EMPLOYMENT AGREEMENT dated as of May 4, 2000 (the
"AGREEMENT"), between PARAGON TRADE BRANDS, INC., a Delaware corporation (the
"COMPANY"), and MICHAEL T. RIORDAN (the "EXECUTIVE").
WHEREAS, the Company has offered to employ the Executive, and
the Executive desires to accept such employment, on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective as of the date hereof
(the "EFFECTIVE DATE").
2. EMPLOYMENT AND DUTIES
2.1 GENERAL. The Company hereby employs the Executive, and the
Executive agrees to serve, as President and Chief Executive Officer of the
Company, upon the terms and conditions herein contained. The Executive shall
have all of the responsibilities and powers normally associated with such
offices. So long as the Executive is employed by the Company, the Executive
shall serve as a member of the Board of Directors of the Company (the "BOARD")
and of the Company's Executive Committee. The Executive shall preside at all
meetings of the Board, determine the agendas for all such meetings in
consultation with the Company's Executive Committee and have such further
responsibilities and powers as are normally associated with the position of
Chairman of the Board. The Executive agrees to serve the Company faithfully and
to the best of his ability under the direction of the Board.
2.2 EXCLUSIVE SERVICES. Except as may otherwise be approved in
advance by the board, and except during vacation periods and reasonable periods
of absence due to sickness, personal injury or other disability, the Executive
shall devote his full working time throughout the Employment Term (as defined n
Section 2.4) to the services required of him hereunder The Executive shall
render his services exclusively to the Company during the Employment Term, and
shall use his best efforts, judgment and energy to improve and advance the
business and interests of the Company in a manner consistent with the duties of
his position. Notwithstanding the foregoing, but subject to the provisions of
Section 9, the Executive may (a) serve on corporate, civic or charitable boards
or engage in charitable activities, (b) perform outside speaking, lecturing or
teaching engagements, (c) continue to serve as an advisor to Kruger Inc. and (d)
manage personal investments, PROVIDED that none of the foregoing activities
interfere with the performance of the Executive's duties under this Agreement.
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2
2.3 PLACE OF PERFORMANCE.
2.3.1 PRE-OCTOBER 31, 2001. Prior to October 31, 2001, the
Executive shall continue to reside in his current principal residence in Green
Bay, Wisconsin, and shall perform his services under this Agreement as follows:
(i) for on day during each work week, the Executive shall perform his services
at an office established by the Executive I his principal residence in Green
Bay, Wisconsin (or, at the Executive's election with the reasonable consent of
the Company, at an office located in Green Bay, Wisconsin outside the
Executive's principal residence) (in either case, the "GREEN BAY OFFICE") and
(ii) for four days during each work week (inclusive of travel time), the
Executive's services shall be performed at the Company's headquarters in
Norcross, Georgia (the "NORCROSS OFFICE"). The Executive shall otherwise travel
on Company business as reasonably required by the Board.
2.3.2 POST-OCTOBER 31, 2001. Except as the parties may
otherwise agree, the Executive shall be required to relocate to the Atlanta,
Georgia metropolitan area by October 31, 2001. Following such relocation, the
Executive's services under this Agreement shall be principally performed at the
Norcross Office, subject to travel on Company business reasonably required by
the Board.
2.4 TERM OF EMPLOYMENT. The Executive's employment under this
Agreement shall commence as of the Effective Date and shall terminate on the
earlier of (i) the third anniversary of the Effective Date, and (ii) termination
of the Executive's employment pursuant to this Agreement; PROVIDED, HOWEVER,
that the term of the Executive's employment shall be automatically extended
without further action of either party for additional one year periods, unless
written notice of either party's intention not to extend has been given to the
other party hereto at least 90 days prior to the expiration of the then
effective term. The period commencing as of the Effective Date and ending on the
third anniversary of the Effective Date or such later date to which the term of
the Executive's employment under this Agreement shall have been extended is
hereinafter referred to as the "EMPLOYMENT TERM." A notice delivered by the
Company that it does not intend to extend the term of this Agreement shall
hereinafter be referred to as a "NONRENEWAL NOTICE."
2.5 REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for reasonable travel and other business expenses incurred by him in
the fulfillment of his duties hereunder upon presentation by the Executive of an
itemized account of such expenditures, in accordance with Company policy. The
Company shall also reimburse the Executive for reasonable expenses (including,
without limitation, for airfare and ground transportation) incurred by him
pursuant to Section 2.3.1 in traveling to and returning form the Norcross Office
on a weekly basis (or more frequently if necessary in light of the Executive's
personal and family obligations).
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3
3. COMPENSATION
3.1 BASE SALARY. From the Effective Date, the Executive shall
be entitled to receive a base salary ("BASE SALARY") at a rate of $500,000 per
annum, payable in arrears in equal installments in accordance with the Company's
payroll practices, with such increases as may be provided in accordance with the
terms hereof. Once increased, such higher amount shall constitute the
Executive's Base Salary.
3.2 ANNUAL REVIEW. The Executive's Base Salary shall be
reviewed by the Board, based upon the Executive's performance, not less often
than annually, and may be increased but not decreased. In addition to any
increases effected as a result of such review, the Board at any time may in its
sole discretion increase the Executive's Base Salary.
3.3 BONUS.
3.3.1 2000 FISCAL YEAR. For the 2000 fiscal year, the
Executive shall be entitled to receive a bonus (without any proration) based on
the level of the Applicable Performance Measure (as defined in Exhibit A
attached hereto) for the fiscal year ending December 31, 2000 (as set forth in
the Company's audited financial statements for such fiscal year):
Amount of
Applicable Bonus Amount (as a
PERFORMANCE MEASURE PERCENTAGE OF BASE SALARY
------------------- -------------------------
$60 Million 0
$75 Million 60
$90 Million 120
$97 Million 180
The amount of the Executive's bonus shall be adjusted upward to reflect any
linear interpolation between the foregoing performance measures.
3.3.2 POST-2000 FISCAL YEARS. For fiscal years after 2000, the
Board shall annually adopt a bonus plan and performance criteria upon which the
bonuses of executives of the Company shall be based. Commencing with the 2001
fiscal year, during his employment under this Agreement, the Executive shall be
entitled to participate in such bonus plan, based on performance criteria to be
determined at the beginning of each year by the Board in good faith in
reasonable consultation with the Executive, and otherwise in an amount
(expressed as a percentage of Base Salary, which shall not be less than 60% if
the target performance measures are satisfied and not less than 180% if the
maximum performance measures established for the Company's senior executives as
a whole are satisfied) and on other terms and conditions that are no less
favorable than those applicable to any other senior executive of the Company.
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3.4 STOCK OPTIONS. Effective as of May 4, 2000, the Executive
shall be granted options (the "STOCK OPTIONS") to purchase 700,000 shares of the
Company's common stock, par value $.01 per share (the "COMMON STOCK"), on the
terms and conditions set forth in the Option Agreement dated as of May 4, 2000
(the "OPTION AGREEMENT") by and between the Company and the Executive. The
Executive shall be eligible to receive future grants of options to purchase
shares of Common Stock as determined by the Board.
4. EMPLOYEE BENEFITS
The Executive shall, during his employment under this
Agreement, be eligible to participate in all employee and fringe benefit plans,
programs and arrangements which shall be established by the Company for, or made
available to, its senior executives ,on terms and conditions that are no less
favorable than those applicable to any other senior executive of the Company,
PROVIDED that the Executive may elect not to participate, or to defer
participation, in the Company's medical and/or dental plans. In addition, the
Company shall furnish the Executive with the following benefits during his
employment under this Agreement:
(i) paid vacation of five weeks per calendar year in
accordance with the vacation policy of the Company;
(ii) reimbursement of the Executive's reasonable expenses in
connection with maintaining and operating the Green Bay Office;
(iii) Reimbursement of the Executive's reasonable expenses in
connection with tax and financial planning services;
(iv) Reimbursement of the Executive's reasonable expenses
(including rent and utilities) in connection with maintaining a
furnished residence in the Atlanta, Georgia metropolitan area;
(v) reimbursement of the Executive's reasonable expenses
(including initiation fees and dues) in connection with his memberships
in a country club and a health club located in the Atlanta, Georgia
metropolitan area;
(vi) reimbursement of the Executive's reasonable legal and
out-of-pocket expenses in connection with the preparation, negotiation
and enforcement (including dispute resolution) of this Agreement and
any related documentation;
(vii) reimbursement of the Executive's expenses associated
with the relocation of his family and moving of his household goods and
furnishings to a new residence in the Atlanta, Georgia metropolitan
area;
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5
(viii) reimbursement of the Executive's broker's fees, closing
costs and other similar expenses (including reasonable legal fees)
associated with (x) the sale of his residence in Green Bay, Wisconsin
and (y) the purchase of a new residence in the Atlanta, Georgia
metropolitan area; and
(ix) coverage by a customary director and officer
indemnification policy on a basis that is no lees favorable than the
coverage provided to any other Company officer or director.
5. TERMINATION OF EMPLOYMENT
5.1 TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD REASON.
5.1.1 GENERAL. If, prior to the expiration of the Employment
Term, the Executive's employment is terminated by the Company without Cause (as
defined in Section 5.3), or the Executive terminates his employment hereunder
for Good Reason (as defined in Section 5.4), the Company shall pay to the
Executive in a lump sum, within 30 days after the date of termination, and
amount equal to (x) two times the sum of (i) the Executive's annual Base Salary
(at the rate in effect on the date of such termination) and (ii) the average of
the Executive's annual bonus pursuant to Section 3.3 for the two fiscal years
immediately preceding the fiscal year in which such termination occurs (or, if
such termination occurs (A) during the 2001 fiscal year, an amount equal to the
bonus for the 2000 fiscal year or (B) during the 2000 fiscal year, an amount
equal to 120% of the Executive's annual Base Salary (at the rate in effect on
the date of such termination)), and (y) a PRO RATA portion of the target bonus
to which the Executive would have been entitled for the year of termination
pursuant to Section 3.3 had the Executive remained employed for the entire year.
In addition, the Executive shall be entitled to continue to participate in the
Company's welfare benefit plans (or, if the Executive is ineligible to continue
to participate under the terms thereof, in substitute programs adopted by the
Company providing substantially comparable benefits) during the period (the
"CONTINUATION PERIOD") beginning on the date of termination and ending on the
earlier of (i) the second anniversary of the date of termination and (ii) in the
case of any such welfare plan, the date on which the Executive becomes covered
by a similar welfare plan maintained by another employer. The Executive shall
have no further right to receive any other compensation or benefits after such
termination or resignation of employment except as determined in accordance with
the terms of the employee benefit plans and programs of the Company.
5.1.2 DEATH DURING CONTINUATION PERIOD. In the event of the
Executive's death during the Continuation Period, the Executive's family shall
continue to participate during the remainder of the Continuation Period in the
Company's welfare benefit plans on the same terms and conditions as were
applicable prior to the date of the Executive's death.
5.1.3 DATE OF TERMINATION. The date of termination of
employment without Cause shall be the date specified in a written notice of
termination to the Executive (which date
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6
shall be at least 10 business days after receipt by the Executive of such
written notice). The date of resignation for Good Reason shall be the date
specified in the written notice of resignation from the Executive to the
Company; PROVIDED, HOWEVER, that no such written notice shall be effective
unless the cure period specified in Section 5.4 has expired without the Company
having corrected, to the reasonable satisfaction of the Executive, the event or
events subject to cure. If no date of resignation is specified in the written
notice from the Executive to the Company, the date of termination shall be the
first day following such expiration of such cure period.
5.2 TERMINATION FOR CAUSE; RESIGNATION FOR GOOD REASON.
5.2.1 GENERAL. If, prior to the expiration of the Employment
Term, the Executive's employment is terminated by the Company for Cause, or the
Executive resigns from his employment hereunder other than for Good Reason, the
Executive shall be entitled only to payment of his Base Salary and other
compensation and benefits through and including the date of termination or
resignation. The Executive shall have no further right to receive any other
compensation or benefits after such termination or resignation of employment,
except as determined in accordance with the terms of the employee benefit plans
and programs of the Company.
5.2.2 DATE OF TERMINATION. Subject to the proviso to Section
5.3, the date of termination for Cause shall be the date specified in a written
notice of termination to the Executive after formal action by the Board at a
meeting of the Board, at which meeting the Board, by a two-thirds vote,
determines to terminate the Executive for Cause. The Executive shall have the
right to receive notice of and appear (with legal counsel) at such meeting to
respond to any allegations made against him concerning the contemplated
termination. The date of resignation without Good Reason shall be the date
specified in the written notice of resignation from the Executive to the
Company, or if no date is specified therein, 10 business days after receipt by
the Company of written notice of resignation from the Executive.
5.3 CAUSE. Termination for "CAUSE" shall mean termination
of the Executive's employment because of:
(i) any willful act or omission that constitutes a material
breach by the Executive of any of his material obligations under this
Agreement;
(ii) the willful and continued failure or refusal of the
Executive to substantially perform the duties reasonably required of
him as an employee of the Company;
(iii) the Executive's conviction of a felony involving
dishonesty or moral turpitude; or
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(iv) any other willful misconduct by the Executive which is
materially injurious to the financial condition or business reputation
of the Company or any of its subsidiaries or affiliates (it being
understood that the good faith performance by the Executive of the
duties required of him pursuant to Section 2.1 shall not constitute
"misconduct" for purposes of this clause (iv));
PROVIDED, HOWEVER, that if any such Cause relates to the Executive's obligations
under this Agreement or is otherwise susceptible to cure, the Company shall not
terminate the Executive's employment hereunder unless the Company first gives
the Executive notice of its intention to terminate and of the grounds for such
termination and the Executive has not, within 20 business days following receipt
of the notice, cured such Cause, or in the event such Cause is not susceptible
to cure within such 20 business day period, the Executive has not taken all
reasonable steps within such 20 business day period to cure such Cause as
promptly as practicable thereafter.
5.4 GOOD REASON. For purposes of this Agreement, "GOOD
REASON" shall mean any of the following (without the Executive's prior written
consent):
(i) a decrease in the Executive's base rate of compensation
or a failure by the Company to pay material compensation due and
payable to the Executive in connection with his employment;
(ii) a diminution of the responsibilities, positions or
titles of the Executive from those set forth in this Agreement;
(iii) the Company's requiring the Executive to be based at
any office or location that is inconsistent with the provisions of
Section 2.3;
(iv) the Company's delivery to the Executive of a Nonrenewal
Notice; or
(v) a material breach by the Company of any term or
provision of this Agreement;
PROVIDED, HOWEVER, that no event or condition described in clauses (i) through
(iii) or (v) of this Section 5.4 shall constitute Good Reason unless (X) the
Executive gives the Company written notice of his objection to such event or
condition and (Y) such event or condition is not corrected by the Company within
20 business days of its receipt of such notice (or in the event that such event
or condition is not susceptible to correction within such 20 business day
period, the Company has not taken all reasonable steps within such 20 business
day period to correct such event or condition as promptly as practicable
thereafter).
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8
6. DEATH, DISABILITY OR RETIREMENT
In the event of termination of the Executive's employment by
reason of death, Permanent Disability (as hereinafter defined) or retirement,
the Executive (or his estate, as applicable) shall be entitled to Base Salary
and other compensation and benefits through and including the date of
termination. In addition, the Company shall pay to the Executive (or his estate,
as applicable) in a lump sum, within 30 days after the date of termination, an
amount equal to 100% of the Base Salary for six months, plus a pro rata portion
of the maximum bonus to which the Executive would have been entitled for the
year of termination pursuant to Section 3.3 had the Executive remained employed
for the entire year. If the Executive's employment terminates by reason of
Permanent Disability, payments to the Executive pursuant to this Section 6 shall
be reduced by an amount equal to the sum of all benefits received by the
Executive during the six-month period following the date of termination under
any disability plan maintained by the Company. Other benefits shall be
determined in accordance with the employee benefit plans or programs of the
Company, and the Company shall have no further obligation hereunder. For
purposes of this Agreement, "PERMANENT DISABILITY" means a physical or mental
disability or infirmity of the Executive that prevents the normal performance of
substantially all his duties as an employee of the Company, which disability or
infirmity shall exist for any continuous period of 180 days.
7. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
7.1 GROSS-UP PAYMENT. Anything in this Agreement to the
contrary or any termination of this Agreement notwithstanding, in the event it
shall be determined that any payment or distribution or benefit received or to
be received by the Executive pursuant to the terms of this Agreement or any
other payment or distribution or benefit made or provided by the Company or any
of its affiliates, to or for the benefit of the Executive (whether pursuant to
this Agreement or otherwise and determined without regard to any additional
payments required under this Section 7) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "CODE"), or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, is hereinafter collectively referred to as the "EXCISE
TAX"), then the Executive shall be entitled to receive an additional payment (a
"GROSS-UP PAYMENT") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income and employment taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon he
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. Any such Gross-Up Payment shall be
reduced by the Offset Amount (as defined below), if any, and shall be subject to
applicable tax withholding pursuant to Section 11.5. for purposes of this
Section 7, "OFFSET AMOUNT" means the amount of the Gross-Up Payment that would
have been payable pursuant to this Section 7.1 had the only Payment taken into
account for purposes of calculating the Gross-Up Payment been the acceleration
of vesting that occurs pursuant to Section 2(c)(iii) of the Option Agreement as
a
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9
result of a Sale (as defined in the Option Agreement) with respect to those
Performance-Based Options (as defined in the Option Agreement) that did not vest
in a fiscal year of the Company preceding the fiscal year in which the Sale
occurs as a result of the failure of the Company to achieve the performance
targets for such fiscal year set forth in Section 2(c)(ii) of the Option
Agreement.
7.2 GROSS-UP PAYMENT CALCULATION. Subject to the provisions of
Section 7.3, all determinations required to be made under this Section 7,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by such certified public accounting firm as may be
jointly designated by the Executive and the Company (the "ACCOUNTING FIRM"),
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to this Section 7,
shall be paid by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 7.3 and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
7.3 CLAIM BY THE IRS. The Executive shall notify the Company
in writing of any claim by the U.S. Internal Revenue Service (the "IRS") that,
if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Executive gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to
time, including, without limitation,
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10
accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company; and
(iii) cooperate with the Company in good faith in order
effectively to contest such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses; (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income and employment tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 7.3, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive shall
agree to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; PROVIDED, HOWEVER, that if the Company
directs the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income and employment tax (including interest or penalties
with respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and PROVIDED FURTHER, that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
IRS or any other taxing authority.
7.4 ENTITLEMENT TO REFUND. If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7.3, the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
Section 7.3) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 7.3, a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
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8. NO MITIGATION OR OFFSET
The Executive shall not be required to mitigate the amount of
any payment or benefit provided for herein by seeking other employment or
otherwise, and any such payment or benefit will not be reduced in the event such
other employment is obtained.
9. NO SOLICITATION; CONFIDENTIALITY; NONCOMPETITION
9.1 NONSOLICITATION. For so long as the Executive is employed
by the Company and continuing for one year thereafter, the Executive shall not,
without the prior written consent of the Company, directly or indirectly, as a
sole proprietor, member of a partnership, stockholder or investor, officer or
director of a corporation, or as an employee, associate, consultant or agent of
any person, partnership, corporation or other business organization or entity
other than the Company or any of its subsidiaries or affiliates: (x) solicit or
endeavor to entice away from the Company or any of its subsidiaries any
individual who is, or, was during the then most recent 6-month period, employed
by the Company or any of its subsidiaries; or (y) solicit or endeavor to entice
away from the Company or any of its subsidiaries any person or entity who is, or
was within the then most recent 6-month period, a customer of the Company or any
of its subsidiaries.
9.2 CONFIDENTIALITY. The Executive covenants and agrees with
the Company that he will not at any time, except in performance of his
obligations to the Company hereunder or wit the prior written consent of the
Company, directly or indirectly, disclose any secret or confidential information
that he may learn or has learned by reason of his association with the Company
or any of its subsidiaries and affiliates. The term "CONFIDENTIAL INFORMATION"
includes information not previously disclosed to the public or tot he trade by
the Company's or any of its subsidiaries' or affiliates' management, or
otherwise in the public domain, with respect to the Company's o any of its
subsidiaries' or affiliates' products, facilities, applications and methods,
trade secrets and other intellectual property, systems, procedures, manuals,
confidential reports, product price lists, customer lists, technical
information, financial information, business plans, prospects or opportunities,
but shall exclude any information which (i) is or becomes available to the
public or is generally known in the industry or industries in which the Company
operates other than as a result of disclosure by the Executive in violation of
his agreements under this Section 9.2 or (ii) the Executive is required to
disclose under any applicable laws, regulations or directives of any government
agency, tribunal or authority having jurisdiction in the matter or under
subpoena or other process of law.
9.3 NO COMPETING EMPLOYMENT. For so long as the Executive is
employed by the Company and continuing for one year thereafter (the "NONCOMPETE
TERM"), the Executive shall not, without the prior written consent of the
Company, directly or indirectly, as a sole proprietor, member of a partnership,
stockholder or investor (other than a stockholder or investor owning not more
than a 5% interest), officer or director of a corporation, or as an employee,
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12
associate, consultant or agent of any person partnership, corporation or other
business organization or entity other than the Company or any of its
subsidiaries or affiliates, render any service to or in any way be affiliated
with any business which is engaged in the business of manufacturing store brand
infant disposable diapers, located in such geographic areas as the business of
the Company and its subsidiaries is located at the time of termination;
PROVIDED, HOWEVER, that if (x) the Company delivers a Nonrenewal Notice to the
Executive and (y) the Executive's employment is terminated for any reason
following the delivery of such Nonrenewal Notice, the Executive's obligations
under this Section 9.3 shall terminate as of the date of termination of
employment.
9.4 EXCLUSIVE PROPERTY. The Executive confirms that all
confidential information is and shall remain the exclusive property of the
Company. All business records, papers and documents kept or made by the
Executive relating to the business of the Company shall be and remain the
property of the Company, except for such papers customarily deemed to be the
personal copies of the Executive.
9.5 INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of the
covenants contained in this Section 9 may result in material and irreparable
injury to the Company or its subsidiaries or affiliates for which there is no
adequate remedy a law, that it will not e possible to measure damages for such
injuries precisely and that, in the event of such a breach or threat thereof,
the Company shall be entitled to seek a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Section 9 or such other relief as may be required
specifically to enforce any of the covenants in this Section 9. If for any
reason, it is held that the restrictions under this Section 9 are not reasonable
or that consideration therefor is inadequate, such restrictions shall be
interpreted or modified to include as much of the duration and scope identified
in this Section 9 as will render such restrictions valid and enforceable.
10. ARBITRATION
Any dispute or controversy arising under or in connection with
this Agreement that cannot be mutually resolved by the parties hereto shall be
settled exclusively by arbitration in New York, New York before one arbitrator
of exemplary qualifications and stature, who shall be selected jointly by the
Company and the Executive, or, if the Company and the Executive cannot agree on
the selection of the arbitrator, shall be selected by the American Arbitration
Association (PROVIDED that any arbitrator selected by the American Arbitration
Association shall not, without the consent of the parties hereto, be affiliated
with the Company or the Executive or any of their respective affiliates).
Judgment may be entered o the arbitrator's award in any court having
jurisdiction. The parties hereby agree that the arbitrator shall be empowered to
enter an equitable decree mandating specific enforcement of the terms of this
Agreement.
<PAGE>
13
11. MISCELLANEOUS
11.1 NOTICES. All notices or communications hereunder shall
be in writing, addressed as follows:
To the Company:
Paragon Trade Brands, Inc.
180 Technology Parkway
Norcross, GA 30092
Telecopier No.: (212) 332-7575
Attention: General Counsel
To the Executive:
Michael T. Riordan
2964 S. Telemark Circle
Green Bay, Wisconsin 54313
Telecopier No.: (920) 497-3641
All such notices shall be conclusively deemed to be received and shall be
effective, (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy
or facsimile transmission, upon confirmation of receipt by the sender of such
transmission or (iii) if sent by registered or certified mail, on the fifth day
after the day on which such notice is mailed.
11.2 SEVERABILITY. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if nay provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.3 ASSIGNMENT. The Company's rights and obligation sunder
this Agreement shall not be assignable by the Company except as incident to a
reorganization, merger or consolidation, or transfer of all or substantially all
of the Company's business and properties. The Company shall require any
permitted successor or assign to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company wold have been required
to perform it had no such succession or assignment taken place. This Agreement
shall not be assignable or otherwise subject to hypothecation by the Executive
without the prior written consent of the Company. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
11.4 ENTIRE AGREEMENT. This Agreement, the Stock Option
Agreement and the related agreements referred to therein represent the entire
agreement of the parties and shall supersede any and all previous contracts,
arrangements or understandings between the Company
<PAGE>
14
and the Executive relating to the subject matter hereof. This Agreement may be
amended at any time by mutual written agreement of the parties hereto.
11.5 WITHHOLDING. The payment of any amount pursuant tot his
Agreement shall be subject to the applicable withholding and payroll taxes, and
such other deductions as may be required under the Company's employee benefit
plans, if any.
11.6 GOVERNING LAW. This Agreement shal be construed,
interpreted, and governed in accordance with the laws of the State of New York
without reference to rules relating to conflicts of law.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed and the Executive has hereunto set his hand, as of the day and
year first above written.
PARAGON TRADE BRANDS, INC.
By: /S/ ALAN J. CYRON
-------------------------------------
Name: Alan J. Cyron
Title: EVP & Chief Financial Officer
EXECUTIVE
/S/ MICHAEL T. RIORDAN
------------------------------------------
Michael T. Riordan
<PAGE>
EXHIBIT A
The "Applicable Performance Measure" means the sum of the following measures for
the Company's fiscal year ending December 31, 2000:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MEASURES LO TARGET MAX SUPER-MAX
(1) US EBITDA 45.0 52.5 60.0 n/a
(2) PMI cash flow 6.6 9.1 11.6 n/a
(3) 21mm-CAPEX* 0.0 2.0 4.0 n/a
(4) Receivable and Inventory 4.0 5.0 6.0 n/a
(5) Other Assets to Cash** 1.4 3.4 5.4 n/a
(6) Net earnings in
Foreign subsidiaries*** 3.0 3.0 3.0 N/A
--- --- --- ---
MEASURE TOTAL 60.0 75.0 90.0 97.0
<FN>
* Excluding new Training Pant M/C and any new business investments.
** Includes sales of building and equipment to JV's.
*** At current ownership.
</FN>
</TABLE>
DETERMINATION OF WHETHER THE APPLICABLE PERFORMANCE MEASURE HAS BEEN ACHIEVED AT
ANY LEVEL WILL BE BASED ON THE "MEASURE TOTAL" FOR SUCH LEVEL, AND NOT WHETHER
ANY INDIVIDUAL MEASURE HAS BEEN INDEPENDENTLY ACHIEVED.
