to the employment of the Employee
by the Company. The parties desire to set forth their
understanding with respect to such employment fully and
completely in writing.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT. The Company shall employ the Employee
as its President, and the Employee shall work for the
Company in such capacity upon the terms and conditions set
forth herein. Employee's primary responsibilities will be
to provide advice concerning the sales and marketing
activities of the Company (which shall include its
affiliated and subsidiary companies) and to develop
incremental sales opportunities through acquisition
activities and new sales ventures. In this capacity,
Employee will report to the Company's Chief Executive
Officer, or if there is no Chief Executive Officer, to such
other person as the Company's Board of Directors shall
designate. Subject to the fiduciary responsibilities of the
Company's Board of Directors, Employee will be nominated for
election to the Company's Board of Directors so long as
Employee remains an employee.
2. EXCLUSIVE AGREEMENT. During the term of this
Agreement, the Employee shall devote his full time and best
effort to the business of the Company. Employee agrees to
sign and adhere to the Company's Corporate Code of Conduct.
3. EMPLOYMENT TERM. Unless earlier terminated in
accordance with the terms of this Agreement, the Employee's
term of employment by the Company (the "Employment Term")
shall be for the period commencing with the closing of the
Company's acquisition of GIDI Holdings, Inc./Grand Illusion
Sportswear and ending December 31, 1999. In the event
Signal elects not to close such acquisition, this Agreement
shall be null and void.
4. CONFIDENTIAL INFORMATION. The Employee
acknowledges that any use of the Company's Confidential
Information (defined below) by the Employee other than for
the sole benefit of the Company would be wrongful and cause
irreparable harm to the Company. Accordingly, the Employee
shall not, at any time during or subsequent to his
employment by the Company, without the express written
consent of the Company, publish, disclose or divulge to any
person, firm or corporation, or use, directly or indirectly,
for his own benefit or for the benefit of any person, firm
or corporation, for use other than for the Company, any
property, trade secrets, or Confidential Information
(defined below) of the Company or its affiliates.
"Confidential Information" includes, but
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is not limited to all data, reports, interpretations,
forecasts, records, statements (written and oral) and
documents of any kind relating to the Company's costs and
financial information, manufacturing methods or processes,
market studies, products, existing and potential customers,
pricing methods and strategies, new product plans and
sources of supply acquired by Employee during Employee's
employment by the Company. In addition, all other
information disclosed to the Employee or which the Employee
shall obtain during such employment with the Company which
the Employee has a reasonable basis to believe to be
confidential, or which the Employee has a reasonable basis
to believe the Company treats as confidential, shall be
presumed to be Confidential Information.
5. ACQUISITION/FINANCING ACTIVITIES. It is
acknowledged that the Company entered into an agreement with
the Weatherly Financial Group ("Weatherly") dated May 9,
1997 (the "Agreement") pursuant to which Employee, as an
associate of Weatherly, was entitled to receive certain
compensation in return for Employee's services as an
acquisition and financial advisor.
Beginning with the commencement of this Agreement, in
consideration of Employee becoming an employee of the
Company and rendering acquisition and financial services to
the Company, it is agreed, subject to the written agreement
of Weatherly, that one-half of the compensation (including
the issuance of warrants) otherwise payable to Weatherly
under the Agreement will be paid directly to Employee in the
same manner and time as such compensation would have been
payable to Weatherly. The Company and Employee agree to
execute an addendum to this Agreement as soon as practicable
reflecting the above arrangement. Said addendum will also
reflect the compensation to which Employee is entitled under
this Section 5 in the event of the termination of Employee's
employment.
6. SALARY AND EXPENSES. The Company shall pay the
Employee an annual base salary of $150,000 in accordance
with the normal payroll practices of the Company. The
Company shall also reimburse the Employee for all
reasonable, legitimate and documented business expenses
incurred by him, on behalf of the Company, upon submission
of accounts in satisfactory form, subject to such reasonable
limitations as the Company may impose in its discretion from
time to time as set forth in the Company's standard
practices and procedures.
7. ADDITIONAL BENEFITS. In addition to the
compensation described in Sections 5 and 6, the Employee
shall be entitled during the Employment Term to receive the
following additional benefits:
(a) HEALTH INSURANCE. The Company will provide
the Employee with health insurance coverage consistent with
the coverage provided to other employees of the Company from
time to time.
(b) RETIREMENT PLANS. The Employee will be
eligible to participate in
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the Company's 401(k) retirement plan and such other
retirement plans as may be established by the Company from
time to time.
(c) HOLIDAYS AND VACATIONS. The Employee shall
be entitled to such paid holidays as may be designated by
the Company. In addition, the Employee shall be entitled to
three weeks of paid vacation for each year during which time
his compensation shall be paid in full. For the remainder
of calendar year 1997, Employee shall be entitled to one
week of paid vacation.
(d) SICK LEAVE. The Employee shall be entitled
to sick leave in accordance with Company practices.
(e) OPTIONS. Employee will be granted options to
purchase 150,000 shares of Signal Common Stock. Such
options will be granted in accordance with the Company's
1985 Stock Option Plan and will have terms and conditions
consistent with options granted to other senior executives
of the Company and the following specific terms:
(1) An exercise price of $2.375 per share,
subject to adjustment;
(2) Two-thirds of the option will vest two
years from date of grant and the option
will be fully exercisable three years
from date of grant;
(3) If employee is terminated for cause or
resigns within the Employment Term, all
outstanding options will be canceled;
(4) If Employee is terminated without cause
during the Employment Term, two-thirds
of the option will become exercisable
and remain exercisable for three months
if incentive options, and for one year
if non-incentive options;
(5) If Employee is terminated or resigns at
the conclusion of the Employment Term,
the option will become fully exercisable
and remain exercisable for three months
if incentive options, and for one year
if non-incentive options.
(f) BONUS. As soon as practicable, the Company
and the Employee will agree upon a bonus program for
Employee to be in effect during the term of this Agreement.
The terms and conditions of said bonus program will be added
to this Agreement by subsequent amendment.
Unless changed by said amendment, the bonus program
will be subject to the following conditions:
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Any bonus payment payable pursuant to this Section
shall be made in a lump sum payment within two weeks of the
finalization of the Company's year-end audit.
Notwithstanding the foregoing, Employee must be
employed with the Company on December 31 of any given year
in order to be eligible to receive the above bonus for that
year. In the event Employee is not so employed, the
following provisions shall apply:
(1) If Employee is terminated for cause by the
Company, Employee shall receive no bonus for that
year or any other year regardless of whether such
bonus is otherwise payable. If Employee
voluntarily terminates Employee's employment with
the Company prior to December 31 of any given
year (except as described under the circumstances
in Section 8(c)), Employee shall receive no bonus
for that year or any subsequent year;
(2) If Employee is terminated by the Company without
cause, prior to December 31 of any given year, or
if Employee exercises Employee's rights under
Section 8(c) prior to December 31 of any given
year, or if this Agreement is terminated prior to
December 31 of any given year upon the death or
disability of Employee as provided in Section
8(a), Employee shall receive only a prorata
portion of any bonus earned pursuant to this
Section 7 which prorata portion shall be based
upon the percentage of 365 calendar year days for
which Employee is employed during said calendar
year. Any bonus due pursuant to this subsection
(2) shall be paid as provided in this Section 7.
Any direct or indirect payments made by the Company to
or on behalf of the Employee determined by the Company's
accountants to be reportable for tax purposes shall be
treated as compensation to the Employee.
8. TERMINATION OF EMPLOYMENT.
(a) The Employee's employment pursuant to this
Agreement shall terminate upon the death of the Employee or
upon his inability, by reason of a mental or physical
condition, to perform his duties hereunder for an
uninterrupted period of sixty (60) days ("Disability"), and
may be terminated for "cause" (as defined below) by the
Company at any time during the Employment Term immediately
upon written notice of termination (except as provided
otherwise below) given by the Company to the Employee
describing such cause. For purposes of this Agreement,
"cause" for termination shall be deemed to exist if: (i)
the Employee is convicted of a felony; (ii) the Employee
engages in dishonesty or fraud involving the Company; or
(iii) the Employee breaches any of his material obligations
as President or any material obligations reasonably assigned
to the Employee by the Company's Chief Executive Officer or
Board of Directors.
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Any written notice of termination for cause pursuant to
this Section shall be a written notice which (a) indicates
the specific termination provision relied upon, (b) sets
forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee's
employment, and (c) if the date of termination is other than
the date of receipt of such notice, specifies the
termination date. In the event that Employee's employment
is terminated pursuant to subsection (iii) above and
Employee's breach of said material obligations is of type
which is subject to cure, then Employee shall have a period
of thirty (30) days to cure the breach of Employee's
obligations under this Agreement as described in the notice
of termination. In the event that Employee cures such
breach within said thirty (30) day period, the notice of
termination shall be considered rescinded. In the event
that Employee fails to cure such breach or such breach is
not of a type which is subject to cure, then this Agreement
will terminate without further notice to Employee as set
forth in the notice of termination, and the provisions of
8(b) shall be applicable. Employee shall not have the
opportunity to cure any termination for cause pursuant to
subsections (i) and (ii) above.
(b) In the event (i) the Employee's employment
under this Agreement is terminated for cause as provided
above, or (ii) the Employee voluntary terminates his
employment with the Company, prior to the end of the
Employment Term, the Company shall promptly pay to the
Employee (or to the Employee's legal representatives) the
amount of any compensation attributable to periods prior to
such termination pursuant to Section 6, plus the amount of
any reimbursable expenses. No other payments shall be due
Employee.
(c) In the event the Employee's employment is
terminated without cause, or the Employee loses his
employment for any other reason other than pursuant to
Section 8(a) and/or (b), including but not limited to
bankruptcy, closure, reorganization, buyout, merger,
consolidation or for any other reason, or Employee, without
Employee's approval, receives a material diminution in
responsibilities, title, or position from the level of
employee's responsibilities, title or position as of the
commencement of this Agreement, and Employee elects to
terminate his employment in writing as a result of and
within thirty days of such diminution, then unless the
Company rectifies such diminution within said thirty-day
period, Employee will be entitled to severance payments
equal only to one year's salary as provided in Section 6
above and continuation of existing health care benefits for
one year. No other payments shall be due Employee except
any bonus payments which may be due pursuant to Section
7(f). Said severance payments shall be paid in the same
manner and on the same schedule (i.e. monthly, weekly, etc.)
as Employee was being paid on the date of termination. To
the extent possible under the Company's Stock Option Plan,
all previously granted stock options shall automatically
vest and become immediately exercisable under this
provision. Severance payments being made pursuant to this
Section shall survive the death of Employee.
9. DUTY OF THE EMPLOYEE UPON TERMINATION. The
Employee shall, upon termination of this Agreement, return
to the Company all of the Company's records of any
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type and all literature, supplies, letters, written or
printed forms, and/or memorandum pertaining to the Company's
business.
10. COVENANTS ON TERMINATION.
(a) During the Employment Term and for a period
of one (1) year thereafter, the Employee shall not, directly
or indirectly, on Employee's own behalf or on behalf of any
other person, corporation, partnership or any other entity,
whether as an employee, officer, director, proprietor,
partner, investor, consultant, advisor, agent or in any
other capacity, induce or attempt to induce any customer of
the Company to reduce its business with the Company, or
solicit or attempt to solicit any employees of the Company
to leave the employ of the Company, nor shall Employee
affiliate with any party engaging in the above actions.
(b) The Employee acknowledges that the
restrictions contained in this Section are reasonable and
necessary to protect the business and interests of the
Company and that any violation of these restrictions will
cause substantial and irreparable injury to the Company.
Therefore, notwithstanding the provisions of Section 14
below, the Employee agrees that the Company is entitled, in
addition to any other remedies, to seek preliminary and
permanent injunctive relief to secure specific performance,
and to prevent a breach or contemplated breach of this
Agreement.
11. COVENANT NOT TO COMPETE.
(a) As a material inducement for the Company to enter
into this Agreement and in consideration of the compensation
to be paid hereunder, Employee agrees not to compete,
directly or indirectly, in any manner with the business
conducted by the Company during the Employment Term and
through any period Employee is receiving severance payments
pursuant to Section 8(c). Employee further agrees, during
the Employment Term and through any period Employee is
receiving severance payments pursuant to Section 8(c), not
to enter, directly or indirectly, into the employ of or
render any service to, any person, firm or corporation which
competes with the Company. Employee acknowledges that he is
fully aware of the nature of the Company's business as a
result of Employee's independent investigation, and that
Employee has been given full opportunity to consult with the
Company's executives concerning the nature and scope of such
business. Employee expressly acknowledges that this
condition does not impose economic hardship on him. It is
expressly agreed that any reference to the Company in this
Section 11(a) will also include the Company's affiliated
and/or subsidiary companies.
(b) In the event of the resignation of Employee upon
the expiration of this Agreement or the termination of
Employee's employment upon the expiration of this Agreement,
the Company, in its sole discretion, shall have the option,
but not the obligation, to extend for up to one year the
period during which the above covenant not to compete shall
be applicable by providing severance payments during such
period
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equivalent to the payments Employee would have received had
Employee remained employed at his then current salary for a
like period. As an example, if the Company desires to
extend the covenant for six months beyond the termination of
Employee upon the expiration of the Agreement, Employee will
be paid his annual base salary for six additional months at
the same time(s) monthly and in the same manner Employee was
last paid during the Employment Term. Said option shall be
exercised by written notice to Employee stating the period
during which said covenant will remain in effect.
(c) In the event of the termination of Employee for
cause pursuant to Section 8(a) or the resignation of
Employee at any time during the Employment Term, Employee
will be bound by the provisions of Section 11(a) above for
the greater of one from the effective date of such
termination or resignation or the period remaining in the
Employment Term.
12. SEVERABILITY. In the event any clause or
provision of this Agreement shall be held to be invalid or
unenforceable, the same shall not affect the validity or
enforceability of any other provision herein, and this
Agreement shall remain in full force and effect in all other
respects. If a claim of invalidity or unenforceability of
any provision of this Agreement is predicated upon the
length of the terms of any covenant or the area covered
thereby, such provision shall not be deemed to be invalid or
unenforceable; rather, such provision shall be deemed to be
modified to the maximum area or the maximum duration as any
court of competent jurisdiction shall deem reasonable, valid
and enforceable.
13. ENTIRE AGREEMENT. The parties understand and
agree that this Employment Agreement is the entire Agreement
between the parties regarding the terms and conditions of
the Employee's employment and there are no other agreements.
The terms of this Agreement may not be varied, modified,
supplemented or in any other way changed by extraneous
verbal or written representations by the Company or its
agents to the Employee, unless by amendment to this
Agreement executed in writing by both parties.
14. GOVERNING LAW. The Agreement shall be governed
by, construed and enforced in accordance with the laws of
the state of Tennessee.
15. ARBITRATION. Each party agrees not to bring suit
against the other party in the courts of any jurisdiction in
connection with any dispute which might be the subject of a
civil action arising from the interpretation or application
of this Agreement. Each party agrees that any such dispute
shall be finally resolved by submission to compulsory
commercial arbitration to be held in Chattanooga, Tennessee
according to the American Arbitration Association rules, by
one or several arbitrators appointed. The parties agree to
be bound by the decision of the arbitration and that a
judgment of any court of competent jurisdiction may be
rendered upon the award made pursuant to said submission to
arbitration.
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16. SURVIVAL. The Covenants of Paragraphs 4, 10, 11,
12 and 14 shall survive the termination of this Agreement.
17. NOTICE. All notices, demands, requests, consents,
reports, approvals, or other communications which may be or
are required to be given, served, or sent pursuant to this
Agreement shall be in writing and shall be mailed by first
class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram or
hand delivery, addressed as first set forth above, or such
other address as a party may subsequently specify in
writing.
IN WITNESS WHEREOF, the parties have executed this
Agreement this 2 day of October, 1997.
SIGNAL APPAREL COMPANY, INC.
Dated: Oct. 2, 1997 By: /S/ Robert J. Powell
Its: Vice President & General Counsel
Dated: 10/2/97 /S/ John W. Prutch
JOHN W. PRUTCH