EMPLOYMENT AND NON-SOLICITATION AGREEMENT
THIS EMPLOYMENT AND NON-SOLICITATION AGREEMENT (“Agreement”), dated as of June 10, 2009, is by and between DELTA APPAREL, INC., a Georgia corporation (“Company”), and Robert W. Humphreys, a South Carolina resident (“Executive”).
WHEREAS, Executive and the Company want to enter into a written agreement providing for the terms of Executive’s employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Employment . Executive agrees to continue Executive’s employment with the Company, and the Company agrees to employ Executive, on the terms and conditions set forth in this Agreement. Executive agrees during the term of this Agreement to devote substantially all of his business time, efforts, skills and abilities to the performance of his duties to the Company and to the furtherance of the Company’s business.
Executive’s job title will be Chairman of the Board of Directors and Chief Executive Officer and his duties will be those as are designated by the Board of Directors of the Company.
2. Compensation .
(a) Base Salary . During the term of Executive’s employment with the Company pursuant to this Agreement, the Company shall pay to Executive as compensation for his services an annual base salary of not less than $690,000 (Base Salary). Executive’s Base Salary will be payable in arrears in accordance with the Company’s normal payroll procedures and will be reviewed annually and subject to upward adjustment at the discretion of the Compensation Committee of the Company’s Board of Directors and confirmed by the full Board of Directors.
(b) Incentive Bonus . During the term of Executive’s employment with the Company pursuant to this Agreement, Executive shall be entitled to participate in the Company’s Short-Term Incentive Compensation Plan as in effect from time to time. The Executive’s Base Short-Term Incentive Compensation Base will be $600,000 during fiscal year 2010, $625,000 during fiscal year 2011, and $650,000 during fiscal year 2012. Calculation of the Executive’s Short-Term Incentive Compensation will be the same as approved annually by the Board of Directors for the Delta Apparel, Inc. Short-Term Incentive Compensation Participants. The maximum payout to the Executive from the Short-Term Incentive Compensation Plan is $1,500,000 for any single fiscal year. Any cash compensation payable under this paragraph shall be referred to as “Incentive Compensation” in this Agreement.
(c) Incentive Stock. During the term of the Executive’s employment with the Company pursuant to this Agreement, Executive will participate in the Delta Apparel, Inc. Incentive Stock Award Plan (“Plan”). Under the service participation of the Plan the Executive will receive a grant on June 29, 2009 that provides a two year award of 30,000 shares per year of Delta Apparel, Inc. Stock upon the filing with the Securities and Exchange Commission of the Company’s Form 10K for each of the fiscal years 2010 and 2011. Under the service participation of the Plan the Executive will receive an annual grant on June 27, 2011 that provides an annual award of 30,000 shares of Delta Apparel, Inc. Stock upon the filing with the Securities and Exchange Commission of the Company’s Form 10K for fiscal year 2012. If shares are not available on the date of the award, a cash award will be made to the Executive in the amount of the value of the award as of the close of the market on the date of the award. In addition, at or about such time the Company shall pay the Executive in cash an amount which will be approximately sufficient, after the payment of all applicable federal and state income taxes attributable to such payment, to pay the federal and state income taxes which the Participant will incur by virtue of the vesting of such Award (or portion thereof) whether received in the form of stock or cash. In the event the Executive’s employment is terminated other than for Cause as defined in Section 4(b) of the Agreement, the full award will be made for the fiscal year in which the Executive’s employment is terminated.
(d) Executive Fringe Benefits . During the term of Executive’s employment with the Company pursuant to this Agreement, Executive shall be entitled to receive such executive fringe benefits as are provided to the executives in comparable positions under any of the Company’s plans and/or programs in effect from time to time for which Executive is eligible to participate and to receive such other benefits as are customarily available to executives of the Company, including, without limitation, vacations and life, medical and disability insurance.
(e) Tax Withholding . The Company shall have the right to deduct from any compensation payable to Executive under this Agreement social security (FICA) taxes and all federal, state, municipal, foreign or other taxes or charges as may now be in effect or that may hereafter be enacted or required.
(f) Expense Reimbursements . The Company shall pay or reimburse Executive for all reasonable business expenses incurred or paid by Executive in the course of performing his duties hereunder, including, but not limited to, reasonable travel expenses for Executive. As a condition to such payment or reimbursement, however, Executive shall maintain and provide to the Company reasonable documentation and receipts for such expenses.
3. Term . Unless sooner terminated pursuant to Section 4 of this Agreement, and subject to the provisions of Section 5 and Section 6 hereof, the term of this Agreement (the “Term”) shall commence as of the first day of fiscal year 2010 and shall continue until the date of the filing with the Securities and Exchange Commission of the Company’s Form 10K for fiscal year 2012.
4. Termination . Notwithstanding the provisions of Section 3 hereof, but subject to the provisions of Section 5 and Section 6 hereof, Executive’s employment under this Agreement shall terminate as follows:
(a) Death . Executive’s employment shall terminate upon the death of Executive; provided, however, that the Company shall continue to pay (in accordance with its normal payroll procedures) the Base Salary to Executive’s estate for a period of six (6) months after the date of Executive’s death if Executive is employed by the Company the on date of his death.
(b) Termination for Cause . The Company may terminate Executive’s employment at any time for “Cause” (as hereinafter defined) by delivering a written termination notice to Executive. For purposes of this Agreement, “Cause” shall mean the Executive is convicted of a felony.
(c) Termination Without Cause . The Company may terminate Executive’s employment at any time for any or no reason by delivering a written termination notice to Executive.
(d) Termination by Executive . Executive may terminate his employment at any time by delivering one hundred eighty (180) days prior written notice to the Board of Directors of the Company; provided, however, that the terms, conditions and benefits specified in Section 5 hereof shall apply or be payable to Executive only if such termination occurs as a result of a material breach by the Company of any provision of this Agreement which breach is not cured within ten (10) days after the Board of Directors of the Company receives from Executive a written notice detailing such breach.
(e) Termination Following Disability . In the event Executive becomes “disabled” (as defined below), the Company may terminate Executive’s employment by delivering a written termination notice to Executive. Notwithstanding the foregoing, Executive shall continue to receive his full Base Salary and benefits to which he is entitled under this Agreement for a period of six (6) months after the effective date of such termination. For purposes of this section, the Executive shall be considered disabled if the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three (3) months under the Company’s disability insurance policy and/or salary continuation policy as in effect on the date of such disability.
(f) Payments . Subject to any limitations under Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), and related Treasury Regulations, following any expiration or termination of this Agreement or Executive’s employment hereunder, and in addition to (but not in duplication of) any amounts owed pursuant to Section 5 or Section 6 hereof, the Company shall pay to Executive all amounts earned by Executive hereunder prior to the date of such expiration or termination.
(g) Non-Disparagement . Executive agrees that during and following the termination of his employment he will not publicly (or in a manner he reasonably should have expected to be made public) disparage or otherwise make negative comments regarding the Company, its employees or its affiliates, provided, however, that the foregoing shall in no way restrict the Executive from in good faith reporting any concerns that he may have to (i) any authority within the Company designated to receive complaints or concerns from employees, including, without limitation, the Company’s Board of Directors or a committee thereof, or (ii) any regulator or other governmental authority with supervisory responsibility for the Company (including, without limitation, the Securities and Exchange Commission) or the Company’s independent auditors.
5. Certain Termination Benefits . In the event that:
(i) the provisions of Section 6 do not apply;
(ii) either the Company terminates Executive’s employment without Cause pursuant to Section 4(c) or Executive terminates his employment pursuant to Section 4(d) as a result of an uncured material breach by the Company of any provision of this Agreement; and
(iii) the Executive executes and delivers the release contemplated in subsection (e) below, then in such case the Company will provide Executive the benefits described in subsection (a) below and, if and to the extent that Executive is eligible to participate in such plans, subsections (b) through (c) below.
(a) Base Salary and Incentive Compensation . The Company shall pay to Executive (i) his Base Salary (as in effect as of the date of his termination) and (ii) Incentive Compensation (in an aggregate amount as follows:
To the extent permitted under Code Section 409A, the sum of applicable Base Salary and Incentive Compensation shall be divided into equal monthly payments and paid to the Executive over the applicable Payout Period shown in the table above, depending on the Executive’s years of service at the time of termination.
(b) Life and Group Disability Insurance . If and to the extent that the Company’s plans in effect from time to time permit such coverage and to the extent permitted under Code Section 409A, the Company shall continue to provide Executive with group life and disability insurance coverage for the applicable Payout Period described above in (a) following termination at coverage levels and rates equal to those applicable to Executive immediately prior to such termination or, if different, as provided to other executive level employees during such applicable period.
(c) Medical Insurance . Upon termination of employment, the Executive shall be entitled to all COBRA continuation benefits available under the Company’s group health plans to similarly situated employees. To the extent permitted under Code Section 409A, during the applicable Payout Period, the Company shall provide such COBRA continuation benefits to the Executive at the active employee rates similarly situated employees must pay for such benefits. Upon the expiration of such Payout Period, the Executive will be responsible for paying the full COBRA premiums for the remaining COBRA continuation period.
(d) Offset . To the extent permitted by COBRA and the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), any fringe benefits received by Executive in connection with any other employment accepted by Executive that are reasonably comparable, even if not necessarily as beneficial to Executive, to the fringe benefits then being provided by the Company pursuant to paragraphs (b) and (c) of this Section 5, shall be deemed to be the equivalent of such benefits, and shall terminate the Company’s responsibility to continue providing the fringe benefits package, taken as a whole, then being provided by the Company pursuant to paragraphs (b) and (c) of this Section 5. The Company agrees that if Executive’s employment with the Company is terminated, Executive shall have no duty to mitigate damages.
(e) General Release . Acceptance by Executive of any amounts pursuant to this Section 5 shall constitute a full and complete release by Executive of any and all claims Executive may have against the Company, its officers, directors and affiliates, including, but not limited to, claims he might have relating to Executive’s employment with the Company and cessation thereof; provided, however, that there may properly be excluded from the scope of such general release the following:
(i) claims that Executive may have against the Company for reimbursement of ordinary and necessary business expenses incurred by him during the course of his employment;
(ii) claims that may be made by the Executive for payment of Base Salary, bonuses, fringe benefits, stock upon vesting of incentive stock awards, stock upon exercise of stock options properly due to him, or other amounts or benefits due to him under this Agreement;
(iii) claims respecting any matters for which the Executive is entitled to be indemnified under the Company’s Articles of Incorporation or By-laws or applicable law, respecting third party claims asserted or third party litigation pending or threatened against the Executive; and
(iv) any claims prohibited by applicable law from being included in the release.
A condition to Executive’s receipt of any amounts pursuant to this Section 5 shall be Executive’s execution and delivery of a general release as described above. In exchange for such release, the Company shall, if Executive’s employment is terminated without Cause, provide a release to Executive, but only with respect to claims against Executive that Executive identifies in writing to the Company at the time of such termination.
6. Effect of Change of Control .
(a) If within one (1) year following a “Change of Control” (as hereinafter defined), Executive terminates his employment with the Company for “Good Reason” (as hereinafter defined) or the Company terminates Executive’s employment for any reason other than Cause, death or disability (as defined in Section 4(e)), the Company shall pay to Executive in a lump sum within thirty (30) days following Executive’s termination of employment: (i) an amount equal to one times the Executive’s Base Salary as of the date of termination; and (ii) an amount equal to the full amount of the cash Short-Term Incentive Compensation base during the fiscal year in which the termination occurs. In addition, the Company shall provide the Executive with out-placement assistance. In addition, to the extent permitted under the terms of the various plans, the Company shall continue to provide the Executive with coverage under the Company’s various welfare and benefit plans, including retirement and group healthcare, dental and life in which Executive participates at the time of termination, for the period equal to twelve (12) months from the date of termination at coverage levels and rates substantially equal to those applicable to Executive immediately prior to such termination.
(b) “Change of Control” means, with respect to the Executive, a “change in ownership,” a “change in effective control,” or a “change in the ownership of substantial assets” of a corporation as described in Treasury Regulations Section 1.409A-3(g)(5) (which events are collectively referred to herein as “Change of Control events”) after the date of this Agreement. To constitute a Change of Control with respect to the Executive, the Change of Control event must relate to a change in control of Delta Apparel, Inc.