FIELDCREST CANNON, INC.
Inter-Office Correspondence
July 12, 1993
PERSONAL & CONFIDENTIAL
Mr. T. R. Staab
Eden
RE: Employee Retention Agreement
Dear Tom:
Fieldcrest Cannon, Inc. (the "Company") recognizes that, as
is the case with many publicly-held corporations, the possibility
of a change in control may exist and that such possibility, and
the uncertainty and questions which it may raise among key
personnel, may result in the departure or distraction of key
personnel to the detriment of the Company, its stockholders and
its customers.
The Board of Directors of the Company (the "Board") has
determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of the
Company's key personnel, including yourself, to their assigned
duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control
of the Company.
In order to induce you to remain in its employ, the Company
agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your
employment with the Company is terminated under the circumstances
described below subsequent to a "Change in Control" of the
Company (as defined below).
1. Change in Control.
As used herein, the following terms shall have the
following respective meanings:
(a) A "Change in Control" shall occur or be deemed to
have occurred only if any of the following events occur:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (other than Dumaines Trust, Amoskeag
Company, a Delaware corporation ("Amoskeag"), or any
majority owned subsidiary thereof, the Company, any trustee
or other fiduciary holding securities under an employee
benefit plan of the Company, any trustee or other fiduciary
of a trust treated for federal income tax purposes as a
grantor trust of which the Company is the grantor, or any
corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportion as their
ownership of stock of the Company) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting
power of the Company's then outstanding securities or any
matter which could come before its stockholders for
approval; (ii) any "person" (other than the Dumaines Trust,
the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company,
any trustee or other fiduciary of a trust treated for
federal income tax purposes as a grantor trust of which the
Company is the grantor, or any corporation owned directly or
indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of
stock of the Company) is or becomes the "beneficial owner,"
directly or
indirectly, of securities of Amoskeag
representing 30% or more of the combined voting power of
Amoskeag's then outstanding securities on any matter which
could come before its stockholders for approval, at any time
at which Amoskeag is the "beneficial owner," directly or
indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then
outstanding securities on any matter which could come before
the stockholders for approval; (iii) individuals who, as of
the date hereof, constitute the Board (as of the date
hereof, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that
any person becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board (other
than an election or nomination of an individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
the directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) shall be,
for purposes of this Agreement, considered as though such
person were a member of the Incumbent Board; (iv) the
stockholders of the Company approve a merger or
consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result
in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately
after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no "person"
(as hereinabove defined) acquires more than 30% of the
combined voting power of the Company's then outstanding
securities; or (v) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(b) A "Potential Change in Control" shall be deemed to
have occurred if:
(i) the Company enters in an agreement, the
consummation of which would result in the occurrence of
a Change in Control of the Company,
(ii) any person (including the Company) publicly
announces an intention to take or to consider taking
actions which, if consummated, would constitute a
Change in Control of the Company; or
(iii) the Board of Directors of the Company adopts
a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control of the Company
has occurred.
2. Term of the Agreement.
The term of this Agreement (the "Term") shall commence
on July 9, 1993 and shall continue in effect through December 31,
1994; provided, however, that commencing on January 1, 1995 and
each January 1 thereafter, the Term shall be automatically
extended for one additional year unless, not later than September
30 of the preceding calendar year, the Company shall have given
you written notice that the Term will not be extended; and
provided further that, if a Change in Control of the Company
shall have occurred during the original or extended Term, this
Agreement shall continue in effect for a period of not less than
24 months beyond the month in which such Change in Control
occurred.
3. Change in Control; Potential Change in Control.
(a) No benefits shall be payable under this Agreement
unless there has been a Change in Control of the Company
during the Term.
(b) You agree that, notwithstanding any provision to
the contrary in this Agreement, in the event of a Potential
Change in Control of the Company, you will not voluntarily
resign as an employee of the Company until the earliest of
(A) a date which is six (6) months after the occurrence of
such Potential Change in Control of the Company or (B) the
termination by you of your employment by reason of
Disability as defined in Section 4(b)(i) or for Good Reason
as defined in Section 4(b)(iii).
4. Employment Status; Termination Following Change in
Control.
(a) You acknowledge that this Agreement does not
constitute a contract of employment or impose on the Company
any obligation to retain you as an employee and this
Agreement does not prevent you from terminating your
employment at any time except as provided in Section 3(b).
If your employment with the Company terminates for any
reason and subsequently a Change in Control shall have
occurred, you shall not be entitled to any benefits
hereunder. Any termination of your employment by the
Company or by you following a Change in Control of the
Company during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other
party hereto in accordance with Section 10. The "Date of
Termination" shall mean the effective date of such
termination as specified in the Notice of Termination
(provided that no such Notice of Termination shall specify
an effective date more than 180 days after the date of such
Notice of Termination).
(b) Notwithstanding anything to the contrary herein,
you shall be entitled to the benefits provided in Section 5
only if a Change in Control shall have occurred during the
Term and your employment with the Company is subsequently
terminated or terminates within 24 months after such Change
in Control, unless such termination is (A) because of your
death, (B) by the Company for Disability [as defined in
Section 4(b)(i)] or Cause [as defined in Section 4(b)(ii)],
or (C) by you other than for Good Reason [as defined in
Section 4(b)(iii)].
(i) Disability. If, as a result of incapacity
due to physical or mental illness, you shall have been
absent from the full-time performance of your duties
with the Company for six (6) consecutive months and,
within thirty (30) days after written notice of
termination is given to you, you shall not have
returned to the full-time performance of your duties,
your employment may be terminated for "Disability."
Any termination for Disability under this Agreement
shall not affect any rights you may otherwise have
under the Company's Long-Term Disability Plan.
(ii) Cause. Termination by the Company of your
employment for "Cause" shall mean termination (A) upon
your willful and continued failure to substantially
perform your duties with the Company [other than any
such failure resulting from your incapacity due to
physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of
Termination by you for Good Reason as defined in
Section 4(b)(iii)], provided that a written demand for
substantial performance has been delivered to you by
the Company specifically identifying the manner in
which the Company believes that you have not
substantially performed your duties and you have not
cured such failure within 30 days after such demand,
(B) by reason of your willful misconduct which is
demonstrably and materially injurious to the Company or
(c) your conviction of a felony from which no appeal is
taken (or which is affirmed upon appeal). For purposes
of this subsection, no act or failure to act on your
part shall be deemed "willful" unless done or omitted
to be done by you not in good faith and without
reasonable belief that your action or omission was in
the best interest of the Company.
(iii) Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your written consent,
the occurrence after a Change in Control of the Company
of any of the following circumstances unless, in the
case of paragraphs (A), (C), (D), (F) or (G), such
circumstances are fully corrected prior to the Date of
Termination [as defined in Section 4(a)] specified in
the Notice of Termination [as defined in Section 4(a)]
given in respect thereof:
(A) the failure of the Company to continue
your employment in a senior executive position
which, in your reasonable judgment, has authority
and responsibility comparable to your authority
and responsibility with the Company immediately
preceding the date of a Change in Control or at
any time thereafter; the assignment to you of any
duties or responsibilities which, in your
reasonable judgment are inconsistent with your
authority or responsibility with the Company
preceding the date of a Change in Control or at
any time thereafter; or any removal of you from
such authority or responsibility, except in
connection with the termination of your employment
for Disability, Cause, as a result of your death
or by you other than for Good Reason;
(B) any reduction in your annual base salary
as in effect on the date hereof or as the same may
be increased from time to time;
(C) the failure of the Company to continue
in effect any material compensation or benefit
plan in which you participate immediately prior to
the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to
such plan, or the failure by the Company to
continue your participation therein (or in such
substitute or alternative plan) on a basis not
materially less favorable, both in terms of the
amount of benefits provided and the level of your
participation relative to other participants, as
existed at the time of the Change in Control or
the failure by the Company to award cash bonuses
to its executives in amounts substantially
consistent with past practice in light of the
Company's financial performance;
(D) the failure by the Company to continue
to provide you with benefits substantially similar
to those enjoyed by you under any of the Company's
life insurance, medical, health and accident, or
disability plans in which you were participating
at the time of the Change in Control, the taking
of any action by the Company which would directly
or indirectly materially reduce any of such
benefits, or the failure by the Company to provide
you with the number of paid vacation days to which
you are entitled on the basis of years of service
with the Company in accordance with the Company's
normal vacation policy in effect at the time of
the Change in Control;
(E) the failure of the Company to obtain a
satisfactory agreement from any successor to
assume and agree to perform the Agreement, as
contemplated in Section 8; or
(F) any purported termination of your
employment which is not effected pursuant to a
Notice of Termination satisfying the requirements
of Section 10, which purported termination shall
not be effective for purposes of this Agreement.
5. Compensation Upon Termination; Vesting of Stock.
Following a Change in Control of the Company, you shall
be entitled to the following benefits during a period of
disability, or upon termination of your employment, as the case
may be, provided that such period or termination occurs during
the Term; provided, however, that the vesting set forth in
Subsection 5(d) shall be required as of the occurrence of a
Change in Control regardless of whether your employment
terminates during the Term and regardless of the reason for the
termination of employment:
(a) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity
due to physical or mental illness, you shall continue to
receive base salary and all other earned compensation at the
rate in effect at the commencement of any such period
(offset by all compensation payable to you under the
Company's disability plan or program or other similar plan
during such period) until your employment is terminated
ursuant to Section 4(b)(i) hereof. Thereafter, or in the
vent your employment is terminated by reason of death, your
enefits shall be determined under the Company's long-term
isability, retirement, insurance and other compensation
rograms then in effect in accordance with the terms of such
rograms.
(b) If your employment shall be terminated by the
ompany for Cause or by you other than for Good Reason
ollowing Change in Control, the Company shall pay you your
ull base salary and all other compensation through the Date
of Termination at the rate in effect at the time the Notice
of Termination is given, plus all other amounts to which you
are entitled under any employment contract with the Company
or under any compensation plan of the Company at the time
such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(c) If your employment with the Company is terminated
by the Company (other than for Cause, Disability or your
death) or by you for Good Reason within 24 months after
Change in Control or if your employment with the Company is
terminated by you or the Company for any reason (other than
your death, Disability or retirement) within six (6) months
after a Change in Control, then you shall be entitled to the
benefits below:
(i) the Company shall pay to you (A) your full
base salary and all other compensation through the Date
of Termination at the rate in effect at the time the
Notice of Termination is given, no later than the full
fifth day following the Date of Termination, plus all
other amounts to which you are entitled under any
compensation plan of the Company at the time such
payments are due, (B) if you so elect, in lieu of your
right to continue to receive deferred compensation
under any deferred compensation plan of the Company
then in effect, no later than the fifth full day
following the Date of Termination, a lump-sum amount,
in cash, equal to the deferred amounts together with
any earnings credited on such amounts under such plan
and (C) if you so elect, in lieu of your right to
continued payments under any employment contract with
the Company, no later than the fifth full day following
the Date of Termination, a lump-sum amount, in cash,
equal to the total of such continued payments;
(ii) the Company shall pay as severance pay to
you, at the time specified in Subsection (e) below, a
lump-sum severance payment (together with the payments
provided in paragraph (iv) below) (the "Severance
Payments") in an amount equal to 200% of your highest
annual base salary in effect during the three-year
period ending the Date of Termination, offset by the
amount, if any, which you are entitled to receive as
severance benefits under any employment contract
between the Company and you;
(iii) the Company shall pay to you all legal fees
and expenses incurred by you as a result of such
termination (including all such fees and expenses, if
any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement or in
connection with any tax audit or proceeding to the
extent attributable to the application of Section 4999
of the Internal Revenue Code of 1986, as amended (the
"Code") to any payment or benefit provided hereunder);
(iv) for a period of twelve (12) months after your
Date of Termination, the Company shall arrange to
provide you with life, disability, dental, accident and
group health insurance benefits substantially similar
to those which you were receiving immediately prior to
the Notice of Termination. Notwithstanding the
foregoing, the Company shall not provide any benefit
otherwise receivable by you pursuant to this paragraph
(iv) if an equivalent benefit is actually received by
you prior to the end of such 12 month period, and any
such benefit actually received by you shall be reported
to the Company; and
(v) you shall be entitled to any benefits or
payments to which you may be entitled under any other
plan or program of the Company in which you are a
participant at the time of your termination.
(d) As of the occurrence of the Change in Control you
shall become vested in any shares of the Company awarded to
you under the Long-Term Incentive Plan of the Company and
not previously vested, or in any additional shares or
substitute shares issued to reflect a change in the shares
of Common Stock of the Company or a stock dividend or stock
split distributable in shares of common stock of the Company
or a change in capital structure of the Company, all as
provided in Section 16 of the Long-Term Incentive Plan.
(e) The payments provided for in Subsections 5(b) and
(c) shall be made not later than the fifth day following the
Date of Termination; provided, however, that, if the amounts
of such payments cannot be finally determined on or before
such day, the Company shall pay to you on such day
an estimate, as determined in good faith by the Company, of
the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the
applicable federal rate provided for in Section 7872(f)(2)
of the Code) as soon as the amount thereof can be determined
but in no event later than the thirtieth day after the Date
of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a
loan by the Company to you, payable on the fifth day after
demand by the Company (together with interest at the
applicable federal rate provided in Section 7872(f)(2) of
the Code).
(f) Except as provided in the second sentence of
Subsection 5(c)(iv) hereof, you shall not be required to
mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in
this Section 5 be reduced by any compensation earned by you
as a result of employment by another employer, by retirement
benefits or by offset against any amount claimed to be owed
by you to the Company or otherwise.
6. Excise Tax Limitation.
(a) Notwithstanding anything in this Agreement to the
contrary, in the event it shall be determined that any
payment or distribution by the Company to or for your
benefit (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by the
Company for federal income tax purposes because of Section
280G of the Code, then the aggregate present value of
amounts payable or distributable to you or for your benefit
pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as
"Total Payments") shall be reduced to the Reduced Amount.
The "Reduced Amount" shall be an amount expressed in present
value which maximizes the aggregate present value of Total
Payments without causing any Payment to be nondeductible by
the Company because of Section 280G of the Code. For
purposes of this Section
6, present value shall be determined in accordance with
Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this
Section 6 shall be made by the Company's independent public
accountants (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the
employee. Any such determination by the Accounting Firm
shall be binding upon the Company and the employee.
(c) As a result of the uncertainty in the application
of Section 280G of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is
possible that Payments will have been made by the Company
which should not have been made ("Overpayment") or that the
additional Payments which will not have been made by the
Company could have been made ("Underpayment"), in each case,
consistent with the calculations required to be made
hereunder. In the event that the Accounting Firm, based
upon the assertion of a deficiency by the Internal Revenue
Service against the employee which the Accounting Firm
believes has a high probability of success determines that
an Overpayment has been made, any such Overpayment paid or
distributed by the Company to or for the benefit of the
employee shall be treated for all purposes as a loan ab
initio to the employee which the employee shall repay to the
Company together with interest at the applicable federal
rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have
been made and no amount shall be payable by the employee to
the Company if and to the extent such deemed loan and
payment would not either reduce the amount on which the
employee is subject to tax under Section 1 and Section 4999
of the Code or generate a refund of such taxes. In the
event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
employee together with interest at the applicable federal
rate provided for in Section 7872(f)(2) of the Code.
7. Sale of Division.
If the Company sells substantially all of its business
assets to an entity (the "Purchaser") which is not controlled by
Dumaines Trust or Amoskeag, you will be entitled to receive the
Change in Control Severance Benefits on the effective date of
such sale. In determining such benefits, the hospitalization or
medical reimbursement plan in effect immediately preceding such
effective date shall be continued in effect without change
(except any change that may be mandated by law) for the period
for which you are entitled to coverage. Notwithstanding the
foregoing, the Change in Control Severance Benefits shall not be
payable if you enter the employment of the Purchaser, or if you
fail to enter such employment but the Purchaser offers you the
following: (i) employment in a senior executive position having
authority and responsibility comparable to your authority and
responsibility with the Company immediately preceding the sale,
and (ii) compensation and benefits at least as great as provided
to you by the Company immediately preceding the sale, including
without limitation severance benefits in the event of your
termination of employment with the Purchaser at least as great as
herein provided (but not conditioned on a change in control of
the Purchaser). Notwithstanding the preceding sentence, the
vesting set forth in Subsection 5(d) shall be required on the
effective date of the sale, regardless of any subsequent events.
For the purpose of determining whether the Purchaser is
controlled by Dumaines Trust or Amoskeag, control shall mean the
ownership of voting rights sufficient to elect at least a
majority of the members of the Board of Directors of the
Purchaser.
8. Waiver of Claims
Notwithstanding any provisions of this Agreement to the
contrary, no payments shall be made to you under Section 5(c)
unless and until you shall have waived and released all claims
which you may have against the Company as of the date of
execution of the waiver and release, including, without
limitation, claims under the Age Discrimination in Employment
Act, but excluding claims for benefits under this Agreement or
claims under any employee benefit plan maintained by the Company.
9. Successors; Binding Agreement.
(a) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or
assets of the Company expressly to assume and agree to
perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had
taken place. Failure of the Company to obtain an assumption
of this Agreement prior to the effectiveness of any
succession shall be a breach of this Agreement and shall
entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled
hereunder if you had terminated your employment for Good
Reason immediately after a Change in Control of the Company,
except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(b) This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or if there is no
such designee, to your estate.
10. Notice.
For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in
writing and shall be duly given when delivered or when mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the General Counsel of
the Company, at 326 East Stadium Drive, Eden, North Carolina, and
to you at the address shown below or to such other address as
either the Company or you may have furnished to the other in
writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
11. Miscellaneous.
(a) The invalidity or unenforceability of any
provision 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) The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws
of the State of North Carolina.
(c) No waiver by you at any time of any breach of, or
compliance with, any provision of this Agreement to be
performed by the Company shall be deemed a waiver of that or
any other provision at any subsequent time.
(d) This Agreement may be executed in several
counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and
the same instrument.
(e) Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal,
state or local law.
(f) This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto;
and any prior agreement of the parties hereto in respect of
the subject matter contained herein is hereby terminated and
cancelled.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company this letter,
which will then constitute our agreement on this subject.
Sincerely,
FIELDCREST CANNON, INC.
By: /s/ James M. Fitzgibbons
James M. Fitzgibbons
Chairman and Chief
Executive Officer
Agreed to this 26th day of July, 1993.
/s/ T. R. Staab
(Signature)
T. R. Staab
Print Name
Address:
3726 N.C. 65
Reidsville, NC 27320
FIELDCREST CANNON, INC.
Inter-Office Correspondence
July 29, 1993
Mr. T. R. Staab
Eden
RE: Amendment to Employee Retention Agreement
Dear Tom:
You and Fieldcrest Cannon, Inc. (the "Company") entered into an
Employee Retention Agreement effective July 9, 1993. The Company now
deems it appropriate to amend Subsection 5(c) of the Employee
Retention Agreement by deleting the phrase "or if your employment with
the Company is terminated by you or the Company for any reason (other
than your death, Disability or Retirement) within six (6) months after
a Change in Control" therefrom. For good and adequate consideration,
the receipt of which is hereby acknowledged, you agree to the
foregoing amendment. Kindly sign and return to the Company this
letter, which will then constitute our agreement on this subject.
Sincerely,
FIELDCREST CANNON, INC.
By: /s/ James M. Fitzgibbons
Chairman and Chief
Executive Officer
Agreed to this 2nd day of August, 1993:
/s/ T. R. Staab
Signature
T. R. Staab
Print Name
Address:
3726 N.C. 65
Reidsville, NC 27320