Document/Exhibit Description Pages Size
1: 10-K Annual Report Ftl 1994 67 293K
6: EX-10 Employment Agreement Between Farley Industries, 27 114K
Inc., Fruit of the Loom, Inc. and Earl
C. Shanks.
7: EX-10 Employment Agreement Between Farley Industries, 27 112K
Inc., Fruit of the Loom, Inc. and Larry
K. Switzer.
4: EX-10 Employment Agreement Between Farley Industries, 27 116K
Inc., Fruit of the Loom, Inc. and
Richard C. Lappin.
5: EX-10 Employment Agreement Between Farley Industries, 27 115K
Inc., Fruit of the Loom, Inc. and
Richard M. Cion.
3: EX-10 Employment Agreement Between Fruit of the Loom, 25 109K
Inc. and John B. Holland.
2: EX-10 Employment Agreement Between Fruit of the Loom, 25 110K
Inc. and William Farley.
8: EX-11 Computation of Earnings Per Common Share 2 11K
9: EX-22 List of Subsidiaries of the Company 3 17K
10: EX-24 Consent of Independent Auditors 1 8K
11: EX-27 Financial Data Schedule 1 9K
EX-10 — Employment Agreement Between Farley Industries, Inc., Fruit of the Loom, Inc. and Earl C. Shanks.
Exhibit Table of Contents
172
CONFORMED COPY
FARLEY INDUSTRIES, INC.
and
FRUIT OF THE LOOM, INC.
Employment Agreement for Earl C. Shanks
173
FARLEY INDUSTRIES, INC.
and
FRUIT OF THE LOOM, INC.
Employment Agreement for Earl C. Shanks
1. Employment and Assignment; Obligations of FOL and Company . . . . . 174
2. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
3. Offices and Duties . . . . . . . . . . . . . . . . . . . . . . . . . 175
4. Salary and Annual Incentive Compensation . . . . . . . . . . . . . . 175
5. Long-Term Compensation, Including Stock Options, and Benefits,
Deferred Compensation, and Expense Reimbursement . . . . . . . . . . 176
6. Termination Due to Normal Retirement, Approved Early Retirement,
Death, or Disability . . . . . . . . . . . . . . . . . . . . . . . . 180
7. Termination For Reasons Other Than Normal Retirement, Approved Early
Retirement, Death or Disability . . . . . . . . . . . . . . . . . . 182
8. Definitions Relating to Termination Events. . . . . . . . . . . . . 187
9. Excise Tax Gross-Up . . . . . . . . . . . . . . . . . . . . . . . . 190
10. Non-Competition and Non-Disclosure; Executive Cooperation . . . . . 192
11. Governing Law; Disputes; Arbitration . . . . . . . . . . . . . . . . 193
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
13. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 197
174
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of the 28th day of March,
1995, by and among FARLEY INDUSTRIES, INC., an Illinois corporation (the
"Company"), FRUIT OF THE LOOM, INC., a Delaware corporation ("FOL"), and Earl
C. Shanks ("Executive"), and shall become effective as of December 18, 1994
(the "Effective Date").
W I T N E S S E T H
WHEREAS, Executive has served and is serving as a senior executive
of the Company and, under Service Agreements between the Company and FOL (any
such agreement as may be in effect from time to time being the "Service
Agreement"), as a senior executive of FOL; and
WHEREAS, FOL desires that Executive continue to serve FOL in a
senior executive capacity in connection with the conduct of its businesses,
the Company desires to continue to employ Executive as a senior executive so
that he may continue serve FOL, under the Service Agreement, in such a senior
executive capacity, and Executive desires to accept such employment by the
Company and assignment with FOL on the terms and conditions herein set forth;
and
WHEREAS, the Company, FOL, and Executive desire to set forth the
terms upon which Executive shall be so employed by the Company and assigned to
FOL.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained herein, and other good and valuable consideration the
receipt and adequacy of which the Company, FOL, and Executive each hereby
acknowledge, the Company, FOL, and Executive hereby agree as follows:
1. Employment and Assignment; Obligations of FOL and Company.
(a) Employment by the Company and Assignment to FOL. The
Company hereby agrees to employ Executive as a senior executive of the Company
and as a senior executive assigned to serve as a senior executive of FOL, FOL
hereby agrees to the assignment of Executive as a senior executive of FOL, and
Executive hereby agrees to accept such employment and assignment and serve in
such capacities, during the Term as defined in Section 2 and upon the terms
and conditions set forth in this Employment Agreement (this "Agreement").
(b) Obligations of FOL and Company, and Effect on Service
Agreement. FOL guarantees to Executive payment of all obligations hereunder
of the Company to Executive, including obligations under Sections 6 and 7.
FOL and the Company acknowledge and agree that, to the extent that this
Agreement specifies matters relating to the assignment of Executive to FOL and
imposes obligations between FOL and the Company relating thereto, this
Agreement may modify and amend the terms of any Service Agreement. If FOL
makes any payment of cash or property to Executive hereunder, including any
payment under a guarantee by FOL of a direct obligation of the Company to
Executive hereunder, that duplicates a payment made or owing by FOL to the
Company under the Service Agreement, FOL shall have a right of reimbursement
or setoff against the Company in respect of such payment. If Section 6 or 7
175
specify a payment, action or other obligation to Executive following
termination of Executive's employment by the Company and service to FOL
without specifying the primary obligor therefor, the obligor therefor shall be
FOL in respect of any obligation that replaces, settles, or otherwise relates
to an obligation of FOL under Sections 4 and 5 and shall be the Company in
respect of any obligation that replaces, settles, or otherwise relates to an
obligation of the Company under Sections 4 and 5, subject to FOL's guarantee
of the obligations of the Company.
2. Term.
The term of employment of Executive and assignment to FOL under
this Agreement (the "Term") shall be the period commencing on the Effective
Date and terminating on December 17, 1997 and any period of extension thereof
in accordance with this Section 2, subject to earlier termination in
accordance with Section 6 or 7. The Term shall be extended automatically
without further action by any party for the one-year period beginning on
December 18, 1997 and each succeeding December 18 thereafter, unless the
Company or FOL shall have served written notice upon Executive (and on the one
of the Company or FOL not serving such notice, if the two are not acting
jointly), or Executive shall have served written notice on the Company and
FOL, in either case in accordance with the provisions of Section 12(d), on or
prior to the June 30 preceding a date upon which such extension would become
effective electing not to extend the Term further as of the December 18 next
succeeding the date such notice is served, in which case the Term shall
terminate at the next December 17 (subject to earlier termination in
accordance with Section 6 or 7).
3. Offices and Duties.
The provisions of this Section 3 will apply during the Term:
(a) Generally. Executive shall serve as a senior executive
assigned, pursuant to the Service Agreement, to serve as a senior executive of
FOL and shall perform such duties and responsibilities, as are substantially
consistent with his duties, responsibilities, rank and status with the Company
and FOL as of the Effective Date. Executive shall devote substantial business
time and attention, and his best efforts, abilities, experience, and talent,
to the position of senior executive of the Company and of FOL and for the
businesses of the Company and FOL; provided, however, that nothing in this
Agreement shall preclude or prohibit Executive from engaging in other
activities, including as assigned by the Company, to the extent that such
other activities do not preclude Executive's employment and assignment to
serve FOL or otherwise inhibit the performance of Executive's duties under
this Agreement or impair the businesses of the FOL, the Company and their
subsidiaries and affiliates.
(b) Place of Employment. Executive's principal place of
employment shall be the Corporate Offices of FOL in Chicago, Illinois or such
other headquarters location as may be assigned by FOL, subject to the consent
of the Company which shall not be reasonably withheld.
4. Salary and Annual Incentive Compensation.
176
As partial compensation for the services to be rendered hereunder
by Executive, the Company agrees to pay to Executive during the Term the
compensation set forth in this Section 4, and FOL agrees to guarantee the
payment of such compensation to Executive.
(a) Base Salary. The Company will pay to Executive during the
Term a base salary at the annual rate in effect at the Effective Date, payable
in cash in substantially equal monthly installments during each calendar year,
or portion thereof, of the Term and otherwise in accordance with the Company's
usual payroll practices with respect to persons assigned to serve as senior
executives of FOL (except to the extent deferred under Section 5(d)).
Executive's annual base salary shall be reviewed by FOL and the Company at
least once in each calendar year and may be increased above, but may not be
reduced below, the then-current rate of such base salary.
(b) Annual Incentive Compensation. The Company will pay to
Executive during the Term annual incentive compensation, determined through
Executive's participation in the FOL 1995 Executive Incentive Compensation
Plan (subject to approval thereof by FOL's stockholders) (the "1995 EICP"),
the FOL Executive Incentive Compensation Plan (the "EICP") if the 1995 EICP is
not approved by FOL stockholders, and any successor to the 1995 EICP or the
EICP, which shall offer to Executive an opportunity to earn additional
compensation in amounts determined by and in the sole discretion of the
Compensation Committee of the Board of Directors of FOL (the "Committee"), in
accordance with the applicable plan and consistent with past practices of the
Company; provided, however, that FOL and the Company will use their best
efforts to maintain in effect, for each year during the Term, the 1995 EICP,
the EICP (if the 1995 EICP is not approved by FOL stockholders), or an
equivalent plan under which Executive will be eligible for an award not less
than the opportunity level available under the 1995 EICP or the EICP during
1995 (if the 1995 EICP is not approved by FOL stockholders) to senior
executives of FOL in similar capacities. Any such annual incentive compensa-
tion payable to Executive shall be paid by FOL to the Company and by the
Company (without varying the amount or timing of payment or otherwise
exercising discretion) to Executive in accordance with FOL's incentive
compensation payment practices with respect to senior executives (except to
the extent deferred under Section 5(d)).
5. Long-Term Compensation, Including Stock Options, and Benefits,
Deferred Compensation, and Expense Reimbursement
As partial compensation for the services to be rendered hereunder
by Executive, the Company agrees to provide the compensation and benefits to
the extent specified in this Section 5, including Sections 5(a), (c), (d), and
(e), FOL agrees to guarantee the payment of all such compensation and benefits
to be provided by the Company under this Section 5, and FOL agrees to provide
the compensation and benefits to the extent specified in this Section 5,
including Sections 5(a), (b),(d) and (e).
(a) Executive Compensation Plans. Executive shall be entitled
during the Term to participate, without discrimination or duplication, in all
executive compensation plans and programs intended for general participation
by senior executives of the Company, including those assigned to FOL and by
senior executives of FOL, as presently in effect or as they may be modified or
177
added to from time to time, subject to the eligibility and other requirements
of such plans and programs, including without limitation the long-term
incentive features of the 1995 EICP, the EICP (if the 1995 EICP is not
approved by FOL's stockholders), any successor to such plans, and other stock
option plans, performance share plans, management incentive plans, and
deferred compensation plans of FOL, and supplemental retirement plans of the
Company; provided, however, that such compensation plans and programs, in the
aggregate, shall provide Executive with benefits and compensation and
incentive award opportunities substantially no less favorable than those
provided by the Company and FOL under such plans and programs to senior
executives in similar capacities. For purposes of this Agreement, all
references to "performance share plans" and "performance shares" refer to such
arrangements under the 1994 EICP or the EICP and to any performance shares,
performance units, stock grants, or other long-term incentive arrangements
adopted as a successor or replacement to performance shares under such plans
or other plans of the Company
(b) Stock Option Grant Upon Signing Agreement. In addition to
the compensation otherwise specified under Sections 4 and 5, FOL has granted
to Executive, as of December 18, 1994 and conditioned upon Executive's
execution of this Agreement, a non-qualified stock option to purchase 30,000
shares of FOL's Class A Common Stock (the "1995 Option"), under the 1995 EICP,
subject to stockholder approval of the 1995 EICP at FOL's 1995 Annual Meeting
of Stockholders. The 1995 Option shall be evidenced by, and have the terms
set forth in, the option agreement attached as Exhibit A hereto (the "Option
Agreement"), which has been authorized and approved by the Committee under the
1995 EICP.
Not later than such time as the 1995 Option becomes exercisable,
FOL will have filed with the Securities and Exchange Commission, and will
thereafter maintain the effectiveness of, a registration statement registering
under the Securities Act of 1933, as amended, the offer and sale of shares by
FOL pursuant to the 1995 Option, which registration statement shall include a
resale prospectus covering the reoffer and resale (or other disposition) of
all shares acquired by Executive upon exercise of the 1995 Option, and FOL
will maintain as current all offering materials under such registration
statement at all times that offers and sales of such shares could be made by
FOL or Executive.
(c) Employee and Executive Benefit Plans. Executive shall be
entitled during the Term to participate, without discrimination or
duplication, in all employee and executive benefit plans and programs of the
Company, as presently in effect or as they may be modified or added to by the
Company from time to time, to the extent such plans are available to similarly
situated senior executives or employees of the Company, including those
assigned to serve as senior executives of FOL, subject to the eligibility and
other requirements of such plans and programs, including without limitation
plans providing pensions, other retirement benefits, medical insurance, life
insurance, disability insurance, and accidental death or dismemberment
insurance, and participation in savings, profit-sharing, and stock ownership
plans; provided, however, that such benefit plans and programs and any benefit
plans and programs of FOL in which Executive may from time to time participate
shall, in the aggregate, provide Executive with benefits substantially no less
178
favorable than those provided by the Company and FOL to senior executives in
similar capacities.
In furtherance of and not in limitation of the foregoing, during
the Term:
(i) Executive will participate in all executive and employee vacation
and time-off programs;
(ii) The Company will provide Executive with coverage by long-term
disability insurance and benefits substantially no less favorable
(including any required contributions by Executive) than such
insurance and benefits provided to Executive at January 1, 1995;
(iii) Executive will be covered by Company-paid group and individual
term life insurance providing a death benefit of not less than
three times Executive's annual base salary under Section 4(a);
provided, however, that such insurance may be combined with a
supplementary retirement funding vehicle;
(iv) Under the Company's pension plans (including supplemental plans):
(A) Executive will be entitled to benefits substantially no less
favorable than those under such plans and programs of the Company
as in effect at January 1, 1995; (B) for purposes of calculating
such benefits Executive's compensation covered by such plans will
include 100% of annual salary paid under Section 4(a) and no less
than 50% of annual incentive compensation paid under Section 4(b),
and Executive shall be credited, for each full calendar year of
the Term that is completed up to five years, with one additional
year of service up to five additional years under such plans,
which shall be fully vested upon crediting; and (C) amounts equal
to the present value of Executive's accrued benefit vested at any
time during the Term, under all supplemental (non-qualified)
pension plans of the Company, will be fully funded by the Company
by the purchase of an insured annuity, the ownership of which
shall be transferred to Executive, providing a benefit equivalent
to such accrued benefit on an after-tax basis, and the Company
will pay to Executive an additional amount (or apply such
additional amount to the purchase of an increased insured annuity
if so elected by Executive) equal to the total of Executive's
federal, state, and local income and employment taxes on the
insured annuity and such additional amount; and
(v) The Company will provide Executive with health and medical
benefits consistent with its policies for other senior executives,
including those assigned to serve as senior executives of FOL,
subject to a lifetime maximum amount of supplemental
reimbursements of $750,000; provided, however, that supplemental
health and medical benefits shall provide for reimbursement of
Executive to the extent that any limitation on maximum lifetime
health and medical benefits and reimbursements under other Company
policies and programs is exceeded.
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(d) Deferral of Compensation. The Company and FOL shall
implement deferral arrangements, as obligations of FOL, permitting Executive
to elect to irrevocably defer receipt, pursuant to written deferral election
terms and forms (the "Deferral Election Forms"), of all or a specified portion
of (i) his annual base salary and annual incentive compensation under Section
4, (ii) long-term incentive compensation under Sections 5(a) and 5(b)
(including payouts relating to performance shares), and (iii) shares acquired
upon exercise of options granted under Sections 5(a) and (b) that are acquired
in an exercise in which Executive pays the exercise price by the surrender of
previously acquired shares, to the extent of the net additional shares
acquired by Executive in such exercise; provided, however, that such deferrals
shall not reduce Executive's total cash compensation in any calendar year
below the sum of (i) the FICA maximum taxable wage base plus (ii) 1.45% of
Executive's salary, annual incentive compensation and long-term incentive
compensation in excess of such FICA maximum. In addition, the Committee may
require mandatory deferral of amounts payable as annual incentive compensation
under Section 4(b) or long-term incentive compensation under Sections 5(a) and
5(b), which deferrals will otherwise be in accordance with this Section 5(d),
and the Company hereby delegates to such Committee full authority to require
such mandatory deferral of annual incentive compensation.
In accordance with such duly executed Deferral Election Forms or
the terms of any mandatory deferral, FOL shall, in lieu of payment by FOL to
the Company (under the Service Agreement in respect of Executive's services)
and in lieu of any direct payment by FOL or the Company to Executive, credit
to one or more bookkeeping accounts maintained by FOL for Executive, on the
respective date or dates payments would otherwise be due to Executive, amounts
equal to the compensation subject to deferral, such credits to be denominated
in cash if the compensation would have been paid in cash but for the deferral
or in shares if the compensation would have been paid in shares but for the
deferral. An amount of cash equal in value to all cash-denominated amounts
credited to Executive's account and a number of shares of Common Stock equal
to the number of shares credited to Executive's account pursuant to this
Section 5(d) shall be transferred as soon as practicable following such
crediting by FOL to, and shall be held and invested by, an independent trustee
selected by FOL (a "Trustee") pursuant to a "rabbi trust" established by FOL
in connection with such deferral arrangement and as to which the Trustee shall
make investments based on Executive's investment objectives (including
possible investment in publicly traded stocks and bonds, mutual funds, and
insurance vehicles). Thereafter, Executive's deferral accounts will be valued
by reference to the value of the assets of the "rabbi trust"; provided,
however, that a portion of the assets of the "rabbi trust" may be used to
reimburse FOL for its reasonable cost of funds resulting from payment of taxes
by FOL relating to such rabbi trust assets during the period of deferral and
prior to the settlement of Executive's deferral accounts. FOL shall pay all
other costs of administration of the deferral arrangement, without deduction
or reimbursement from the assets of the "rabbi trust."
Except as otherwise provided under Section 7 in the event of
Executive's termination of employment with the Company or termination of
service to FOL or as otherwise determined by the Committee in the event of
hardship on the part of Executive, upon such date(s) or event(s) set forth in
the Deferral Election Forms (including forms filed after deferral but before
settlement in which Executive may elect to further defer settlement) or the
180
terms of any mandatory deferral, FOL shall promptly pay to Executive cash
equal to the cash then credited to Executive's deferral accounts and cash
equal in value to any shares of Common Stock then credited to Executive's
deferral accounts, less applicable withholding taxes, and such distribution
shall be deemed to fully settle such accounts; provided, however, that FOL may
instead settle such accounts by directing the Trustee to distribute the assets
of the "rabbi trust." FOL, the Company, and Executive agree that compensation
deferred pursuant to this Section 5(d) shall be fully vested and
nonforfeitable; provided, however, Executive acknowledges that his rights to
the deferred compensation provided for in this Section 5(d) shall be no
greater than those of a general unsecured creditor of FOL, and that such
rights may not be pledged, collateralized, encumbered, hypothecated, or liable
for or subject to any lien, obligation, or liability of Executive, or be
assignable or transferable by Executive, otherwise than by will or the laws of
descent and distribution, provided that Executive may designate one or more
beneficiaries to receive any payment of such amounts in the event of his
death.
(e) Reimbursement of Expenses. The Company will promptly
reimburse Executive for all reasonable business expenses and disbursements
incurred by Executive in the performance of Executive's duties during the Term
in accordance with the Company's reimbursement policies as in effect from time
to time.
6. Termination Due to Normal Retirement, Approved Early Retirement,
Death, or Disability
Executive may terminate employment with the Company and cease to
serve as a senior executive of FOL upon Executive's retirement at or after age
65 ("Normal Retirement") or, if approved in advance by the Company and the
Committee, upon Executive's early retirement prior to age 65 ("Approved Early
Retirement"). FOL may terminate the service of Executive due to the
Disability (as defined in Section 8(c)) of Executive, in which case
Executive's employment by the Company and service to FOL will terminate due to
Disability.
At the time Executive's employment by the Company and service to
FOL terminates due to Normal Retirement, Approved Early Retirement, or death,
the Term will terminate. In the event Executive's employment by the Company
and service to FOL terminates due to Disability, the Term will terminate at
the expiration of the 30-day period referred to in the definition of Disability
(set forth in Section 8(c)) absent the actions referred to therein being taken
by Executive to return to service and present to the Company and FOL a
certificate of good health.
Upon a termination of Executive's employment by the Company and
service to FOL due to Normal Retirement, Approved Early Retirement, death, or
Disability, all obligations of the Company, FOL, and Executive under Sections
1 through 5 of this Agreement will immediately cease; provided, however, that
subject to the provisions of Section 12(c), the Company and FOL will pay
Executive (or his beneficiaries or estate) (in accordance with Section 1(b)),
and Executive (or his beneficiaries or estate) will be entitled to receive,
the following:
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(i) The unpaid portion of annual base salary at the rate payable, in
accordance with Section 4(a) hereof, at the date of termination,
pro rated through such date of termination, will be paid;
(ii) All vested, nonforfeitable amounts owing or accrued at the date of
termination under any compensation and benefit plans, programs,
and arrangements set forth or referred to in Sections 4(b) and
5(a) and (c) hereof (including any earned annual incentive
compensation and performance shares) in which Executive
theretofore participated will be paid under the terms and
conditions of the plans, programs, and arrangements (and
agreements and documents thereunder) pursuant to which such
compensation and benefits were granted;
(iii) In lieu of any annual incentive compensation under Section 4(b)
for the year of Executive's termination (unless otherwise payable
under (ii) above), Executive will be paid an amount equal to the
average annual incentive compensation paid to Executive in the
three years immediately preceding the year of termination (or, if
Executive was not eligible to receive or did not receive such
incentive compensation for any year in such three year period, the
Executive's target annual incentive compensation for such year(s)
shall be used to calculate average annual incentive compensation)
multiplied by a fraction the numerator of which is the number of
days Executive was employed and served in the year of termination
and the denominator of which is the total number of days in the
year of termination;
(iv) In lieu of any payment in respect of performance shares granted in
accordance with Section 5(a) for any performance period not
completed at the date of Executive's termination (unless otherwise
payable under (ii) above), Executive will be paid in cash an
amount equal to the cash amount payable plus the value of any
shares of Common Stock or other property (valued at the date of
termination) payable upon achievement of (A) the maximum
performance, in the case of death or Disability, or (B) at target
performance, in the case of Normal Retirement or Early Retirement,
in respect of each tranche of performance shares, multiplied by a
fraction the numerator of which is the number of days Executive
was employed and served during the respective performance period
and the denominator of which is the total number of days in such
performance period;
(v) Stock options then held by Executive will be exercisable to the
extent and for such periods, and otherwise governed, by the plans
and programs and the agreements and other documents thereunder
pursuant to which such stock options were granted;
(vi) All deferral arrangements under Section 5(d) will be settled in
accordance with Executive's duly executed Deferral Election Forms
or the terms of any mandatory deferral;
182
(vii) Reasonable business expenses and disbursements incurred by
Executive prior to such termination will be reimbursed, as
authorized under Section 5(e); and
(viii) If Executive's employment and service terminates due to
Disability, for the period extending from such termination until
Executive reaches age 65, Executive shall continue to participate
in all employee benefit plans, programs, and arrangements under
Section 5(c) providing health, medical, and life insurance and
pension benefits in which Executive was participating immediately
prior to termination, the terms of which allow Executive's
continued participation, as if Executive had continued in
employment with the Company and service to FOL during such period
or, if such plans, programs, or arrangements do not allow
Executive's continued participation, a cash payment equivalent on
an after-tax basis to the value of the additional benefits
Executive would have received under such employee benefit plans,
programs, and arrangements in which Executive was participating
immediately prior to termination, as if Executive had received
credit under such plans, programs, and arrangements for service
and age with the Company and FOL during such period following
Executive's termination, with such benefits payable by the Company
and/or FOL at the same times and in the same manner as such
benefits would have been received by Executive under such plans
(it being understood that the value of any insurance-provided
benefits will be based on the premium cost to Executive, which
shall not exceed the highest risk premium charged by a carrier
having an investment grade or better credit rating);
provided further, that, in the case of termination of Executive's employment
and service due to Disability, Executive must continue to satisfy the
conditions set forth in Section 10 in order to continue receiving the
compensation and benefits under (viii), above. Amounts payable under (i),
(ii), (iii), (iv), and (vii) above will be paid as promptly as practicable
after Executive's termination; provided, however, to the extent that FOL would
not be entitled to deduct any such payments under Internal Revenue Code
Section 162(m), such payments shall be made at the earliest time that the
payments would be deductible by FOL without limitation under Section 162(m)
(unless this provision is waived by FOL).
7. Termination For Reasons Other Than Normal Retirement, Approved
Early Retirement, Death or Disability
(a) Termination for Cause and Termination by Executive. In
accordance with the provisions of this Section 7(a), FOL may terminate the
service of Executive as a senior executive of FOL for Cause (as defined in
Section 8(a)) at any time prior to a Change in Control (as defined in Section
8(b)), in which case Executive's employment by the Company and service to FOL
will terminate, the Company may terminate the employment of Executive for
Cause (as defined in Section 8(a)) at any time prior to a Change in Control
(as defined in Section 8(b)), and Executive may terminate his employment with
the Company and service with FOL voluntarily for reasons other than Good
Reason (as defined in Section 8(d)) at any time. An election by Executive not
to extend the Term pursuant to Section 2 hereof shall be deemed to be a
183
voluntary termination of such employment and such service by Executive at the
date of expiration of the Term, unless there occurs a Change in Control prior
to the date of expiration.
Upon a termination of Executive's service with FOL for Cause,
termination of Executive's employment by the Company for Cause or voluntarily
termination by the Executive, the Term will immediately terminate, and all
obligations of the Company and FOL under Sections 1 through 5 of this
Agreement will immediately cease; provided, however, that subject to the
provisions of Section 12(c), the Company and FOL shall pay Executive, and
Executive shall be entitled to receive, the following:
(i) The unpaid portion of annual base salary at the rate payable, in
accordance with Section 4(a) hereof, at the date of termination,
pro rated through such date of termination, will be paid;
(ii) All vested, nonforfeitable amounts owing or accrued at the date of
termination under any compensation and benefit plans, programs,
and arrangements set forth or referred to in Sections 4(b) and
5(a) and 5(c) hereof (including any earned annual incentive
compensation and performance shares) in which Executive
theretofore participated will be paid under the terms and
conditions of the plans, programs, and arrangements (and
agreements and documents thereunder) pursuant to which such
compensation and benefits were granted;
(iii) A cash amount equal to the amount credited to Executive's deferral
accounts under deferral arrangements authorized under Section 5(d)
hereof at the date of termination (including cash equal in value
at that date to any shares of Common Stock credited to Executive's
deferral accounts), less applicable withholding taxes under
Section 12(i); provided, however, that FOL may instead settle such
accounts by directing the Trustee to distribute the assets of the
"rabbi trust." Such amounts shall be paid or distributed as
promptly as practicable following such date of termination,
without regard to any stated period of deferral otherwise
remaining in respect of such amounts, and the payment of such
amounts shall be deemed to fully settle such accounts; and
(iv) Reasonable business expenses and disbursements incurred by
Executive prior to such termination will be reimbursed, as
authorized under Section 5(e).
Amounts payable under (i), (ii), (iii), and (iv) above will be paid as
promptly as practicable after Executive's termination; provided, however, to
the extent that FOL would not be entitled to deduct any such payments under
Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by FOL without limitation
under Section 162(m) (unless this provision is waived by FOL).
(b) Termination Without Cause and Termination by Executive for
Good Reason. In accordance with the provisions of this Section 7(b), FOL may
terminate the service by Executive as a senior executive of FOL without Cause
(as defined in Section 8(a)), including after a Change in Control (as defined
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in Section 8(b)), upon 90 days' written notice to Executive, in which case
Executive's employment by the Company will terminate, the Company may
terminate Executive's employment without Cause (as defined in Section 8(a)),
including after a Change in Control (as defined in Section 8(b)), upon 90
days' written notice to Executive, and Executive may terminate his employment
by the Company and service with FOL for Good Reason (as defined in Section
8(d)) following a Change in Control upon 90 days' written notice to the
Company and FOL; provided, however, that, if the basis for such Good Reason is
correctable, the Company and/or FOL have not corrected the basis for such Good
Reason within 30 days after both have received such notice. The foregoing
notwithstanding, in lieu of the Company or FOL providing 90 days' written
notice to Executive, the Company and FOL may pay Executive his then-current
annual base salary under Section 4(a) and credit Executive with service for 90
days for all purposes hereunder. An election by the Company or FOL not to
extend the Term pursuant to Section 2 hereof shall be deemed to be a
termination of service with FOL and termination of employment by the Company
without Cause at the date of expiration of the Term.
Upon a termination of Executive's service with FOL without Cause
or termination of Executive's employment by the Company without Cause prior to
or following a Change in Control or termination of Executive's service with
FOL and employment with the Company by Executive for Good Reason following a
Change in Control, the Term will immediately terminate and all obligations of
the Company, FOL, and Executive under Sections 1 through 5 of this Agreement
will immediately cease, except that subject to the provisions of Section 12(c)
the Company and FOL shall pay Executive, and Executive shall be entitled to
receive, the following:
(i) A lump-sum cash payment will be paid as follows:
(A) In the event such termination is a termination by FOL or
the Company without Cause following a Change in Control or
a termination by Executive for Good Reason following a
Change in Control, an amount paid by FOL equal to the sum
of Executive's annual base salary payable under Section
4(a) immediately prior to termination plus the average
annual incentive compensation paid to Executive in the
three years immediately preceding the year of termination
(or, if Executive was not eligible to receive or did not
receive such incentive compensation for any year in such
three year period, the Executive's target annual incentive
compensation for such year(s) shall be used to calculate
average annual incentive compensation) (such sum being the
"total cash" for purposes of this Section 7(b)(i))
multiplied by a number which is the greater of the number
of years (including any fraction determined based on the
number of days remaining in the year of termination)
remaining in the term without regard to such termination or
2.0, which payment shall be reduced pro rata to the extent
the number of full months remaining until Executive attains
age 65 is less than 24 months, plus, in lieu of any payment
in respect of performance shares or other long term
incentive awards granted in accordance with Section 5(a)
for any performance period not completed at the date of
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Executive's termination (unless otherwise payable under
(iii) below), an amount equal to the cash amount payable
plus the value of any shares of Common Stock or other
property (valued at the date of termination) payable upon
the achievement of maximum performance in respect of each
tranche of performance shares without proration; or
(B) In the event such termination is a termination by FOL or
the Company without Cause prior to a Change in Control, an
amount equal to then-current annual base salary payable
under Section 4(a) multiplied by 1.0, which payment shall
be reduced pro rata to the extent the number of full months
remaining until Executive attains age 65 is less than 12
months, plus, in lieu of any payment in respect of
performance shares or other long term incentive awards
granted in accordance with Section 5(a) for any performance
period not completed at the date of Executive's termination
(unless otherwise payable under (iii) below), Executive
will be paid in cash an amount equal to the cash amount
payable plus the value of any shares of Common Stock or
other property (valued at the date of termination) payable
upon achievement of the greater of target performance or
actual performance achieved at the date of termination in
respect of each tranche of performance shares, multiplied
by a fraction the numerator of which is the number of days
Executive was employed and served during the respective
performance period and the denominator of which is the
total number of days in such performance period;
(ii) The unpaid portion of annual base salary at the rate payable, in
accordance with Section 4(a) hereof, at the date of termination,
pro rated through such date of termination, will be paid;
(iii) All vested, nonforfeitable amounts owing or accrued at the date of
termination under any compensation and benefit plans, programs,
and arrangements set forth or referred to in Sections 4(b) and
5(a) and (c) hereof (including any earned annual incentive
compensation and performance shares) in which Executive
theretofore participated will be paid under the terms and
conditions of the plans, programs, and arrangements (and
agreements and documents thereunder) pursuant to which such
compensation and benefits were granted;
(iv) In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive's employment and service
terminated (unless otherwise payable under (iii) above), Executive
will be paid an amount equal to the average annual incentive
compensation paid to Executive in the three years immediately
preceding the year of termination (or, if Executive was not
eligible to receive or did not receive such incentive compensation
for any year in such three year period, the Executive's target
annual incentive compensation for such year(s) shall be used to
calculate average annual incentive compensation) multiplied by a
fraction the numerator of which is the number of days Executive
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was employed and served in the year of termination and the
denominator of which is the total number of days in the year of
termination;
(v) Stock options then held by Executive will be exercisable to the
extent and for such periods, and otherwise governed, by the plans
and programs (and the agreements and other documents thereunder)
pursuant to which such stock options were granted;
(vi) All deferral arrangements under Section 5(d) will be settled in
accordance with Executive's duly executed Deferral Election Forms
or the terms of any mandatory deferral; provided, however, in the
event of a termination by FOL or the Company without Cause prior
to a Change in Control, a cash amount will be paid equal to the
amount credited to Executive's deferral accounts under deferral
arrangements authorized under Section 5(d) hereof at the date of
termination (including cash equal in value at that date to any
shares of Common Stock credited to Executive's deferral accounts),
less applicable withholding taxes under Section 12(i); provided,
however, that FOL may instead settle such accounts by directing
the Trustee to distribute the assets of the "rabbi trust." Such
amounts shall be paid or distributed as promptly as practicable
following such date of termination, without regard to any stated
period of deferral otherwise remaining in respect of such amounts,
and the payment of such amounts shall be deemed to fully settle
such accounts;
(vii) Reasonable business expenses and disbursements incurred by
Executive prior to such termination will be reimbursed, as
authorized under Section 5(e);
(viii) In the event such termination is a termination by FOL or the
Company without Cause following a Change in Control or a
termination by Executive for Good Reason following a Change in
Control, a lump-sum cash payment will be paid by FOL equal to the
present value of Executive's accrued benefit, if any, which shall
be fully vested at the date of termination, under all supplemental
(non-qualified) pension plans of the Company, unless such benefits
are fully funded based on assets held in trust for the benefit of
Executive which cannot be reached by creditors of the Company or
FOL, or such benefits are otherwise funded and secured in an
equivalent manner; and
(ix) In the event such termination is a termination by FOL without
cause or a termination by Executive for Good Reason, for a period
of two years after such termination, Executive shall continue
to participate in all employee, executive, and special individual
benefit plans, programs, and arrangements under Section 5(c)
including but not limited to health, medical, disability, life
insurance, and pension benefits in which Executive was
participating immediately prior to termination, the terms of which
allow Executive's continued participation, as if Executive had
continued in employment with the Company and service to FOL during
such period or, if such plans, programs, or arrangements do not
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allow Executive's continued participation, a cash payment
equivalent on an after-tax basis to the value of the additional
benefits Executive would have received under such employee benefit
plans, programs, and arrangements in which Executive was
participating immediately prior to termination, as if Executive
had received credit under such plans, programs, and arrangements
for service and age with the Company during such period following
Executive's termination, with such benefits payable by the Company
and/or FOL at the same times and in the same manner as such
benefits would have been received by Executive under such plans
(it being understood that the value of any insurance-provided
benefits will be based on the premium cost to Executive, which
shall not exceed the highest risk premium charged by a carrier
having an investment grade or better credit rating).
Amounts payable under (i), (ii), (iii), (iv), (vi), (vii), and (viii) above
will be paid as promptly as practicable after Executive's termination, and in
no event more than 45 days after such termination, provided, however, that, in
the case of a termination by FOL without Cause prior to a Change in Control,
to the extent that FOL would not be entitled to deduct any such payments under
Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by FOL without limitation
under Section 162(m) (unless this provision is waived by FOL), but in no event
later than twelve months subsequent to the date of termination.
8. Definitions Relating to Termination Events.
(a) "Cause." For purposes of this Agreement, "Cause" shall
mean Executive's gross misconduct (as defined herein) or willful and material
breach of Section 10 of this Agreement. For purposes of this definition,
"gross misconduct" shall mean (A) a felony conviction in a court of law under
applicable federal or state laws which results in material damage to the
Company, FOL, or any of their subsidiaries or affiliates or materially impairs
the value of the Executive's services to the Company or FOL, or (B) willfully
engaging in one or more acts, or willfully omitting to act in accordance with
duties hereunder, which is demonstrably and materially damaging to the
Company, FOL, or any of their subsidiaries or affiliates, including acts and
omissions that constitute gross negligence in the performance of Executive's
duties under this Agreement. For purposes of this Agreement, an act or
failure to act on Executive's part shall be considered "willful" if it was
done or omitted to be done by him not in good faith, and shall not include any
act or failure to act resulting from any incapacity of Executive.
Notwithstanding the foregoing, Executive may not be terminated for Cause
unless and until there shall have been delivered to him a copy of a resolution
duly adopted by a majority affirmative vote of the membership of the Board of
Directors of FOL or the Company (excluding Executive, if he is then a member)
at a meeting of such Board called and held for such purpose (after giving
Executive reasonable notice specifying the nature of the grounds for such
termination and not less than 30 days to correct the acts or omissions
complained of, if correctable, and affording Executive the opportunity,
together with his counsel, to be heard before such Board) finding that, in the
good faith opinion of the Board, Executive was guilty of conduct affecting the
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Board's corporation or a subsidiary which conduct constitutes Cause as set
forth in this Section 8(a).
(b) "Change in Control." A "Change in Control" shall be deemed
to have occurred if:
(i) An acquisition by any Person of Beneficial Ownership of the shares
of Common Stock of FOL then outstanding ("FOL Common Stock
Outstanding") or the voting securities of FOL then outstanding
entitled to vote generally in the election of directors ("FOL
Voting Securities Outstanding"); provided, however, that such
acquisition of Beneficial Ownership would result in the Person's
Beneficially Owning twenty-five percent (25%) or more of FOL
Common Stock Outstanding or twenty-five percent (25%) or more of
the combined voting power of FOL Voting Securities Outstanding;
and provided further, that immediately prior to such acquisition
such Person was not a direct or indirect Beneficial Owner of
twenty-five percent (25%) or more of FOL Common Stock Outstanding
or twenty-five percent (25%) or more of the combined voting power
of FOL Voting Securities Outstanding, as the case may be; or
(ii) The approval by the stockholders of FOL of a reorganization,
merger, consolidation, complete liquidation or dissolution of FOL,
the sale or disposition of all or substantially all of the assets
of FOL or similar corporate transaction (in each case referred to
in this Section 8(b) as a "Corporate Transaction") or, if
consummation of such Corporate Transaction is subject, at the time
of such approval by stockholders, to the consent of any government
or governmental agency, the obtaining of such consent (either
explicitly or implicitly); or
(iii) A change in the composition of the Board of Directors of FOL (the
"FOL Board") such that the individuals who, as of the Effective
Date, constitute the FOL Board (such FOL Board shall be
hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the FOL Board;
provided, however, for purposes of this Section 8(b), that any
individual who becomes a member of the FOL Board subsequent to the
Effective Date whose election, or nomination for election by FOL's
stockholders, was approved by a vote of at least a majority of
those individuals who are members of the Board and who were also
members of the Incumbent FOL Board (or deemed to be such pursuant
to this proviso) shall be considered as though such individual
were a member of the Incumbent Board; but, provided, further, that
any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A under the Exchange
Act, including any successor to such Rule) or other actual or
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board shall not be so considered as a
member of the Incumbent Board.
Notwithstanding the provisions set forth in subparagraphs (i) and (ii) of this
Section 8(b), the following shall not constitute a Change in Control for
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purposes of this Plan: (1) any acquisition by or consummation of a Corporate
Transaction with any Subsidiary or an employee benefit plan (or related trust)
sponsored or maintained by FOL or an affiliate; or (2) any acquisition or
consummation of a Corporate Transaction following which more than fifty
percent (50%) of, respectively, the shares then outstanding of common stock of
the corporation resulting from such acquisition or Corporate Transaction and
the combined voting power of the voting securities then outstanding of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were Beneficial Owners, respectively, of FOL
Common Stock Outstanding and FOL Voting Securities Outstanding immediately
prior to such acquisition or Corporate Transaction in substantially the same
proportions as their ownership, immediately prior to such acquisition or
Corporate Transaction, of FOL Common Stock Outstanding and FOL Voting
Securities Outstanding, as the case may be; or (3) any transaction initiated
or controlled, directly or indirectly, by Executive, in a capacity other than
as a senior executive or director of FOL or senior executive or director of
the Company.
For purposes of this definition:
(A) The terms "Beneficial Owner," "Beneficially Owning," and
"Beneficial Ownership" shall have the meanings ascribed to such
terms in Rule 13d-3 under the Exchange Act (including any
successor to such Rule).
(B) The term "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor act thereto.
(C) The term "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, including "group" as defined in Section 13(d)
thereof.
(c) "Disability." "Disability" means the failure of Executive
to render and perform the services required of him under this Agreement, for a
total of 180 days of more during any consecutive 12 month period, because of
any physical or mental incapacity or disability as determined by a physician
or physicians selected by FOL and reasonably acceptable to Executive, unless,
within 30 days after Executive has received written notice from FOL of a
proposed termination due to such absence, Executive shall have returned to the
full performance of his duties hereunder and shall have presented to FOL a
written certificate of Executive's good health prepared by a physician
selected FOL and reasonably acceptable to the Executive.
(d) "Good Reason." For purposes of this Agreement, "Good
Reason" shall mean the occurrence of a Change in Control following which there
occurs, without Executive's prior written consent: (A) a material change,
adverse to Executive, in Executive's positions, titles, or offices, status,
rank, nature of responsibilities, or authority within FOL in effect prior to a
Change in Control, except in connection with the termination of Executive's
service to FOL for Cause, Disability, Normal Retirement or Approved Early
Retirement, as a result of Executive's death, or as a result of action by
Executive, (B) an assignment of any duties to Executive with FOL which are
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inconsistent with his status, duties, responsibilities, and authorities in
effect prior to a Change in Control, (C) a decrease in annual base salary or
other compensation opportunities and maximums or benefits provided under this
Agreement, (D) any other failure by FOL or the Company to perform any material
obligation under, or breach by FOL or the Company of any material provision
of, this Agreement, (E) any failure to secure the agreement of any successor
corporation or other entity to FOL or to the Company to fully assume the
obligations of FOL or the Company, respectively, under this Agreement in a
form reasonably acceptable to Executive, and (F) any attempt by FOL or the
Company to terminate Executive for Cause which does not result in a valid
termination for Cause, except in the case that valid grounds for termination
for Cause exist but are corrected as permitted under Section 8(a).
9. Excise Tax Gross-Up.
In the event that there shall occur a Change in Control of FOL, if
Executive becomes entitled to one or more payments (with a "payment"
including, without limitation, the vesting of an option or other non-cash
benefit or property), whether pursuant to the terms of this Agreement or any
other plan, arrangement, or agreement with the Company, FOL, or any affiliated
company (the "Total Payments"), which are or become subject to the tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code")
(or any similar tax that may hereafter be imposed) (the "Excise Tax"), FOL
shall pay to Executive at the time specified below an additional amount (the
"Gross-up Payment") (which shall include, without limitation, reimbursement
for any penalties and interest that may accrue in respect of such Excise Tax)
such that the net amount retained by Executive, after reduction for any Excise
Tax (including any penalties or interest thereon) on the Total Payments and
any federal, state and local income or employment tax and Excise Tax on the
Gross-up Payment provided for by this Section 9, but before reduction for any
federal, state, or local income or employment tax on the Total Payments, shall
be equal to the sum of (a) the Total Payments, and (b) an amount equal to the
product of any deductions disallowed for federal, state, or local income tax
purposes because of the inclusion of the Gross-up Payment in Executive's
adjusted gross income multiplied by the highest applicable marginal rate of
federal, state, or local income taxation, respectively, for the calendar year
in which the Gross-up Payment is to be made.
For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax:
(i) The Total Payments shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, unless, and except to the extent that,
in the written opinion of independent compensation
consultants or auditors of nationally recognized standing
("Independent Advisors") selected by FOL and reasonably
acceptable to Executive, the Total Payments (in whole or in
part) do not constitute parachute payments, or such excess
parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in
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excess of the base amount within the meaning of Section
280G(b)(3) of the Code or are otherwise not subject to the
Excise Tax;
(ii) The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Total Payments or (B) the total
amount of excess parachute payments within the meaning of
section 280G(b)(1) of the Code (after applying clause (i)
above); and
(iii) The value of any non-cash benefits or any deferred payment
or benefit shall be determined by the Independent Advisors
in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment,
Executive shall be deemed (A) to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in which the
Gross-up Payment is to be made; (B) to pay any applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of Executive's adjusted gross income); and
(C) to have otherwise allowable deductions for federal, state, and local
income tax purposes at least equal to those disallowed because of the
inclusion of the Gross-up Payment in Executive's adjusted gross income. In
the event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time the Gross-up Payment is made,
Executive shall repay to FOL at the time that the amount of such reduction in
Excise Tax is finally determined (but, if previously paid to the taxing
authorities, not prior to the time the amount of such reduction is refunded to
Executive or otherwise realized as a benefit by Executive) the portion of the
Gross-up Payment that would not have been paid if such Excise Tax had been
applied in initially calculating the Gross-up Payment, plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time the Gross-up Payment is made
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-up Payment), FOL shall make an additional
Gross-up Payment in respect of such excess (plus any interest and penalties
payable with respect to such excess) at the time that the amount of such
excess is finally determined.
The Gross-up Payment provided for above shall be paid on the 30th
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Total Payments (or
any portion thereof) are subject to the Excise Tax; provided, however, that if
the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, FOL shall pay to Executive on such day an
estimate, as determined by the Independent Advisors, of the minimum amount of
such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon
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as the amount thereof can be determined. 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 FOL to Executive, payable on the
fifth day after demand by FOL (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code). If more than one Gross-up Payment is
made, the amount of each Gross-up Payment shall be computed so as not to
duplicate any prior Gross-up Payment. FOL shall have the right to control all
proceedings with the Internal Revenue Service that may arise in connection
with the determination and assessment of any Excise Tax and, at its sole
option, FOL may pursue or forego any and all administrative appeals,
proceedings, hearings, and conferences with any taxing authority in respect of
such Excise Tax (including any interest or penalties thereon); provided,
however, that FOL's control over any such proceedings shall be limited to
issues with respect to which a Gross-up Payment would be payable hereunder,
and Executive shall be entitled to settle or contest any other issue raised by
the Internal Revenue Service or any other taxing authority. Executive shall
cooperate with FOL in any proceedings relating to the determination and
assessment of any Excise Tax and shall not take any position or action that
would materially increase the amount of any Gross-Up Payment hereunder.
10. Non-Competition and Non-Disclosure; Executive Cooperation.
(a) Non-Competition. Without the consent in writing of the
Board of Directors of FOL, upon termination of Executive's employment and
cessation of service to FOL for any reason, Executive will not, for a period
of one year thereafter, acting alone or in conjunction with others, directly
or indirectly (i) engage (either as owner, investor, partner, stockholder,
employer, employee, consultant, advisor or director) in any business in the
continental United States in which he has been directly engaged on behalf of
FOL or any of its subsidiaries; or has supervised as an executive thereof,
during the last two years prior to such termination and which is directly in
competition with a business then conducted by FOL or any of its subsidiaries;
(ii) induce any customers of FOL or any of its subsidiaries with whom
Executive has had contacts or relationships, directly or indirectly, during
and within the scope of his assignment and service to FOL or any of its
subsidiaries, to curtail or cancel their business with such companies or any
of them; or (iii) induce, or attempt to influence, any employee FOL or any of
its subsidiaries to terminate employment; provided, however, that the
limitation contained in clause (i) above shall not apply if Executive's
employment is terminated as a result of a termination by FOL without Cause
following a Change in Control or a termination by Executive for Good Reason
following a Change in Control. The provisions of subparagraphs (i), (ii) and
(iii) above are separate and distinct commitments independent of each of the
other subparagraphs. It is agreed that the ownership of not more than one
percent of the equity securities of any company having securities listed on an
exchange or regularly traded in the over-the-counter market shall not, of
itself, be deemed inconsistent with clause (i) of this paragraph (a).
(b) Non-Disclosure. Executive shall not, at any time during
the Term and thereafter (including following Executive's termination of
employment with the Company or service with FOL for any reason), disclose,
use, transfer, or sell, except in the course of employment with or other
service to the Company, FOL, any company or business other than FOL for which
the Company provides management services, and any subsidiary or affiliate
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thereof, any confidential or proprietary information of the Company, FOL, any
company or business other than FOL for which the Company provides management
services, and any subsidiary or affiliate thereof so long as such information
has not otherwise been disclosed or is not otherwise in the public domain,
except as required by law or pursuant to legal process.
(c) Cooperation With Regard to Litigation. Executive agrees to
cooperate with the Company and FOL, during the Term and thereafter (including
following Executive's termination of employment with the Company or service
with FOL for any reason), by making himself available to testify on behalf of
the Company, FOL, any company or business other than FOL for which the Company
provides management services, or any subsidiary or affiliate thereof, in any
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, and to assist the Company, FOL, any company or business other
than FOL for which the Company provides management services, or any subsidiary
or affiliate thereof, in any such action, suit, or proceeding, by providing
information and meeting and consulting with the Board of Directors of the
Company and the Board of Directors of FOL, and their representatives or
counsel, or representatives or counsel of the Company, FOL, any company or
business other than FOL for which the Company provides management services, or
any subsidiary or affiliate thereof, as requested. The Company and FOL agree
to reimburse Executive, on an after-tax basis, for all expenses actually
incurred in connection with his provision of testimony or assistance.
(d) Release of Employment Claims. Executive agrees, as a
condition to receipt of the termination payments and benefits provided for in
Sections 6 and 7 herein, that he will execute a release agreement, in a form
satisfactory to the Company and FOL, releasing any and all claims arising out
of Executive's employment by the Company and service by FOL (other than
enforcement of this Agreement).
(e) Survival. The provisions of this Section 10 shall survive
the termination or expiration of this Agreement in accordance with the terms
hereof.
11. Governing Law; Disputes; Arbitration.
(a) Governing Law. This Agreement is governed by and is to be
construed, administered, and enforced in accordance with the laws of the State
of Illinois, without regard to Illinois conflicts of law principles, except
insofar as the Delaware General Corporation Law and federal laws and
regulations may be applicable. If under the governing law, any portion of
this Agreement is at any time deemed to be in conflict with any applicable
statute, rule, regulation, ordinance, or other principle of law, such portion
shall be deemed to be modified or altered to the extent necessary to conform
thereto or, if that is not possible, to be omitted from this Agreement. The
invalidity of any such portion shall not affect the force, effect, and
validity of the remaining portion hereof. If any court determines that any
provision of Section 10 is unenforceable because of the duration or geographic
scope of such provision, it is the parties' intent that such court shall have
the power to modify the duration or geographic scope of such provision, as the
case may be, to the extent necessary to render the provision enforceable and,
in its modified form, such provision shall be enforced.
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(b) Reimbursement of Expenses in Enforcing Rights. All
reasonable costs and expenses (including fees and disbursements of counsel)
incurred by Executive in seeking to enforce rights pursuant to this Agreement
shall be paid on behalf of or reimbursed to Executive promptly by the Company,
whether or not Executive is successful in asserting such rights; provided,
however, that no reimbursement shall be made of such expenses relating to any
unsuccessful assertion of rights if and to the extent that Executive's
assertion of such rights was in bad faith or frivolous, as determined by
independent counsel mutually acceptable to the Executive and the Company.
(c) Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration
in Chicago, Illinois by three arbitrators in accordance with the rules of the
American Arbitration Association in effect at the time of submission to
arbitration. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. For purposes of entering any judgment upon an award
rendered by the arbitrators, the Company, FOL, and Executive hereby consent to
the jurisdiction of any or all of the following courts: (i) the United States
District Court for the Northern District of Illinois, (ii) any of the courts
of the State of Illinois, or (iii) any other court having jurisdiction. The
Company, FOL, and Executive further agree that any service of process or
notice requirements in any such proceeding shall be satisfied if the rules of
such court relating thereto have been substantially satisfied. The Company,
FOL, and Executive hereby waive, to the fullest extent permitted by applicable
law, any objection which it may now or hereafter have to such jurisdiction and
any defense of inconvenient forum. The Company, FOL, and Executive hereby
agree that a judgment upon an award rendered by the arbitrators may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Subject to Section 11(b), the Company shall bear all costs
and expenses arising in connection with any arbitration proceeding pursuant to
this Section 11. Notwithstanding any provision in this Section 11, Executive
shall be entitled to seek specific performance of Executive's right to be paid
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
(d) Interest on Unpaid Amounts. Any amounts that have become
payable pursuant to the terms of this Agreement or any decision by arbitrators
or judgment by a court of law pursuant to this Section 11 but which are not
timely paid shall bear interest, payable by the party owing such amounts, at
the prime rate in effect at the time such payment first becomes payable, as
quoted by the Bankers Trust Company.
12. Miscellaneous.
(a) Integration. This Agreement modifies and supersedes any
and all prior agreements and understandings among the parties hereto with
respect to the employment of Executive by the Company (and any affiliate) and
assignment as a senior executive of FOL (and any subsidiary), except for
contracts relating to compensation under executive compensation and employee
benefit plans of the Company and FOL and subject to the provisions of Section
1(b). This Agreement (together with the Option Agreement) constitutes the
entire agreement among the parties with respect to the matters herein
provided, and no modification or waiver of any provision hereof shall be
effective unless in writing and signed by the parties hereto. Executive shall
195
not be entitled to any payment or benefit under this Agreement which
duplicates a payment or benefit received or receivable by Executive under such
prior agreements and understandings with the Company and/or FOL or under any
benefit or compensation plan of the Company and/or FOL.
(b) Non-Transferability. Neither this Agreement nor the rights
or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as specified in Section 12(c). The Company and FOL may assign
this Agreement and the Company's and FOL's rights and obligations hereunder,
and shall assign this Agreement, to any Successor (as hereinafter defined)
which, by operation of law or otherwise, continues to carry on substantially
the business of the Company or FOL prior to the event of succession, and the
Company and FOL, if involved in any such event, shall, as a condition of the
succession, require such Successor to agree to assume the obligations of the
predecessor and be bound by this Agreement. For purposes of this Agreement,
"Successor" shall mean any person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the
business of the Company or FOL directly, by merger or consolidation, or
indirectly, by purchase of the Company's or FOL's voting securities or all or
substantially all of the Company or FOL's assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate
(and change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits payable hereunder
following Executive's death.
(d) Notices. Whenever under this Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is intended or who should be advised or notified, by
Federal Express or other similar overnight service or by certified or
registered mail, return receipt requested, postage prepaid and addressed to
such party at the address set forth below or at such other address as may be
designated by such party by like notice:
If to the Company:
Farley Industries, Inc.
5000 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Secretary
If to FOL:
Fruit of the Loom, Inc.
5000 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Secretary
With copies to:
196
Fruit of the Loom, Inc.
5000 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Attention: General Counsel
If to Executive:
Earl C. Shanks
170 Dover Circle
Lake Forest, Illinois 60045
If the parties by mutual agreement supply all other parties with telecopier
numbers for the purposes of providing notice by facsimile, such notice shall
also be proper notice under this Agreement. In the case of Federal Express or
other similar overnight service, such notice or advice shall be effective when
sent, and, in the cases of certified or registered mail, shall be effective 2
days after deposit into the mails by delivery to the U.S. Post Office.
(e) Reformation. The invalidity of any portion of this
Agreement shall not deemed to render the remainder of this Agreement invalid.
(f) Headings. The headings of this Agreement are for
convenience of reference only and do not constitute a part hereof.
(g) No General Waivers. The failure of any party at any time
to require performance by any other party of any provision hereof or to resort
to any remedy provided herein or at law or in equity shall in no way affect
the right of such party to require such performance or to resort to such
remedy at any time thereafter, nor shall the waiver by any party of a breach
of any of the provisions hereof be deemed to be a waiver of any subsequent
breach of such provisions. No such waiver shall be effective unless in
writing and signed by the party against whom such waiver is sought to be
enforced.
(h) No Obligation To Mitigate. Executive shall not be required
to seek other employment or otherwise to mitigate Executive's damages upon any
termination of employment or service to FOL; provided, however, that, to the
extent Executive receives from a subsequent employer health or other insurance
benefits that are substantially similar to the benefits referred to in Section
5(c) hereof, any such benefits to be provided by the Company or FOL to
Executive following the Term shall be correspondingly reduced.
(i) Offsets; Withholding. The amounts required to be paid by
the Company and/or FOL to Executive pursuant to this Agreement shall not be
subject to offset other than with respect to any amounts that are owed to the
Company or FOL by Executive due to his receipt of funds as a result of his
fraudulent activity. The foregoing and other provisions of this Agreement
notwithstanding, all payments to be made to Executive under this Agreement,
including under Sections 6 and 7, or otherwise by the Company or FOL will be
subject to required withholding taxes and other required deductions.
(j) Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of Executive, his heirs, executors,
197
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns and of FOL and its
successors and assigns.
13. Indemnification.
All rights to indemnification by the Company or FOL now existing
in favor of the Executive as provided in the Certificate of Incorporation or
By-Laws of the Company or FOL or pursuant to other agreements in effect on or
immediately prior to the Effective Date shall continue in full force and
effect from the Effective Date (including all periods after the expiration of
the Term), and the Company and FOL shall also advance expenses for which
indemnification may be ultimately claimed as such expenses are incurred to the
fullest extent permitted under applicable law, subject to any requirement that
the Executive provide an undertaking to repay such advances if it is
ultimately determined that the Executive is not entitled to indemnification;
provided, however, that any determination required to be made with respect to
whether the Executive's conduct complies with the standards required to be met
as a condition of indemnification or advancement of expenses under applicable
law and the Company's or FOL's Certificate of Incorporation, By-Laws, or other
agreement shall be made by independent counsel mutually acceptable to the
Executive and the indemnifying party (except to the extent otherwise required
by law). After the date hereof, the Company and FOL shall not amend its
respective Certificate of Incorporation or By-Laws or any agreement in any
manner which adversely affects the rights of the Executive to indemnification
thereunder. Any provision contained herein notwithstanding, this Agreement
shall not limit or reduce any rights of the Executive to indemnification
pursuant to applicable law. In addition, the Company and FOL will maintain
directors' and officers' liability insurance in effect and covering acts and
omissions of Executive (including during the Term and for a period of six
years thereafter) on terms substantially no less favorable as those in effect
on the Effective Date (if any).
198
IN WITNESS WHEREOF, Executive has hereunto set his hand and the
Company and FOL have each caused this instrument to be duly executed as of the
day and year first above written.
FARLEY INDUSTRIES, INC.
By: /S/ William Farley
Name: William Farley
Title: Chairman and
Chief Executive Officer
FRUIT OF THE LOOM, INC.
By: /S/ William
Name: William Farley
Title: Chairman and
Chief Executive Officer
EXECUTIVE
/S/ Earl C. Shanks
Earl C. Shanks
Dates Referenced Herein
| Referenced-On Page |
---|
This ‘10-K’ Filing | | Date | | First | | Last | | | Other Filings |
---|
| | |
| | 12/18/97 | | 4 | | | | | None on these Dates |
| | 12/17/97 | | 4 |
Filed on: | | 3/29/95 |
| | 1/1/95 | | 7 |
For Period End: | | 12/31/94 |
| | 12/18/94 | | 3 | | 6 |
| List all Filings |
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