Exhibit 10.3
CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT
THIS CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT (the "Agreement") is made
and entered into as of _______________, 2007 by and between CULP, INC., a
North
Carolina corporation headquartered in High Point, North Carolina
(the "Company")
and the employee ("Employee").
Background Statement
Culp, Inc. (the
"Company") has
determined that it is
in its best interests to
have the continued dedication and services of certain employees,
notwithstanding
the possibility,
threat, or occurrence of a Change of
Control (as hereinafter
defined) of the Company. It is imperative to diminish the
inevitable distraction
of senior management because of the personal uncertainties and risks created
by
any pending or threatened Change of Control, to encourage senior management's
full attention and
dedication to the
Company in the event of any threatened or
pending change of control, to provide an incentive for certain
senior management
members to continue in
the employ of the Company following a Change of Control
in order to assure
continuity in the management of the Company, and to provide
certain senior management members with compensation
arrangements upon a
Change
of Control which ensure that the compensation expectations of certain senior
management members
will be satisfied and that such compensation will be
competitive with the
compensation
of corporations similarly situated. The
Company has
also determined that it is in its best interests to restrict
competition with
the Company by certain key management personnel upon
termination of their employment with the Company following a Change of Control.
The purpose of this Agreement is to memorialize the compensation Employee will
receive upon termination of his employment in certain circumstances
following a
Change of Control.
In consideration of the foregoing and the mutual covenants
contained herein
and
other good and valuable consideration, the receipt and sufficiency of
which are
hereby acknowledged, the Company and Employee agree as follows:
A. For
purposes of this Agreement, the following definitions and related
provisions shall apply:
1. Total Compensation.
"Total Compensation" shall mean
Employee's
annual salary
in effect at the time of termination of employment ("Base
Salary"), plus with
respect to the Company's annual incentive plan, the
annual
targeted amount
for the current year in which Employee's employment is
terminated. If Employee is not participating in an annual incentive
plan for the
year in which his employment is terminated, then "Total
Compensation" shall mean
Employee's Base Salary
plus the annual targeted amount for the most recent year
in which Employee participated in an annual incentive plan.
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2. Cause. "Cause" means (i) Employee's willful and continued
failure
to substantially
perform his duties with the Company (other than any such
failure resulting from
Disability (as
hereinafter defined)
or occurring after
issuance by Employee of a notice of termination for Good Reason (as
hereinafter
defined)), after a
written demand for
substantial
performance is delivered to
Employee that
specifically
identifies the manner in which the Company believes
that Employee
willfully failed to substantially perform his duties, and after
Employee has
failed to resume substantial performance of his duties on a
continuous basis
within thirty calendar days of receiving such demand; or (ii)
Employee has
committed an act which
seriously and substantially damages or
embarrasses the
Company for which
there is no cure (for
example, and
without
limitation, sexual
harassment).
If Employee is charged
with a felony, in
the
discretion of the board of directors, Employee may be placed on a paid
leave of
absence for six
months pending a trial of such
charge. If the charge is not
brought on for trial
within this six month
period, in the
discretion
of the
board of directors,
Employee may be placed
on an unpaid leave of absence until
the charge is tried.
If Employee is
convicted of the felony, he may, in the
discretion of the board of directors, be terminated for Cause. If Employee is
acquitted of the felony, he shall be reinstated to active status to
the position
held at the
beginning of the paid leave of absence and reimbursed for
compensation and
benefits he would have
received during the unpaid leave of
absence. For
purposes of this
definition,
actions or failures to
act will be
deemed "willful"
only if done or
omitted in bad faith and without reasonable
belief that the action or omission was in the best interests of the
Company.
3. Disability.
"Disability" shall
have the same meaning as it does
under the Company's
Long-Term Disability
policy, as maintained
for employees.
Employee shall be
deemed to be disabled
when Employee becomes eligible to
commence benefits under the Company's Long-Term Disability
policy.
4. Good Reason. "Good Reason" shall mean, without Employee's
express
written consent, the
existence of any of the following conditions unless such
conditions are fully
corrected within
thirty days after Employee notifies the
Company of the existence of such conditions as hereinafter
provided:
(i) a material diminution in Employee's authority, duties or
responsibilities;
(ii) a material diminution in the authority, duties or
responsibilities of
the supervisor to whom
Employee is required to
report, including a
requirement that
Employee report to a
Company
officer or employee
instead of reporting
directly to the Company's
board of directors;
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<PAGE>
(iii) a material
diminution in Employee's Base Salary, other
than as a result
of across-the-board
salary reductions similarly
affecting all management personnel of the Company; or
(iv) a material change
in the geographic
location at which
Employee must regularly perform services for the Company.
Employee shall
notify the
Company that he believes that one or more of the
conditions described
above exists, and of his intention to terminate employment
for Good Reason as a result thereof, within sixty days after the time that
he
gains knowledge
of such conditions. Employee shall not deliver a notice of
termination of
employment
for Good Reason until
thirty days after he delivers
the notice described in the preceding sentence, and Employee may do so only if
the conditions
described in such notice have not been fully
corrected by the
Company.
5. Change of Control.
"Change of Control"
means the occurrence
of
one of the following:
(i) any "person"
(as that term is used in Sections
13(d)(3) of the Securities Exchange Act of 1934, as amended),
other
than (A) a trustee or other fiduciary holding securities under
an
employee benefit plan of the Company or (B) Employee or a group
of
persons including Employee, is or becomes the beneficial owner
(as
determined pursuant to
the provisions
of Section 13(d) of the
Securities
Exchange Act
of 1934, without regard to the
requirements set
forth in Section 13(d)(1) in regard to
registration and also
without regard to Section 13(d)(b)(3)),
directly or indirectly, of 35% or more of the common
voting stock
of the Company or its
successors, other than
an underwriter
or
group of underwriters
owning shares of common voting stock in
connection with a bona
fide public
offering of such shares and
the sale of such shares to the public;
(ii) there shall be any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or as a result of which the holders of 35% or more of
the voting
capital stock (if any)
of the surviving
corporation
were not holders
of voting capital stock of the Company
immediately prior
to the
transaction;
(iii) there occurs the sale or transfer of all or substantially
all of the assets of the Company or the liquidation or
dissolution
of the Company; or
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<PAGE>
(iv) individuals who constitute the Board as of the effective
date of this Agreement (the "Incumbent Board"), cease for any
reason
(including but not
limited to a change
mandated by any
statute or
regulation) to
constitute
a majority of the Board; provided,
however,
that any individual
becoming a director
subsequent to the
date of this Agreement whose election or nomination for election
was
approved by a vote of
at least a majority of
the Incumbent
Board
shall be a member of the Incumbent Board; except that any
individual
whose initial
assumption of office occurs as a result of any actual
or threatened election
contest that is subject to the provisions of
Rule 14a-11
of the General Rules and Regulations under the
Securities Exchange
Act of 1934, shall not be deemed to be a member
of the Incumbent Board.
B.
Payments
upon Change of Control.
1. Payment Circumstances. If:
(i) a Change of
Control occurs
while this
Agreement is in
effect; and
(ii) (A) Employee's
employment is terminated in anticipation
of a Change of Control, or (B) Employee is employed by the
Company
or an affiliate
thereof at the time such Change of Control occurs,
and at any time during the three-year period following such Change
of Control,
(1) Employee's
employment is
terminated by the Company
or an affiliate
thereof for any reason
other than for death,
Disability or Cause, or
(2) Employee
terminates his
employment for Good Reason
within one
year following the initial existence of the
conditions giving rise to such Good Reason,
the Company (or its
successors) shall pay
Employee, or his
beneficiary in the
event of his subsequent death, subject to applicable federal and state income,
social security and other employment tax withholdings, an amount
(the "Change of
Control Payment") equal to 1.99 times Employee's Total Compensation
in effect at
the date of
termination of
employ
