SEPARATION AGREEMENT
In consideration for the agreement by Signal Apparel Company, Inc. ("the
Company") to provide John W. Prutch ("Employee") with the severance package,
payments and benefits outlined below, the sufficiency of which the Employee
acknowledges, Employee, on behalf of Employee, Employee's heirs, Employee's
successors and assigns, releases and forever discharges the Company and its
officers, directors, employees, shareholders (specifically including, but not
limited to WGI LLC, including its individual and company affiliates),
representatives, subsidiaries, parent and affiliated companies and their
respective assigns from any and all claims, damages, liabilities and causes of
action, whether known or unknown which the Employee may presently have or claim
to have against the Company and/or any of the above persons or entities whether
or not relating to or arising out of Employee's employment by or relationship
with the Company or the termination of that employment relationship including,
but not limited to, claims under federal, state, or local constitutions,
statutes, regulations, ordinances or common law, including, but not limited to
the Employee Retirement Income Security Act, and the Civil Rights Act, as
amended and specifically including, but not limited to the employee agreement
between the Company and Employee dated October 2, 1997 (the "Employment
Agreement"), the unsigned agreement by Employee for acquisition and financial
advisory services between the Company, Employee and Thomas McFall dated August
10, 1998 (the "August 10, 1998 Agreement") and the agreement between the Company
and Weatherly Financial dated May 9, 1997 (the "Weatherly Agreement") and
including any written or oral amendments to the foregoing as well as any other
oral or written agreements between the Company and Employee of whatever nature.
In consideration for the releases and agreements herein by Employee the
sufficiency of which the Company acknowledges, the Company, on behalf of itself
and its successors and assigns, releases and forever discharges the Employee and
his heirs, legal representatives, attorneys, agents and assigns from any and all
claims, damages, liabilities and causes of action, whether known or unknown,
which the Company may presently have or claim to have against Employee and/or
any of the above persons or entities, whether or not relating to or arising out
of Employee's employment by or relationship with the Company, or the termination
of that employment relationship, or otherwise, including, but not limited to,
claims under federal, state, or local constitutions, statutes, regulations,
ordinances or common law, including, but not limited to the Employment
Agreement, the August 10, 1998 Agreement and the Weatherly Agreement and
including any written or oral amendments to the foregoing as well as any other
oral or written agreements between the Company and Employee of whatever nature.
The foregoing releases and discharges shall become effective on the Closing
Date upon consummation of the Closing (as such terms are defined in the Stock
Purchase Agreement dated as of July 31, 1999 between the Company as "Seller" and
the Employer as "Buyer" (the "Stock Purchase Agreement") the terms of which are
specifically incorporated herein by reference). Notwithstanding anything to the
contrary in this Agreement, nothing in this Agreement or otherwise shall be
deemed to constitute a release, discharge, termination or
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waiver or other limitation of any of (i) Employee's or the Company's rights,
benefits or interests now or hereafter arising under this Agreement, the Stock
Purchase Agreement or any other agreement entered into in connection with such
agreements, (ii) any party's rights, remedies or claims now or hereafter arising
in connection with any breach, default or violation under this Agreement, the
Stock Purchase Agreement or any other agreement entered into in connection with
such agreements or (iii) any rights of Employee to indemnification from the
Company or any of its affiliates, now existing or hereafter arising, in
connection with his acts or omissions as an officer, director, employee or agent
thereof, whether arising under the Company's by-laws, applicable law or
otherwise.
The Company and Employee agree that:
1. Employee's employment with the Company shall cease and the Employment
Agreement shall terminate as of the Closing Date upon consummation of
the Closing, and Employee hereby resigns as an employee, officer and
director of the Company and all affiliated companies (excluding GIDI
Holdings, Inc. ("GIDI") but specifically including as a director of
the USISL) as of that date.
2. As severance pay, the Company shall pay Employee the equivalent of
four months of Employee's annual base salary of $150,000 (i.e.
$50,000), less legally required withholdings. Such severance pay shall
be paid in equal installments every two weeks in accordance with the
schedule Employee is currently receiving salaried compensation.
3. The Company shall permit Employee to maintain Employee's existing
health and dental insurance benefits from the Closing Date through
October 31, 1999 provided Employee continues the payment of Employee's
portion of the premiums with respect to such insurance.
4. The Company shall extend all medical and dental benefits after October
31, 1999 for the period of eighteen months at the option of the
Employee in accordance with the Consolidated Omnibus Budget
Reconciliation Act (COBRA) of 1986.
5. The Company and Employee agree that Employee is entitled to no
additional compensation for unused vacation as any amount otherwise
due for such vacation is reflected in the severance pay provided in
Section 2 above.
6. The Company and Employee agree that the stock options issued to
Employee by the Company pursuant to Section 7(e) of the Employment
Agreement are terminated and null and void as of July 31, 1999.
7. As the total and final compensation Employee is to receive under the
terms of the August 10, 1998 Agreement and the Weatherly Agreement,
the Company
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and Employee agree as follows:
(a) The Company agrees to pay Employee the sum of $100,000 payable in
83,333 shares of the Company's Common Stock (the "Prutch Common
Stock") which Common Stock will be issued by the Company to
Employee as soon as practicable (and in any event within 45 days)
following the Closing Date and held by the Company in escrow
until such time as the conditions of Section 9.6 of the Stock
Purchase Agreement have been fully satisfied, whereupon the
certificates for such Prutch Common Stock promptly (and in any
event within 10 days) shall be delivered to Employee. The Company
intends to issue such shares pursuant to its 1999 Stock Incentive
Plan and shall register such shares pursuant to the Securities
Act of 1933 within 60 days after the Closing Date. Employee
agrees that the Prutch Common Stock may not be sold prior to
January 1, 2000 under any circumstances and such shares shall
bear a restrictive legend to that effect;
(b) The Company hereby re-confirms its grant effective May 8, 1998 of
warrants to Employee to purchase 1,536,515 shares of the
Company's Common Stock in accordance with the terms of the
warrant certificate attached to this Agreement as Attachment A
(the "Warrants"). Said Warrant certificate is to be retained in
escrow by the Company until such time as the conditions of
Section 9.6 of the Stock Purchase Agreement have been fully
satisfied, whereupon it shall be promptly (and in any event
within 10 days) delivered to Employee.
(c) Employee acknowledges that $100,000 in additional fees
potentially owed pursuant to the August 10, 1998 Agreement is in
dispute, and Employee specifically waives any claim Employee may
have for payment of such disputed fees.
Other than the compensation set forth in (a) and (b) above and except
as set forth below, the Company and Employee agree that as to
Employee, the August 10, 1998 Agreement is terminated as of July 31,
1999, and the Weatherly Agreement terminated as of August 10, 1998.
Except as set forth above, Employee specifically renounces all rights
to receive any additional compensation in any form, including but not
limited to in the form of additional warrants to purchase the
Company's Common Stock, now or at any time in the future pursuant to
the August 10, 1998 Agreement or the Weatherly Agreement or any other
oral or written agreement between the Company and Employee. Employee
further specifically renounces any rights now or in the future to be
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nominated or elected to the Company's Board of Directors or to
designate a candidate to be nominated or elected to the Company's
Board of Directors. Notwithstanding the foregoing provisions of this
paragraph, such provisions shall not become effective unless and until
the Closing has occurred.
Notwithstanding the foregoing, Employee agrees to execute the
assignments attached hereto as Attachments B which attachments are
specifically incorporated herein by reference.
8. The Company shall not be obligated to provide any other severance,
payments or benefits other than those discussed in this Agreement and
no severance, payments or benefits will be provided until the Company
receives a signed copy of this Agreement.
THE EMPLOYEE AGREES THAT:
(a) The severance, payments and other benefits to be provided by the
Company under this Agreement and the other agreements hereunder and
under the Stock Purchase Agreement are intended to resolve any
potential claim by the Employee concerning Employee's employment by
and relationship with the Company and his termination from such
employment and relationships. These severance, payments and other
benefits exceed the benefits Employee would have received had Employee
not executed this Agreement.
(b) The Employee has been advised to discuss this Agreement and Release
with an attorney of Employee's choice before signing it, and is freely
and voluntarily signing this document in exchange for the promises and
consideration provided by the Company under this Agreement.
(c) This Agreement and Release constitute the entire agreement between the
Employee and the Company concerning the Employee's employment by and
relationships with the Company and Employee's separation therefrom.
This Agreement and the other agreements referenced will supersede all
prior written or oral agreements or understandings between the Company
and the Employee relating to his employment by and relationships with
the Company and his separation therefrom, specifically including but
not limited to the Employment Agreement, the August 10, 1998 Agreement
and the Weatherly Agreement. Notwithstanding the foregoing, Employee
hereby reconfirms Employee's obligation to comply with Sections 4 and
9 of the Employment Agreement provided such sections shall not be
deemed to apply to any information or documentation of or concerning
GIDI or its assets, business or property.
(d) Each party agrees to cooperate fully with the other in connection with
the transition of Employee's responsibilities from Employee and
transition of
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ownership of GIDI to Employee and to refrain from making disparaging
comments concerning the other to any account or any other third party.
(e) Employee further acknowledges that he has been given at least
Twenty-Five (25) days to review and consider this Agreement. This
offer will expire at the close of business on the 25th day following
its presentment to Employee unless a signed copy of this Agreement has
been returned to the Company by that date.
(f) In further consideration for the Agreement by the Company to provide
Employee with the severance package, payments and benefits outlined
above, the sufficiency of which the Employee acknowledges, effective
concurrently with Employee's release set forth above in the first
paragraph, Employee, on behalf of himself, Employee's successors, and
assigns, releases and forever discharges the Company and its
subsidiaries, parent and affiliated companies and their respective
assigns from any and all claims or causes of action relating to or
arising out of Employee's employment by the Company or the termination
of that employment which arises under the Age Discrimination in
Employment Act, as amended. The Employee further acknowledges that he
may revoke acceptance to the waiver of claims under the Age
Discrimination in Employment Act, by notifying the Company of such
revocation within seven (7) days of the execution of this Agreement.
The Company will not provide severance payments until the expiration
of this seven day period.
(g) 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 through GIDI or
any other party, in any manner with the business conducted by the
Company for a period of one year from the date of this Agreement.
Employee further agrees for a period of one year from the date of this
Agreement, not to enter, directly or indirectly through GIDI or any
other party, into the employ of or render any service to or become
affiliated with, any person, firm or corporation which competes with
the Company. The term "compete(s)" for the purposes of this Section
shall mean any business which is involved in the sale to any customer
of the Company as of the date of this Agreement of ladies and men's
swimwear and/or swimwear cover-ups and/or ladies activewear and/or
bodywear or any business which holds a license for apparel products
from any licensor of the Company as of the date of this Agreement.
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 (g) will also include the
Company's affiliated and/or subsidiary companies. The foregoing shall
not apply to the purchase of Iron Knights by
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Employee or by a company with which Employee is affiliated or the
purchase by Iron Knights of GIDI Holdings, Inc. or the development of
a business relationship between GIDI Holdings, Inc. and Iron Knights.
It is specifically agreed that this Section prohibits Employee,
directly or indirectly through GIDI or any other party, for a period
of one year from the date of this Agreement, from purchasing the
assets or capital stock of the company holding the Umbro license for
Canada or such company purchasing the assets or capital stock of any
company with which Employee is affiliated. Except as specifically set
forth above, the foregoing further shall not prohibit or limit
Employee's right to own, operate or otherwise participate in the
business of GIDI.
This Agreement will be interpreted in accordance with the laws of the State of
New York.
The foregoing is agreed to between Employee and the Company as of July 31, 1999.
/s/ John W. Prutch
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JOHN W. PRUTCH
SIGNAL APPAREL COMPANY, INC.
/s/ Robert J. Powell
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ROBERT J. POWELL
VICE PRESIDENT
The undersigned hereby acknowledge and accept the provisions of the foregoing
Agreement relating to the August 10, 1998 Agreement and the Weatherly Agreement.
WEATHERLY FINANCIAL
By: /s/ Thomas A. McFall
--------------------------------
Its: Chairman
/s/ Thomas A. McFall
-------------------------------------
THOMAS A. MCFALL
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