Superior Group Of Companies, Inc 10-Q for FY2021 Q2
Superior Group Of Companies, Inc. (SGC)
About this 10-Q
Superior Group Of Companies, Inc filed this 10-Q on July 28, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $130.79M
- down 17.9% from $159.36M a year earlier
- Net income
- $4.58M
- down 69.8% from net income of $15.17M a year earlier
- Diluted EPS
- $0.28
- down 72.0% from $1.00 a year earlier
| UNITED STATES |
| SECURITIES AND EXCHANGE COMMISSION |
| WASHINGTON, D.C. 20549 |
| FORM |
| (Mark One) |
| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
| For the quarterly period ended | |||||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
| For the transition period from ________ to __________ |
| Commission file number: |
| Exact name of registrant as specified in its charter: |
| SUPERIOR GROUP OF COMPANIES, INC. |
| State or other jurisdiction of incorporation or organization: | I.R.S. Employer Identification No.: |
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| Address of principal executive offices: | ||||||||
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| Registrant’s telephone number, including area code: | ||||||||
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| Former name, former address and former fiscal year, if changed since last report: ___________________ |
| Securities registered pursuant to Section 12(b) of the Act: |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | |
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| Non-accelerated filer ☐ |
| Smaller Reporting Company | |
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| Emerging Growth Company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of common stock of the registrant outstanding as of July 21, 2021 was
TABLE OF CONTENTS
| PART I - FINANCIAL INFORMATION |
| SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| (Unaudited) |
| (In thousands, except shares and per share data) |
| Three Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Net sales | $ | $ | ||||||
| Costs and expenses: | ||||||||
| Cost of goods sold | ||||||||
| Selling and administrative expenses | ||||||||
| Other periodic pension costs | ||||||||
| Pension plan termination charge | ||||||||
| Interest expense | ||||||||
| Income before taxes on income | ||||||||
| Income tax expense | ||||||||
| Net income | $ | $ | ||||||
| Net income per share: | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
| Weighted average shares outstanding during the period: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Defined benefit pension plans: | ||||||||
| Recognition of net losses included in net periodic pension costs | $ | $ | ||||||
| Recognition of settlement loss included in net periodic pension costs | ||||||||
| Recognition of net losses included in pension plan termination charges | ||||||||
| Loss on cash flow hedging activities | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Other comprehensive income | ||||||||
| Comprehensive income | $ | $ | ||||||
| Cash dividends per common share | $ | $ | ||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except shares and per share data)
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Net sales | $ | $ | ||||||
| Costs and expenses: | ||||||||
| Cost of goods sold | ||||||||
| Selling and administrative expenses | ||||||||
| Other periodic pension costs | ||||||||
| Pension plan termination charge | ||||||||
| Interest expense | ||||||||
| Income before taxes on income | ||||||||
| Income tax expense | ||||||||
| Net income | $ | $ | ||||||
| Net income per share: | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
| Weighted average shares outstanding during the period | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Defined benefit pension plans: | ||||||||
| Recognition of net losses included in net periodic pension costs | $ | $ | ||||||
| Recognition of settlement loss included in net periodic pension costs | ||||||||
| Recognition of net losses included in pension plan termination charges | ||||||||
| Loss on cash flow hedging activities | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Other comprehensive income (loss) | ( | ) | ||||||
| Comprehensive income | $ | $ | ||||||
| Cash dividends per common share | $ | $ | ||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
| CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||||
| (Unaudited) |
|||||||||
| (In thousands, except share and par value data) |
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, less allowance for doubtful accounts of $ and $, respectively | ||||||||
| Accounts receivable - other | ||||||||
| Inventories | ||||||||
| Contract assets | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Other current liabilities | ||||||||
| Current portion of long-term debt | ||||||||
| Current portion of acquisition-related contingent liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt | ||||||||
| Long-term pension liability | ||||||||
| Long-term acquisition-related contingent liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Deferred tax liability | ||||||||
| Other long-term liabilities | ||||||||
| Commitments and contingencies (Note 6) | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, par value - authorized shares ( issued) | ||||||||
| Common stock, par value - authorized shares, issued and outstanding and shares, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive income (loss), net of tax: | ||||||||
| Pensions | ( | ) | ( | ) | ||||
| Cash flow hedges | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
| CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
| THREE MONTHS ENDED June 30, 2021 AND 2020 |
| (Unaudited) |
| (In thousands, except shares and per share data) |
| Accumulated | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Additional | Comprehensive | Total | ||||||||||||||||||||||
| Common | Common | Paid-In | Retained | (Loss) Income, | Shareholders’ | |||||||||||||||||||
| Shares | Stock | Capital | Earnings | net of tax | Equity | |||||||||||||||||||
| Balance, April 1, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options, net | ( | ) | ||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of | ||||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance, April 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options and SARs, net | ( | ) | ||||||||||||||||||||||
| Performance based shares issued | ||||||||||||||||||||||||
| Restricted shares issued | ||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Tax withheld on exercise of performance based shares | ( | ) | ( | ) | ||||||||||||||||||||
| Cash dividends declared ( per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of $ | ||||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of | ||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
SIX MONTHS ENDED June 30, 2021 AND 2020
(Unaudited)
(In thousands, except shares and per share data)
| Accumulated | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Additional | Comprehensive | Total | ||||||||||||||||||||||
| Common | Common | Paid-In | Retained | (Loss) Income, | Shareholders’ | |||||||||||||||||||
| Shares | Stock | Capital | Earnings | net of tax | Equity | |||||||||||||||||||
| Balance, January 1, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options | ( | ) | ||||||||||||||||||||||
| Restricted shares issued | ||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Tax benefit from vesting of acquisition-related restricted stock | ( | ) | ( | ) | ||||||||||||||||||||
| Cash dividends declared ( per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock reacquired and retired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of | ||||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options and SARs, net | ( | ) | ||||||||||||||||||||||
| Performance based shares issued | ||||||||||||||||||||||||
| Restricted shares issued | ||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Tax withheld on exercise of performance based shares | ( | ) | ( | ) | ||||||||||||||||||||
| Tax benefit from vesting of acquisition-related restricted stock | ||||||||||||||||||||||||
| Cash dividends declared ( per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Comprehensive income (loss): | - | |||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of $ | ||||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of | ||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| (In thousands) |
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Provision for bad debts - accounts receivable | ||||||||
| Share-based compensation expense | ||||||||
| Deferred income tax benefit | ( | ) | ( | ) | ||||
| Change in fair value of acquisition-related contingent liabilities | ||||||||
| Pension plan termination charge | ||||||||
| Changes in assets and liabilities, net of acquisition of business: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Accounts receivable - other | ( | ) | ||||||
| Contract assets | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable and other current liabilities | ( | ) | ||||||
| Payment of acquisition-related contingent liabilities | ( | ) | ||||||
| Long-term pension liability | ||||||||
| Other long-term liabilities | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Additions to property, plant and equipment | ( | ) | ( | ) | ||||
| Acquisition of business | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from borrowings of debt | ||||||||
| Repayment of debt | ( | ) | ( | ) | ||||
| Payment of cash dividends | ( | ) | ( | ) | ||||
| Payment of acquisition-related contingent liability | ( | ) | ( | ) | ||||
| Proceeds received on exercise of stock options | ||||||||
| Tax withholdings on exercise of performance based stock | ( | ) | ||||||
| Tax (provision) benefit from vesting of acquisition-related restricted stock | ( | ) | ||||||
| Common stock reacquired and retired | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of currency exchange rates on cash | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents balance, beginning of period | ||||||||
| Cash and cash equivalents balance, end of period | $ | $ | ||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
Superior Group of Companies, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 – Description of Business and Basis of Presentation:
Description of business
Superior Group of Companies, Inc. (together with its subsidiaries, “the Company,” “Superior,” “we,” “our,” or “us”) was organized in 1920 and was incorporated in 1922 as a New York company under the name Superior Surgical Mfg. Co., Inc. In 1998, the Company changed its name to Superior Uniform Group, Inc. and its state of incorporation to Florida. Effective on May 3, 2018, Superior Uniform Group, Inc. changed its name to Superior Group of Companies, Inc.
Superior’s Uniforms and Related Products segment, through its primary signature marketing brands Fashion Seal Healthcare®, HPI®, and WonderWink®, manufactures (through third parties or its own facilities) and sells a wide range of uniforms, corporate identity apparel, career apparel and accessories that are worn by employees in the hospital and healthcare fields; hotels; fast food and other restaurants; transportation; and the private security, industrial and commercial markets.
Superior services its Remote Staffing Solutions segment through multiple The Office Gurus® entities, including its subsidiaries in El Salvador, Belize, Jamaica, and the United States (collectively, “TOG”). TOG is primarily a near-shore premium provider of cost effective multilingual telemarketing and business process outsourced solutions.
The Promotional Products segment, through the BAMKO®, Public Identity®, Tangerine® and Gifts by Design brands, services customers that purchase primarily promotional and related products. The segment currently has sales offices in the United States, Brazil and Canada with support services in China, Hong Kong and India.
Basis of presentation
The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Intercompany items have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, and filed with the Securities and Exchange Commission. Management believes that the information furnished includes all adjustments of a normal recurring nature that are necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods indicated. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.
We refer to the condensed consolidated financial statements collectively as “financial statements,” and individually as “statements of comprehensive income,” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein.
Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be not applicable.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. On January 1, 2021, the Company adopted this standard on a prospective basis. The Company’s adoption of this standard did not have a material impact on its financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326).” The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. In February 2020, the FASB issued ASU 2020-2, “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” The update delayed the effective date of ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” for Smaller Reporting Companies until fiscal years beginning after December 15, 2022. Adoption will require a modified retrospective approach beginning with the earliest period presented. The Company is currently evaluating the potential impact this standard will have on its financial statements.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and LIBOR. This guidance includes practical expedients for contract modifications due to reference rate reform. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date. This guidance may be applied through December 31, 2022. The Company will apply this guidance to transactions and modifications to contracts and hedging relationships that reference LIBOR.
NOTE 2 – Inventories:
Inventories consisted of the following amounts (in thousands):
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Inventories | $ | $ | ||||||
Debt consisted of the following (in thousands):
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Credit Facilities: | ||||||||
| Revolving credit facility due February 2026 | $ | $ | ||||||
| Term loan due February 2024 (“2017 Term Loan”) | ||||||||
| Term loan due January 2026 (“2018 Term Loan”) | ||||||||
| Less: | ||||||||
| Payments due within one year included in current liabilities | ||||||||
| Debt issuance costs | ||||||||
| Long-term debt less current maturities | $ | $ | ||||||
The Company is party to an amended and restated credit agreement with Truist Bank, consisting of a revolving credit facility, a term loan maturing in February 2024 (“2017 Term Loan”) and a term loan maturing in January 2026 (“2018 Term Loan”). The revolving credit facility, 2017 Term Loan and 2018 Term Loan are collectively referred to as the “Credit Facilities.”
On February 8, 2021, the Company entered into a Second Amended and Restated Credit Agreement with Truist Bank (the “Credit Agreement”), pursuant to which the maximum availability under the Company’s existing revolving credit facility was increased from $
Obligations outstanding under the 2018 Term Loan have a variable interest rate of LIBOR plus a margin of between
Contractual principal payments for the 2017 Term Loan are as follows: remainder of 2021 - $
The Company is a party to an interest rate swap with a total notional value of $
NOTE 4 – Periodic Pension Expense:
The Company had previously sponsored
The Company is also the sponsor of an unfunded supplemental executive retirement plan in which several of its employees are participants.
The following table details the net periodic pension expense under the Company’s plans for the periods presented (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Service cost - benefits earned during the period | $ | $ | $ | $ | ||||||||||||
| Interest cost on projected benefit obligation | ||||||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Recognized actuarial loss | ||||||||||||||||
| Settlement loss | ||||||||||||||||
| Pension plan termination charge | ||||||||||||||||
| Net periodic pension cost after settlements | $ | $ | $ | $ | ||||||||||||
The pension settlement losses included in the table above resulted from lump sum pension payments made to various employees upon their retirement or termination during the periods specified. The pension settlement losses did not require a cash outlay by the Company. The service cost component is included in selling and administrative expenses in our statements of comprehensive income and the other components of net periodic pension cost are included in other periodic pension costs in our statements of comprehensive income.
In the second quarter of 2021, the Company terminated its two noncontributory qualified defined benefit pension plans, which were fully funded. The Company settled its obligations under the plans by providing lump-sum payments of $
NOTE 5 – Net Sales:
For our Uniforms and Related Products and Promotional Products segments, revenue is primarily generated from the sale of finished products to customers. Revenue for our Uniforms and Related Products and Promotional Products segments is recognized when the performance obligations under the contract terms are satisfied. For certain contracts with customers in which the Company has an enforceable right to payment for goods with no alternative use, revenue is recognized over time upon receipt of finished goods into inventory. Revenue for goods that do have an alternative use or that the customer is not obligated to purchase under the terms of a contract is generally recognized when the goods are transferred to the customer. Revenue from the sale of personal protective equipment, including face masks, isolation gowns, sanitizers and gloves, is generally recognized at a point in time when the goods are transferred to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contract. The Company includes shipping and handling fees billable to customers in net sales. Shipping and handling activities that occur after the transfer of promised goods are accrued as control is transferred to the customer rather than being treated as a separate performance obligation.
For our Remote Staffing segment, revenue is generated from providing our customers with staffing solution services. Revenue for our Remote Staffing segment is recognized as services are delivered.
Revenue is measured at the amount of consideration we expect to receive in exchange for the goods or services. Variable consideration for estimated returns, allowances and other price variances is recorded based upon historical experience and current allowance programs. Contract termination terms may involve variable consideration clauses such as sales discounts and customer rebates, and revenue is adjusted accordingly for these provisions. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The promised amount of consideration in a contract is not adjusted for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised good or service to a customer and when the customer pays for that product or service will be one year or less. Sales taxes are excluded from the measurement of a performance obligation’s transaction price. Sales commissions are expensed as incurred when we expect that the amortization period of such costs will be one year or less.
The following table presents disaggregated revenue by operating segment for the periods presented (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Uniforms and Related Products Segment: | ||||||||||||||||
| Uniforms and related products | $ | $ | $ | $ | ||||||||||||
| Personal protective equipment | ||||||||||||||||
| Total Uniforms and Related Products Segment | $ | $ | $ | $ | ||||||||||||
| Remote Staffing Solutions Segment: | ||||||||||||||||
| Remote staffing solutions services | $ | $ | $ | $ | ||||||||||||
| Net intersegment eliminations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Remote Staffing Solutions Segment | $ | $ | $ | $ | ||||||||||||
| Promotional Products Segment: | ||||||||||||||||
| Promotional products | $ | $ | $ | $ | ||||||||||||
| Personal protective equipment | ||||||||||||||||
| Total Promotional Products Segment | $ | $ | $ | $ | ||||||||||||
| Consolidated Net Sales | $ | $ | $ | $ | ||||||||||||
Contract Assets and Contract Liabilities
The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers (in thousands):
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Accounts receivable | $ | $ | ||||||
| Current contract assets | ||||||||
| Current contract liabilities | ||||||||
Contract assets relate to goods produced without an alternative use for which the Company has an enforceable right to payment but which have not yet been invoiced to the customer. The majority of the amounts included in contract assets on December 31, 2020 were transferred to accounts receivable during the six months ended June 30, 2021. Contract liabilities relate to payments received in advance of the Company completing its performance under a contract. Contract liabilities are included in other current liabilities in our balance sheets. During the six months ended June 30, 2021, $
NOTE 6 – Contingencies:
The purchase price to acquire substantially all of the assets of BAMKO, Inc. (“BAMKO”) in 2016 included contingent consideration based on varying levels of BAMKO’s consolidated EBITDA in each measurement period through 2021. The estimated fair value for BAMKO acquisition-related contingent consideration payable as of June 30, 2021 was $
The Company is involved in various legal actions and claims arising from the normal course of business. In the opinion of management, the ultimate outcome of these matters is not expected to have a material impact on the Company’s results of operations, cash flows, or financial position.
NOTE 7 – Share-Based Compensation:
Share-based compensation is recorded in selling and administrative expense in the statements of comprehensive income. The following table details the share-based compensation expense by type of award and the total related tax benefit for the periods presented (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Stock options and SARs | $ | $ | $ | $ | ||||||||||||
| Restricted stock | ||||||||||||||||
| Performance shares | ||||||||||||||||
| Total share-based compensation expense | $ | $ | $ | $ | ||||||||||||
Stock options and Stock Appreciation Rights (“SARs”)
The Company grants stock options and stock-settled SARs to employees that allow them to purchase shares of the Company’s common stock. Stock options are also granted to outside members of the Board of Directors of the Company. The Company determines the fair value of stock options and SARs at the date of grant using the Black-Scholes valuation model.
All stock options and SARs granted prior to August 3, 2018 vested immediately when granted. Awards issued thereafter vest either or years after the grant date. Employee awards expire years after the grant date, and those issued to directors expire years after the grant date. The Company issues new shares upon the exercise of stock options and SARs.
A summary of stock option transactions during the six months ended June 30, 2021 follows:
| Weighted Average | Aggregate | |||||||||||||||
| No. of | Weighted Average | Remaining Life | Intrinsic Value | |||||||||||||
| Shares | Exercise Price | (in years) | (in thousands) | |||||||||||||
| Outstanding, January 1, 2021 | $ | $ | ||||||||||||||
| Granted(1) | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Lapsed or cancelled | ( | ) | ||||||||||||||
| Outstanding, June 30, 2021 | ||||||||||||||||
| Exercisable, June 30, 2021 | ||||||||||||||||
| (1) | The weighted average grant date fair value of stock options granted was $ |
As of June 30, 2021, the Company had $
A summary of stock-settled SARs transactions during the six months ended June 30, 2021 follows:
| Weighted Average | Aggregate | |||||||||||||||
| No. of | Weighted Average | Remaining Life | Intrinsic Value | |||||||||||||
| Shares | Exercise Price | (in years) | (in thousands) | |||||||||||||
| Outstanding, January 1, 2021 | $ | $ | ||||||||||||||
| Granted(1) | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Outstanding, June 30, 2021 | ||||||||||||||||
| Exercisable, June 30, 2021 | ||||||||||||||||
| (1) | The weighted average grant date fair value of SARs granted was $ |
As of June 30, 2021, the Company had $
Restricted Stock
The Company has granted shares of restricted stock to directors and certain employees, which vest at a specified future date, generally after years, ratably over years or when certain conditions are met. The shares are subject to accelerated vesting under certain circumstances as outlined in the 2013 Incentive Stock and Awards Plan (the “2013 Plan”). Expense for each of these grants is based on the fair value at the date of the grant and is being recognized on a straight-line basis over the respective service period.
A summary of restricted stock transactions during the six months ended June 30, 2021 follows:
| Weighted Average | ||||||||
| No. of | Grant Date | |||||||
| Shares | Fair Value | |||||||
| Outstanding, January 1, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Outstanding, June 30, 2021 | ||||||||
As of June 30, 2021, the Company had $
Performance Shares
Certain employees received service-based or service-based and performance-based shares, to which we collectively refer to as performance shares. The service-based awards vest after the service period is met, which is generally to years. Expense for these grants is based on the fair value on the date of the grant and is being recognized on a straight-line basis over the respective service period. The performance-based shares generally vest after years if the performance and service targets are met. The Company evaluates the performance conditions associated with these grants each reporting period to determine the expected number of shares to be issued. Expenses for grants of performance shares are recognized on a straight-line basis over the respective service period based on the grant date fair value and expected number of shares to be issued. The awards are subject to accelerated vesting under certain circumstances as outlined in the 2013 Plan.
A summary of performance share transactions during the six months ended June 30, 2021 follows:
| Weighted Average | ||||||||
| No. of | Grant Date | |||||||
| Shares | Fair Value | |||||||
| Outstanding, January 1, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Outstanding, June 30, 2021 | ||||||||
As of June 30, 2021, the Company had $
NOTE 8 – Income Taxes:
The Company calculates its interim income tax provision in accordance with the accounting guidance for income taxes in interim periods. At the end of each interim period, the Company makes its best estimate of the annual expected effective tax rate and applies that rate to its ordinary year-to-date income or loss. The tax expense or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.
The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year and permanent and temporary differences. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.
For the three months ended June 30, 2021, the Company recorded a provision for income taxes of $
NOTE 9 – Net Income Per Share:
The Company’s basic net income per share is computed based on the weighted average number of shares of common stock outstanding for the period. Diluted net income per share includes the effect of the Company’s outstanding stock options, stock appreciation rights, unvested shares of restricted stock and unvested performance shares, if the inclusion of these items is dilutive.
The following table presents a reconciliation of basic and diluted net income per share for the three and six months ended June 30, 2021 and 2020:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net income used in the computation of basic and diluted net income per share (in thousands) | $ | $ | $ | $ | ||||||||||||
| Weighted average shares outstanding - basic | ||||||||||||||||
| Dilutive common stock equivalents | ||||||||||||||||
| Weighted average shares outstanding - diluted | ||||||||||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
Awards to purchase
Awards to purchase
NOTE 10 – Operating Segment Information:
The Company classifies its businesses into
The Company evaluates the performance of each operating segment based on several factors of which the primary financial measures are net sales and income before taxes on income. Amounts for corporate expenses are included in the totals for the Uniforms and Related Products segment.
The following tables set forth financial information related to the Company’s operating segments (in thousands):
| Uniforms and Related Products | Remote Staffing Solutions | Promotional Products | Intersegment Eliminations | Total | ||||||||||||||||
| As of and For the Three Months Ended June 30, 2021: | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||
| Pension plan termination charge | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Income (loss) before taxes on income | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | |||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
| Uniforms and Related Products | Remote Staffing Solutions | Promotional Products | Intersegment Eliminations | Total | ||||||||||||||||
| As of and For the Three Months Ended June 30, 2020: | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Income before taxes on income | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | |||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
| Uniforms and Related Products | Remote Staffing Solutions | Promotional Products | Intersegment Eliminations | Total | ||||||||||||||||
| As of and For the Six Months Ended June 30, 2021: | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||
| Pension plan termination charge | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Income (loss) before taxes on income | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | |||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
| Uniforms and Related Products | Remote Staffing Solutions | Promotional Products | Intersegment Eliminations | Total | ||||||||||||||||
| As of and For the Six Months Ended June 30, 2020: | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Income before taxes on income | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | |||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
NOTE 11 – Acquisition of Businesses:
Gifts By Design, Inc.
On January 29, 2021, the Company, through BAMKO, acquired substantially all of the assets of Gifts By Design, Inc. (“Gifts by Design”) of Seattle, Washington. Gifts by Design is a promotional products and branded merchandise agency that is well-established as a developer and supplier of corporate awards, incentives, and recognition programs for some of the world’s biggest brands. The purchase price for the acquisition consisted of $
Assets Acquired and Liabilities Assumed
The total purchase price was allocated to the tangible and intangible assets and liabilities of Gifts by Design based on their estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was allocated to goodwill.
The following table presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and liabilities of Gifts by Design based on their estimated fair values as of the effective date of the transaction (in thousands):
| Accounts receivable | $ | |||
| Prepaid expenses and other current assets | ||||
| Property, plant and equipment | ||||
| Identifiable intangible assets | ||||
| Goodwill | ||||
| Total assets | $ | |||
| Accounts payable | ||||
| Other current liabilities | ||||
| Total liabilities | $ |
The amounts in the table above are reflective of measurement period adjustments made during the three and six months ended June 30, 2021 to previously provisional estimates, which included an increase of $
The Company recorded $
The difference between the fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities.
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes thereto included in the Condensed Consolidated Financial Statements in Part I, Item 1 (“Financial Statements”) of this report and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020.
Disclosure Regarding Forward Looking Statements
Certain matters discussed in this Form 10-Q are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified by use of the words “may,” “will,” “should,” “could,” “expect,” anticipate,” “estimate,” “believe,” “intend,” “project,” “potential,” or “plan” or the negative of these words or other variations on these words or comparable terminology. Forward-looking statements in this Quarterly Report on Form 10-Q may include, without limitation: (1) the projected impact of the COVID-19 pandemic on our, our customers’, and our suppliers’ businesses, (2) projections of revenue, income, and other items relating to our financial position and results of operations, (3) statements of our plans, objectives, strategies, goals and intentions, (4) statements regarding the capabilities, capacities, market position and expected development of our business operations, and (5) statements of expected industry and general economic trends.
Such forward-looking statements are subject to certain risks and uncertainties that may materially adversely affect the anticipated results. Such risks and uncertainties include, but are not limited to, the following: the impact of competition; the effect of uncertainties related to the COVID-19 pandemic, including existing and possible future variants, on the United States of America (“U.S.” or “United States”) and global markets, our business, operations, customers, suppliers and employees, including without limitation the length and scope of restrictions imposed by various governments and organizations and the success of efforts to deliver effective vaccines on a timely basis to a number of people sufficient to prevent or substantially lower the severity of incidents of infection or variants, among other factors; our ability to navigate successfully the challenges posed by current global supply disruptions; general economic conditions, including employment levels, in the areas of the United States in which the Company’s customers are located; changes in the healthcare, retail, hotels, food service, transportation and other industries where uniforms and service apparel are worn; our ability to identify suitable acquisition targets, successfully integrate any acquired businesses, successfully manage our expanding operations, or discover liabilities associated with such businesses during the diligence process; the price and availability of cotton and other manufacturing materials; attracting and retaining senior management and key personnel and other factors described in the Company’s filings with the Securities and Exchange Commission, including those described in the “Risk Factors” section herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this Form 10-Q and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law.
Recent Acquisition
On January 29, 2021, the Company, through BAMKO, acquired substantially all of the assets of Gifts By Design, Inc. (“Gifts by Design”) of Seattle, Washington. Gifts by Design is a promotional products and branded merchandise agency that is well-established as a developer and supplier of corporate awards, incentives, and recognition programs for some of the world’s biggest brands. The purchase price for the acquisition consisted of $6.0 million in cash at closing.
Business Outlook
Superior Group of Companies, Inc. (together with its subsidiaries, the “Company,” “Superior,” “we,” “our,” or “us”) is comprised of three reportable business segments: (1) Uniforms and Related Products, (2) Remote Staffing Solutions, and (3) Promotional Products.
Uniforms and Related Products
In our Uniforms and Related Products segment, we manufacture and sell a wide range of uniforms, career apparel and accessories. Our primary products are service apparel, such as scrubs, lab coats, protective apparel and patient gowns, provided to the healthcare industry, and service apparel, such as uniforms, provided to workers employed by our customers in various industries, including retail, hotels, food service, transportation and other industries. We sell our brands of healthcare service apparel primarily to healthcare laundries, dealers, distributors and retailers. The COVID-19 pandemic created increased demand for healthcare service apparel from laundries, dealers and distributors that service hospitals and other medical facilities. From a long-term perspective, we expect that demand for our signature marketing brands, including Fashion Seal Healthcare® and WonderWink®, will continue to provide opportunities for growth and increased market share. Sales of uniforms are impacted by our customers’ opening and closing of locations and reductions, increases, and turnover of employees. The COVID-19 pandemic reduced demand for uniform apparel in many of our customers’ industries, such as the restaurant, transportation and hospitality industries. This, however, was partially offset by demand from customers in certain retail industries, such as grocery and pharmacy customers. The economic environment in the United States is beginning to return to pre-pandemic economic activity levels. While we continue to source personal protective equipment for our customers, we anticipate that opportunities to supply personal protective equipment, including through our Uniforms and Related Products segment, will decline. Based on the longer-term fundamentals of our uniforms business, we believe that we have growth opportunities to expand our market share.
Remote Staffing Solutions
This business segment (also known as “The Office Gurus”), which operates in El Salvador, Belize, Jamaica, and the United States, initially started to support the Company’s back office needs while improving overall efficiencies and lowering operating costs. After years of consistently improving key performance indicators, lowering costs and providing exceptional service to our Uniforms and Related Products segment in areas such as order entry, cash collections, vendor payables processing, customer service, sales, and others, The Office Gurus started selling their services to outside companies in 2009. The Office Gurus has become an award-winning business process outsourcer offering inbound and outbound voice, email, text, chat and social media support. Although the COVID-19 pandemic has generated uncertainties for our customers and their industries, we have recently seen increased demand for our services. With an environment and career path designed to attract and maintain top talent across all sites, we believe The Office Gurus is positioned well to continue growing this business.
Promotional Products
For more than a decade, we sold promotional products on a limited basis to our existing Uniforms and Related Products customer base. While there were substantial opportunities to sell promotional products to those customers, it was not an area of focus, specialization, or expertise for us. On March 1, 2016, that changed with our acquisition of substantially all of the assets of BAMKO, Inc. (“BAMKO”). BAMKO has many strengths, well-developed systems, and time-tested processes that offer significant competitive advantages. With a robust back-office support platform operated out of India, direct-to-factory sourcing operations based in China, and proprietary technological platforms and programming capabilities that we believe are competitive, BAMKO is well positioned in the promotional products industry and continues to be a platform for potential future acquisitions. We completed two additional acquisitions in this segment in late 2017, as well as an acquisition in January 2021, and remain open to additional acquisitions going forward. In recent years we have seen an increase in customer orders in our promotional products business and expect growth opportunities for our core promotional products business to continue. The COVID-19 pandemic created significant opportunities for us within the personal protective equipment market. And although we will continue to source personal protective equipment for our customers, we anticipate, based on supply and demand factors, that opportunities to supply personal protective equipment, including through our Promotional Products segment, will decline. Our core promotional products business has not experienced the same downturn during the pandemic that many of our competitors experienced as increased activities from customers in certain industries, such as the delivery service industry, more than offset reduced activities from customers in other industries, such as the restaurant and entertainment industries. From a long-term perspective, we believe that this segment’s synergistic fit with our uniforms business will create opportunities to cross-sell the products of each of these business segments to new and existing customers.
COVID-19 Impact
The COVID-19 pandemic continues to affect our operations around the world and financial performance, and likely will continue to do so for an undetermined period of time. International, federal, state and local efforts to contain the spread of COVID-19 have continued. Government actions to address the situation remain in effect and new actions continue to be enacted or modified, including safety requirements such as recommended or mandatory use of face masks and other personal protective equipment and related products, social distancing rules and guidelines, travel restrictions, temporary closures of non-essential businesses and other restrictive measures.
In responding to the needs of our customers, we have sourced personal protective equipment, including face masks, isolation gowns, sanitizers and gloves, which contributed $18.3 million and $15.2 million to net sales during the six months ended June 30, 2021 for our Uniforms and Related Products segment and Promotional Products segment, respectively.
However, the pandemic also had and could continue to have a number of adverse impacts on our business, including, but not limited to, disruption to the economy and our customers’ willingness and/or ability to spend, temporary or permanent closures of businesses that consume our products and services, additional work restrictions, and supply chains being interrupted, slowed, or rendered inoperable. Our employees and the employees and contractors of our suppliers and customers also could become ill, quarantined, or otherwise unable to work or travel due to health reasons or governmental restrictions.
Prolonged or recurring disruptions or instability in the United States and global economies, and how the world reacts to those disruptions or instability, could have long-term impacts on our business. These business impacts could negatively affect us in a number of ways, including, but not limited to, reduced demand for our core products and services, reductions to our revenue and profitability, costs associated with complying with new or amended laws and regulations affecting our business, declines in our stock price, reduced availability and less favorable terms of future borrowings, valuation of our pension assets and obligations, reduced credit-worthiness of our customers, and potential impairment of the carrying value of goodwill or other indefinite-lived intangible assets. The extent to which the COVID-19 pandemic ultimately impacts our business, financial condition, results of operations or cash flows will depend on numerous evolving factors that we are unable to accurately predict at this time, including the delivery of effective vaccines on a timely basis to a number of people sufficient to prevent or substantially lower the severity of incidents of infection or possible future variants of the virus, the extent and effectiveness of containment actions, availability of widespread rapid testing and effective treatment alternatives. Prolonged or recurring periods of difficult market conditions could have material adverse impacts on our business, financial condition, results of operations and cash flows.
Sourcing of Goods and Raw Materials
Along with many manufacturers that source goods and raw materials from abroad, we are currently experiencing continued significant supply disruptions and delays due to a variety of reasons. These changes are partially driven by interruptions in global supply chains (including as a result of port congestion) and partially by a shift in customer buying habits to e-commerce, which has the effect of increasing demand for shipping capacity from Asia, leading to capacity constraints. Both factors have increased shipping times as well as the price of shipping, whether by sea, air, rail, or vehicle, this year. Shipping delays combined with significant increases in orders for our products have recently created, and are expected to continue to create, inventory pressure for us.
An interruption in any of our supply sources or facilities could temporarily adversely affect our results of operations until alternate sources or facilities can be secured. The Uniforms and Related Products segment’s principal fabrics used in the manufacture of its finished goods are cotton, polyester, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced in China. The Promotional Products segment relies on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, the Company and the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, logistical challenges (such as port strikes and embargos), foreign currency fluctuations, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States, any of which could result in additional cost or limit our supply of necessary goods and raw materials.
We currently believe challenges created by such supply chain disruptions are manageable. However, we have limited insight into the extent to which COVID-19 or other factors could further impair our sourcing of goods and materials
| Results of Operations |
| Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 |
| Net Sales (in thousands): |
| Three Months Ended June 30, |
||||||||||||
| 2021 |
2020 |
% Change |
||||||||||
| Uniforms and Related Products |
$ | 68,193 | $ | 75,842 | (10.1 | %) | ||||||
| Remote Staffing Solutions |
15,653 | 9,351 | 67.4 | % | ||||||||
| Promotional Products |
48,678 | 75,456 | (35.5 | %) | ||||||||
| Net intersegment eliminations |
(1,737 | ) | (1,290 | ) | 34.7 | % | ||||||
| Consolidated Net Sales |
$ | 130,787 | $ | 159,359 | (17.9 | %) | ||||||
Net sales for the Company decreased 17.9% from $159.4 million for the three months ended June 30, 2020 to $130.8 million for the three months ended June 30, 2021. The principal components of this aggregate decrease in net sales were as follows: (1) a decrease in net sales for our Uniforms and Related Products segment (contributing (4.8%)), (2) a decrease in net sales for our Promotional Products segment (contributing (16.8%)), and (3) an increase in net sales for our Remote Staffing Solutions segment after intersegment eliminations (contributing 3.7%).
Uniforms and Related Products net sales decreased 10.1%, or $7.6 million, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The decrease was primarily due to lower market demand for healthcare service apparel when compared to the spike in demand during the early phases of the COVID-19 pandemic that began in the second quarter of 2020, and a decrease of $3.1 million in sales of personal protective equipment driven by the progression of the COVID-19 pandemic. These decreases were nominally offset by an increase in demand for uniform apparel as a number of our customers’ industries, such as the restaurant, transportation and hospitality industries, have begun to show signs of recovery from the effects of the COVID-19 pandemic.
Remote Staffing Solutions net sales increased 67.4% before intersegment eliminations and 72.6% after intersegment eliminations for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. These increases were primarily attributed to our providing continued services in the current year period to our customer base that was expanded during 2020, the onboarding of new customers in 2021 and the negative impact of disruptions experienced in 2020 resulting from COVID-19.
Promotional Products net sales decreased 35.5%, or $26.8 million, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The decrease was primarily due to a decrease of $48.7 million in net sales of personal protective equipment, partially offset by an increase of $22.0 million in net sales in our core promotional products business. The robust sales of personal protective equipment during the three months ended June 30, 2020 was driven by market demand as a result of the COVID-19 pandemic. The increase in net sales in our core promotional products business was primarily driven by the timing of promotional programs launched for certain customers, growth of our customer base through continued market penetration experienced in 2020 and 2021 and improved market conditions.
Cost of Goods Sold
Cost of goods sold consists primarily of direct costs of acquiring inventory, including cost of merchandise, inbound freight charges, purchasing costs, and inspection costs for our Uniforms and Related Products and Promotional Products segments. Cost of goods sold for our Remote Staffing Solutions segment includes salaries and payroll related benefits for agents. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with out-bound freight are recorded in cost of goods sold. Other shipping and handling costs are included in selling and administrative expenses.
As a percentage of net sales, cost of goods sold for our Uniforms and Related Products segment was 66.4% for the three months ended June 30, 2021 and 63.2% for the three months ended June 30, 2020. The percentage increase was primarily driven by higher logistical costs during the current year period. For additional information related to logistical challenges, please refer to the section “ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Outlook – Sourcing of Goods and Raw Materials.”
As a percentage of net sales, cost of goods sold for our Remote Staffing Solutions segment was 40.7% for the three months ended June 30, 2021 and 45.3% for the three months ended June 30, 2020. The percentage decrease was primarily driven by disruptions experienced during the three months ended June 30, 2020 resulting from COVID-19.
As a percentage of net sales, cost of goods sold for our Promotional Products segment was 67.2% for the three months ended June 30, 2021 and 68.5% for the three months ended June 30, 2020. The percentage decrease was primarily the result of differences in the mix of products and customers.
Selling and Administrative Expenses
Selling and administrative expenses decreased 6.6%, or $2.4 million, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The decrease was primarily due to a $2.8 million decrease in bad debt expense on outstanding trade accounts receivable, which was primarily driven by the impact COVID-19 had on our customers in the prior year period.
As a percentage of net sales, selling and administrative expenses for our Uniforms and Related Products segment was 27.0% for the three months ended June 30, 2021 and 26.4% for the three months ended June 30, 2020. As a percentage of net sales, selling and administrative expenses remained relatively flat.
As a percentage of net sales, selling and administrative expenses for our Remote Staffing Solutions segment was 35.5% for the three months ended June 30, 2021 and 37.6% for the three months ended June 30, 2020. The percentage decrease was primarily due to the increase in net sales explained above.
As a percentage of net sales, selling and administrative expenses for our Promotional Products segment was 22.4% for the three months ended June 30, 2021 and 18.0% for the three months ended June 30, 2020. The percentage increase was primarily due to the decrease in net sales explained above.
Pension Plan Terminations
In the second quarter of 2021, the Company terminated its two noncontributory qualified defined benefit pension plans, which were fully funded. Consequently, the Company recognized a settlement charge of $6.9 million during the three months ended June 30, 2021, which represents the acceleration of deferred charges previously included within accumulated other comprehensive loss and the impact of remeasuring the plan assets and obligations at termination. The pension plan terminations did not require a cash outlay by the Company.
Interest Expense
Interest expense decreased to $0.3 million for the three months ended June 30, 2021 from $0.4 million for the three months ended June 30, 2020. This decrease was primarily due to a decrease in LIBOR rates on our outstanding borrowings.
Income Taxes
The effective income tax rate was 17.3% and 19.6% for the three months ended June 30, 2021 and 2020, respectively. Income tax expense for the three months ended June 30, 2021 was favorably impacted by $0.8 million of windfall tax benefits from stock options exercised and $0.6 million of stranded tax benefits recognized as a result of the Company’s termination of its pension plans. These benefits were partially offset by the non-deductible pension termination charge recognized during the three months ended June 30, 2021. The effective tax rate may vary from quarter to quarter due to unusual or infrequently occurring items, the resolution of income tax audits, changes in tax laws, the tax impact from employee share-based payments, taxes incurred in connection to the territorial style tax system, or other items.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Net Sales (in thousands):
| Six Months Ended June 30, |
||||||||||||
| 2021 |
2020 |
% Change |
||||||||||
| Uniforms and Related Products |
$ | 138,761 | $ | 135,944 | 2.1 | % | ||||||
| Remote Staffing Solutions |
28,683 | 18,551 | 54.6 | % | ||||||||
| Promotional Products |
107,552 | 101,634 | 5.8 | % | ||||||||
| Net intersegment eliminations |
(3,362 | ) | (2,525 | ) | 33.1 | % | ||||||
| Consolidated Net Sales |
$ | 271,634 | $ | 253,604 | 7.1 | % | ||||||
Net sales for the Company increased 7.1% from $253.6 million for the six months ended June 30, 2020 to $271.6 million for the six months ended June 30, 2021. The principal components of this aggregate increase in net sales were as follows: (1) an increase in net sales for our Uniforms and Related Products segment (contributing 1.1%), (2) an increase in net sales for our Promotional Products segment (contributing 2.3%), and (3) an increase in net sales for our Remote Staffing Solutions segment after intersegment eliminations (contributing 3.7%).
Uniforms and Related Products net sales increased 2.1%, or $2.8 million, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase was primarily due to an increase of $8.0 million in sales of personal protective equipment and an increase in demand for uniform apparel. These increases were partially offset by lower market demand for healthcare service apparel when compared to the spike in demand during the early phases of the COVID-19 pandemic that began in the second quarter of 2020.
Remote Staffing Solutions net sales increased 54.6% before intersegment eliminations and 58.0% after intersegment eliminations for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. These increases were primarily attributed to our providing continued services in the current year period to our customer base that was expanded during 2020, the onboarding of new customers in 2021 and the negative impact of disruptions experienced in 2020 resulting from COVID-19.
Promotional Products net sales increased 5.8%, or $5.9 million, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase was primarily due to an increase of $40.4 million in net sales in our core promotional products business, partially offset by a decrease of $15.2 million in the sale of personal protective equipment. The increase in net sales in our core promotional products business was driven by the timing of promotional programs launched for certain customers, growth of our customer base through continued market penetration experienced in 2020 and 2021 and improved market conditions. Additionally, the acquisition of Gifts by Design on January 29, 2021 resulted in an increase of net sales of $4.7 million during the six months ended June 30, 2021. The robust personal protective equipment sales during the six months ended June 30, 2020 was driven by market demand during the early phases of the COVID-19 pandemic.
Cost of Goods Sold
As a percentage of net sales, cost of goods sold for our Uniforms and Related Products segment was 66.3% for the six months ended June 30, 2021 and 63.7% for the six months ended June 30, 2020. The percentage increase was primarily driven by higher logistical costs during the current year period and the increase in personal protective equipment sales. For additional information related to logistical challenges, please refer to the section “ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Outlook – Sourcing of Goods and Raw Materials.”
As a percentage of net sales, cost of goods sold for our Remote Staffing Solutions segment was 40.7% for the six months ended June 30, 2021 and 44.3% for the six months ended June 30, 2020. The percentage decrease was primarily driven by disruptions resulting from COVID-19 during the six months ended June 30, 2020.
As a percentage of net sales, cost of goods sold for our Promotional Products segment was 68.0% for the six months ended June 30, 2021 and 69.2% for the six months ended June 30, 2020. The percentage decrease was primarily the result of differences in the mix of products and customers.
Selling and Administrative Expenses
Selling and administrative expenses increased 8.2%, or $5.2 million, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase was primarily due to an increase in employee costs driven mostly by increased headcount and a reduction in expenses of $1.2 million in the prior year period that was the result of the Company’s decision to forgo its discretionary matching contribution under its defined contribution plan in 2020, partially offset by a decrease in bad debt expense of $3.3 million on outstanding trade accounts receivable.
As a percentage of net sales, selling and administrative expenses for our Uniforms and Related Products segment was 28.0% for the six months ended June 30, 2021 and 28.1% for the six months ended June 30, 2020. As a percentage of net sales, selling and administrative expenses remained relatively flat.
As a percentage of net sales, selling and administrative expenses for our Remote Staffing Solutions segment was 35.9% for the six months ended June 30, 2021 and 37.3% for the six months ended June 30, 2020. The percentage decrease was primarily due to the increase in net sales explained above.
As a percentage of net sales, selling and administrative expenses for our Promotional Products segment was 20.3% for the six months ended June 30, 2021 and 19.9% for the six months ended June 30, 2020. As a percentage of net sales, selling and administrative expenses remained relatively flat.
Pension Plan Terminations
In the second quarter of 2021, the Company terminated its two noncontributory qualified defined benefit pension plans, which were fully funded. Consequently, the Company recognized a settlement charge of $6.9 million during the six months ended June 30, 2021, which represents the acceleration of deferred charges previously included within accumulated other comprehensive loss and the impact of remeasuring the plan assets and obligations at termination. The pension plan terminations did not require a cash outlay by the Company.
Interest Expense
Interest expense decreased to $0.6 million for the six months ended June 30, 2021 from $1.5 million for the six months ended June 30, 2020. This decrease was primarily due to a decrease in LIBOR rates on our outstanding borrowings and a loss of $0.3 million recognized on our interest rate swap during the six months ended June 30, 2020.
Income Taxes
The effective income tax rate was 19.8% and 21.1% for the six months ended June 30, 2021 and 2020, respectively.
Income tax expense for the six months ended June 30, 2021 was favorably impacted by $0.8 million of windfall tax benefits from stock options exercised and $0.6 million of stranded tax benefits recognized as a result of the Company’s termination of its pension plans. These benefits were partially offset by the non-deductible pension termination charge recognized during the six months ended June 30, 2021. The effective tax rate may vary from quarter to quarter due to unusual or infrequently occurring items, the resolution of income tax audits, changes in tax laws, the tax impact from employee share-based payments, taxes incurred in connection to the territorial style tax system, or other items.
Liquidity and Capital Resources
Overview
Management uses a number of standards in measuring the Company’s liquidity, such as: working capital, profitability ratios, cash flows from operating activities, and activity ratios. The Company’s balance sheet generally provides the ability to pursue acquisitions, invest in new product lines and technologies and invest in additional working capital as necessary.
The Company’s primary source of liquidity has been its net income and the use of credit facilities and term loans as described further below. Management currently believes that cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the Company’s anticipated working capital requirements for the next twelve months. In the future, the Company may continue to use credit facilities and other secured and unsecured borrowings as a source of liquidity. The Company may also begin relying on the issuance of equity or debt securities, including under its universal shelf registration statement (File No. 333-249760). There can be no assurance that any such financings would be available to us on reasonable terms. Any future issuances of equity securities or securities convertible into or exercisable for equity securities may be dilutive to our shareholders. Additionally, the cost of the Company’s future sources of liquidity may differ from the costs of the Company’s sources of liquidity to date.
Working Capital
Superior’s Uniforms and Related Products segment markets itself to its customers as a “stock house.” Therefore, Superior carries inventories of both raw materials and finished products, the practice of which requires substantial working capital, which we believe to be common in the industry.
Cash and cash equivalents increased by $2.3 million to $7.5 million as of June 30, 2021 from $5.2 million on December 31, 2020. Working capital increased to $175.2 million at June 30, 2021 from $143.6 million at December 31, 2020. The increase in working capital was primarily due to a decrease in other current liabilities, an increase in inventories and a decrease in current portion of acquisition-related contingent liabilities. The decrease in other current liabilities was primarily related to significant accruals as of December 31, 2020, associated with the Company’s performance in 2020, that were paid in the current year period, including accrued compensation and income taxes. The increase in inventories was primarily related to the timing of inventory purchases within our Promotional Products and Uniforms and Related Products segments. The decrease in current portion of acquisition-related contingent liabilities was primarily driven by payments made in the current year period.
Cash Flows
Our cash flows from operating, investing and financing activities, as reflected in the statements of cash flows, are summarized in the following table (in thousands):
| Six Months Ended June 30, |
||||||||
| 2021 |
2020 |
|||||||
| Net cash provided by (used in): |
||||||||
| Operating activities |
$ | (3,010 | ) | $ | 39,762 | |||
| Investing activities |
(17,352 | ) | (4,893 | ) | ||||
| Financing activities |
22,583 | (38,280 | ) | |||||
| Effect of exchange rates on cash |
137 | (525 | ) | |||||
| Net increase (decrease) in cash and cash equivalents |
$ | 2,358 | $ | (3,936 | ) | |||
Operating Activities. The decrease in net cash provided by operating activities during the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily attributable to payments made in the current year period related to significant accruals as of December 31, 2020 associated with the Company’s performance in 2020, including accrued compensation and income taxes, advanced customer payments received on personal protective equipment contracts in the prior year period and a $4.2 million contingent consideration payment representing the excess of the total contingent consideration payment made in the current year period over the fair value of the liability estimated at the time of acquisition. Working capital cash changes during the six months ended June 30, 2021 included a decrease of $14.5 million in accounts payable and other current liabilities and an increase of $8.7 million in inventories. Working capital cash changes during the six months ended June 30, 2020 included an increase of $21.0 million in accounts payable and other current liabilities and a decrease of $12.3 million in accounts receivable.
Investing Activities. The increase in net cash used in investing activities during the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was attributable to $6.0 million of cash paid for the acquisition of Gifts by Design in 2021 and an increase in capital expenditures of $6.4 million primarily related to the expansion of our distribution facility in Eudora, Arkansas. From a long-term perspective, the Company expects to continue its ongoing capital expenditure program designed to improve the effectiveness and capabilities of its facilities and technology.
Financing Activities. The increase in net cash provided by financing activities during the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily attributable to net borrowings of $25.8 million in debt during the current year period compared to net repayments in debt of $34.3 million in the prior year period.
Credit Facilities (See Note 3 to the Financial Statements)
As of June 30, 2021, the Company had approximately $114.2 million in outstanding borrowings under its credit facilities with Truist Bank, consisting of $51.3 million outstanding under the revolving credit facility, $18.0 million outstanding under a term loan maturing in February 2024 (“2017 Term Loan”) and $44.9 million outstanding under a term loan maturing in January 2026 (“2018 Term Loan”). The revolving credit facility, 2017 Term Loan and 2018 Term Loan are collectively referred to as the “Credit Facilities.”
On February 8, 2021, the Company entered into a Second Amended and Restated Credit Agreement with Truist Bank (the “Credit Agreement”), pursuant to which the maximum availability under the Company’s existing revolving credit facility was increased from $75.0 million to $125.0 million and its maturity date was extended until February 8, 2026. The 2017 Term Loan and the 2018 Term Loan remain outstanding with the same amortization schedules. The floor on LIBOR for the revolving credit facility was increased from zero to 0.25%, but the interest rates on the revolving credit facility and the term loans were not otherwise modified. Except as described above, the covenants, events of default and substantially all of the other terms that were contained in the Company’s prior credit agreement with Truist Bank remain unchanged in the Credit Agreement.
Obligations outstanding under the 2018 Term Loan have a variable interest rate of LIBOR plus a margin of between 0.85% and 1.65% (based on the Company’s funded debt to EBITDA ratio) (0.94% at June 30, 2021). Obligations outstanding under the revolving credit facility and the 2017 Term Loan generally have a variable interest rate of one-month LIBOR (with a 0.25% floor on LIBOR for the revolving credit facility) plus a margin of between 0.68% and 1.50% (based on the Company’s funded debt to EBITDA ratio) (0.93% for the revolving credit facility and 0.77% for the 2017 Term Loan at June 30, 2021). The Company is obligated to pay a commitment fee of 0.15% per annum on the average unused portion of the commitment under the revolving credit facility. The available balance under the revolving credit facility is reduced by outstanding letters of credit. At June 30, 2021, the Company had undrawn capacity of $73.1 million under the revolving credit facility.
Contractual principal payments for the 2017 Term Loan are as follows: remainder of 2021 - $3.0 million; 2022 through 2023 - $6.0 million per year; and 2024 - $3.0 million. Contractual principal payments for the 2018 Term Loan are as follows: remainder of 2021 - $4.6 million; 2022 through 2025 - $9.3 million per year; and 2026 - $3.1 million. The term loans do not contain pre-payment penalties.
The Credit Agreement contains customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, restricted payments, and sales of assets. The Credit Agreement also requires the Company to maintain a fixed charge coverage ratio (as defined in the Credit Agreement) of at least 1.25:1 and a funded debt to EBITDA ratio (as defined in the Credit Agreement) not to exceed 5.0:1. As of June 30, 2021, the Company was in compliance with these ratios. The Credit Facilities are secured by substantially all of the operating assets of the Company as collateral, and the Company’s obligations under the Credit Facilities are guaranteed by all of its domestic subsidiaries. The Company’s obligations under the Credit Facilities are subject to acceleration upon the occurrence of an event of default as defined in the Credit Agreement.
Dividends and Share Repurchase Program
During the six months ended June 30, 2021 and 2020, the Company paid cash dividends of $3.4 million and $1.5 million, respectively. The Company anticipates that it will continue to pay dividends in the future as financial conditions permit, but can provide no assurances to this effect.
On May 2, 2019, the Company’s Board of Directors approved a stock repurchase program of up to 750,000 shares of Company’s outstanding common stock. There is no expiration date or other restriction governing the period over which the Company can make share repurchases under the program. All purchases under this program will be open market transactions. At June 30, 2021, the Company’s remaining repurchase capacity under its common stock repurchase program was 657,451 shares. Shares purchased under the common stock repurchase program are constructively retired and returned to unissued status. The Company considers several factors in determining when to make share repurchases, including among other things, the cost of equity, the after-tax cost of borrowing, the debt to total capitalization targets and the expected future cash needs.
Off-Balance Sheet Arrangements
The Company does not engage in any off-balance sheet financing arrangements. In particular, the Company does not have any interest in variable interest entities, which include special purpose entities and structured finance entities.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We are subject to market risk exposure related to changes in interest rates on our debt. Interest on our Credit Facilities are based upon the one-month LIBOR rate. In order to reduce the interest rate risk on our debt, the Company entered into an interest rate swap agreement on a portion of its borrowings. Excluding the effect of the interest rate swap agreement, a hypothetical increase in the LIBOR rate of 100 basis points as of January 1, 2021 would have resulted in approximately $0.6 million in additional pre-tax interest expense for the six months ended June 30, 2021. For further information regarding our debt instruments, see Note 3 to the Financial Statements.
Foreign Currency Exchange Risk
Sales to customers outside of the United States are subject to fluctuations in foreign currency exchange rates, which may negatively impact gross margin realized on our sales. Less than 5% of our sales contracts are not denominated in U.S. dollar. We cannot predict the effect of exchange rate fluctuations on our operating results. In certain cases, we may enter into foreign currency cash flow hedges to reduce the variability of cash flows associated with our sales and expenses denominated in foreign currency. As of June 30, 2021, we had no foreign currency exchange hedging contracts. There can be no assurance that our strategies will adequately protect our operating results from the effect of exchange rate fluctuations.
Financial results of our foreign subsidiaries in the Promotional Products segment are denominated in their local currencies, which include the Hong Kong dollar, the Chinese renminbi, the British pound, the Indian rupee, the Brazilian real and the Canadian dollar. These operations may also have net assets and liabilities not denominated in their functional currency, which exposes us to changes in foreign currency exchange rates that impact income. Excluding intercompany payables and receivables considered to be long-term investments, changes in exchange rates for assets and liabilities not denominated in their functional currency are reported as foreign currency gains (losses) within selling and administrative expenses in our statements of comprehensive income. During the six months ended June 30, 2021 and 2020, foreign currency losses were not significant. We also have exposure to foreign currency exchange risk from the translation of foreign subsidiaries from the local currency into the U.S. dollar. Comprehensive income during the six months ended June 30, 2021 and 2020 included a foreign currency translation adjustment gain of $0.4 million and foreign currency translation adjustment loss of $1.4 million, respectively, primarily related to exchange rate movements of the Brazilian real.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
The Company conducted an evaluation, under supervision and with the participation of the Company’s principal executive officer, Michael Benstock, and the Company’s principal financial officer, Andrew D. Demott, Jr., of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to ensure that information the Company is required to disclose in its filings with the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
We are a party to certain lawsuits in the ordinary course of business. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.
We are exposed to certain risks and uncertainties that could have a material adverse impact on our business, financial condition and operating results. Except as set forth below, there have been no material changes to the Risk Factors described in Part I, Item 1A-Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.
Shortages of sourced goods or raw materials from suppliers, interruptions in our manufacturing, and local conditions in the countries in which we operate could adversely affect our results of operations.
Along with many manufacturers that source goods and raw materials from abroad, we are currently experiencing continued significant supply disruptions and delays due to a variety of reasons. These changes are partially driven by interruptions in global supply chains (including as a result of port congestion) and partially by a shift in customer buying habits to e-commerce, which has the effect of increasing demand for shipping capacity from Asia, leading to capacity constraints. Both factors have increased shipping times as well as the price of shipping, whether by sea, air, rail, or vehicle, this year. Shipping delays combined with significant increases in orders for our products have recently created, and are expected to continue to create, inventory pressure for us.
An interruption in any of our supply sources or facilities could temporarily adversely affect our results of operations until alternate sources or facilities can be secured. The Uniforms and Related Products segment’s principal fabrics used in the manufacture of its finished goods are cotton, polyester, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced in China. The Promotional Products segment relies on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, the Company and the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, logistical challenges (such as port strikes and embargos), foreign currency fluctuations, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States. For example, political and civil unrest and gang warfare in Haiti may worsen following the recent assassination of President Moïse, which could cause manufacturing disruptions in our Haiti facilities and those of our suppliers. The materialization of any of these risks could result in additional expense to us or limit our supply of necessary goods and raw materials, which effects may be material.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of equity securities during the quarter ended June 30, 2021, that were not previously reported in a current report on Form 8-K.
The table below sets forth the information with respect to purchases made by or on behalf of Superior Group of Companies, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our shares of common stock during the three months ended June 30, 2021.
| Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) |
||||||||||||
| April 1, 2021 to April 30, 2021 |
- | $ | - | - | ||||||||||||
| May 1, 2021 to May 31, 2021 |
- | - | - | |||||||||||||
| June 1, 2021 to June 30, 2021 |
- | - | - | |||||||||||||
| Total |
- | - | - | 657,451 | ||||||||||||
| (1) |
On May 2, 2019, the Company’s Board of Directors approved a stock repurchase program of up to 750,000 shares of Company’s outstanding common stock. There is no expiration date or other restriction governing the period over which the Company can make share repurchases under the program. All purchases under this program will be open market transactions. |
Under our Credit Agreement, as amended, with Truist Bank, if an event of default exists, we may not make distributions to our shareholders. The Company is in full compliance with all terms, conditions and covenants of such agreement.
ITEM 3. Defaults upon Senior Securities
Not applicable.
ITEM 4. Mine Safety Disclosures
Not applicable.
None.
| Exhibit No. | Description | |
| 10.1*++ | Employment Agreement between the Company and Philip Koosed. | |
| 10.2*++ | Employment Agreement between The Office Gurus, LLC and Dominic Leide. | |
| 10.3*++ | Change in Control Agreement between the Company and Jordan Alpert. | |
| 10.4*++ | Retention Bonus Agreement between the Company and Jordan Alpert. | |
| 10.5*++ | Amended and Restated Performance Share Agreement between the Company and Dominic Leide. | |
| 10.6*++ | Performance Share Agreement between the Company and Philip Koosed. | |
| 10.7*++ | Restricted Stock Agreement between the Company and Philip Koosed. | |
| 10.8*++ | Restricted Stock Agreement between the Company and Jordan Alpert. | |
| 31.1* | Certification by the Chief Executive Officer (Principal Executive Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification by the Chief Financial Officer (Principal Financial Officer and Accounting Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32** | Certification by the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS+ |
Inline XBRL Instance Document. |
|
| 101.SCH+ |
Inline XBRL Taxonomy Extension Schema. |
|
| 101.CAL+ |
Inline XBRL Taxonomy Extension Calculation Linkbase. |
|
| 101.DEF+ |
Inline XBRL Taxonomy Extension Definition Linkbase. |
|
| 101.LAB+ |
Inline XBRL Taxonomy Extension Label Linkbase. |
|
| 101.PRE+ |
Inline XBRL Taxonomy Extension Presentation Linkbase. |
|
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
*Filed herewith.
**Furnished, not filed.
+ Submitted electronically with this Quarterly Report.
++ Management contracts and compensatory plans and agreements.
Portions omitted in accordance with Item 601(b) of Regulation S-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: July 28, 2021 | SUPERIOR GROUP OF COMPANIES, INC. | |
| By | /s/ Michael Benstock | |
| Michael Benstock | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: July 28, 2021 | ||
| By | /s/ Andrew D. Demott, Jr. | |
| Andrew D. Demott, Jr. | ||
| Chief Operating Officer, Chief Financial Officer and Treasurer (Principal Financial Officer) |
||
Exhibit 10.1
Exhibit Includes Redactions
Certain information identified with brackets ([$***]) has been excluded from this exhibit in accordance with Item 601(b) of Regulation S-K because it is both not material and is the type that the registrant treats as private or confidential.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the “Agreement”) is effective as of July 1, 2021 (the “Effective Date”) by and between SUPERIOR GROUP OF COMPANIES, INC, a Florida corporation (the “Company”), and PHILIP KOOSED (“Employee”). Employee and the Company are each referred to herein as a “Party” and collectively as the “Parties.”
BACKGROUND
A. A subsidiary of the Company, BAMKO, LLC (“BAMKO”), acquired substantially all of the assets owned or used by BAMKO, Inc., a California corporation, which is now named PEKMA, Inc. (“Original BAMKO”), on the Effective Date pursuant to an Asset Purchase Agreement among BAMKO, Original BAMKO, Employee and all the other shareholders of Original BAMKO (the “Purchase Agreement”).
B. Employee was a shareholder and executive officer of Original BAMKO prior to the Effective Date of the Purchase Agreement, and accepted employment with BAMKO following the closing of the transactions contemplated by the Purchase Agreement (the “Transaction”), and Employee has and will continue to substantially benefit from the Transaction.
C. Employee has been employed with BAMKO since March 1, 2016, and currently holds the title of President.
D. Employee currently has an employment agreement with BAMKO, dated March 8, 2016 (“2016 Employment Agreement”), that expires on December 31, 2021.
E. The Company desires to promote Employee to the position of Chief Strategy Officer of the Company, effective immediately.
F. Employee’s services are of a special, unique, unusual, extraordinary, and intellectual character, and will remain so after being promoted to the role of Chief Strategy Officer.
G. Employee acknowledges that he is and will be employed in a key senior management role with the Company, and that the Company bestows upon and expects from Employee a great deal of responsibility, trust, and reliance.
H. During the course of Employee’s employment with the Company, the Company will (and already has as part of his employment with BAMKO) impart to Employee certain proprietary, confidential, and/or trade secret information, data, and/or materials of the Company Parties (as defined below).
I. It is essential to the conduct of the Company’s business, the sale of its products, and the provision of its services that all proprietary, confidential, and/or trade secret information, data, and/or materials of the Company Parties be kept confidential and that the professional and business relationships of the Company Parties be protected.
AGREEMENT
The Parties agree as follows:
1. Incorporation. The provisions set forth under the heading “Background” are true and correct and are hereby incorporated into and made a part of this Agreement for all purposes.
2. Term of Employment. The Company agrees to employ Employee, and Employee accepts employment with the Company, on the terms set forth in this Agreement, for a period commencing on the Effective Date and ending on December 31, 2026, unless sooner terminated in accordance with the provisions of Section 5.
3. Position and Duties. The Company will employ Employee, and Employee agrees to work for the Company, as the Chief Strategy Officer of the Company, to perform the duties and responsibilities inherent in such position and such other duties and responsibilities as the Company shall from time to time assign to Employee. Employee will initially report to Chief Executive Officer of the Company. The Company may at any time alter the internal organizational structure of the Company, including the reporting responsibilities of Employee. Employee shall devote his full business time and reasonable best efforts in the performance of the foregoing services in a diligent, trustworthy, professional and efficient manner and, in performing such services, Employee shall comply with the Company’s policies and procedures in effect from time to time and fully support and implement the business and strategic plans of the Company. Employee will act in the best interest of the Company and any other Company Parties (as appropriate) and, except as may be specifically permitted by the Company in writing, will not engage in any other business activity which conflicts with his role at the Company or otherwise causes a conflict of interest. However, Employee may hold passive investment interests or serve in a passive advisory role in other business enterprises that would not constitute a violation of the restrictions described in Sections 6-10 of this Agreement and which would not interfere with Employee’s ability to perform his duties under this Agreement.
4. Compensation and Benefits. During the term of Employee’s employment with the Company under this Agreement:
4.1 Salary Compensation. Beginning January 1, 2022, the Company shall pay Employee an annualized base salary of THREE HUNDRED AND SEVENTY-FIVE THOUSAND DOLLARS ($375,000.00), payable in accordance with the Company’s customary payroll practices, no less frequently than monthly. Until January 1, 2022, Employee will continue to earn his current annual base salary, as provided by the 2016 Employment Agreement.
4.2 Bonus. Beginning January 1, 2022, Employee shall be eligible for a bonus pursuant to the terms set forth in Exhibit 1 to this Agreement. Employee will also be eligible to participate in such bonus plans as the Company may in its sole and absolute discretion offer to Employee, which may be similar to or entirely different from those available to other similarly situated employees of the Company or any other Company Party. Employee will be paid by March 15, 2022 all bonuses due to him for calendar year 2021, as provided by the 2016 Employment Agreement.
4.3 Fringe Benefits. During his employment, Employee shall be entitled to receive all of the Company’s other fringe benefits of employment available to its other employees when and as he becomes eligible for them. The Company reserves the right to modify, suspend or discontinue any and all of its benefit plans as long as such action is taken generally with respect to similarly situated persons and does not single out employee.
4.4 Reimbursement of Certain Expenses. Employee shall be reimbursed for such reasonable and necessary business expenses incurred by him while he is employed by the Company, which are directly related to the furtherance of the Company’s business. Employee must submit any request for reimbursement in accordance with the Company’s reimbursement policy regarding same and business expenses must be substantiated by appropriate receipts and documentation as required by applicable Company policy.
5. Termination of Employment. Employee’s employment shall terminate upon the occurrence of any of the following:
5.1 Termination for Cause. At the election of the Company, the Company may terminate Employee’s employment immediately for Cause upon written notice by the Company to Employee. For the purposes of this Agreement, “Cause” for termination shall be deemed to exist upon the occurrence of any of the following:
(a) gross negligence or willful misconduct by Employee with respect to any Company Party or in the performance of Employee’s duties hereunder;
(b) Employee’s continued failure to substantially perform his employment duties, which failure is not cured to the good faith reasonable satisfaction of the Company within thirty (30) days after Employee’s receipt of written notice from the Company specifically describing the nature of such failure;
(c) Employee’s material breach of the provisions of Sections 7, 9, 10, 11 or 12;
(d) Employee commits any felony or criminal offense that involves moral turpitude;
(e) Employee commits or engages in any act or omission constituting fraud, theft, dishonesty (including relating to financial matters), deceit, embezzlement, misappropriation or misconduct against or at the expense of any Company Party, or which results in, material harm to the business or reputation of any Company Party; or
(f) Employee commits or engages in any act or omission constituting a material violation of applicable law or a material violation of the Company’s published policies and procedures applicable to senior management employees, including those related to the workplace environment (such as laws or policies relating to sexual harassment or age, race, sex or other prohibited discrimination) and insider trading.
5.2 Death or Disability. Employee’s employment shall terminate automatically and immediately upon his death. At the election of the Company, the Company may terminate Employee’s employment immediately upon Employee’s disability by sending written notice of such election to Employee. The term “disability” shall mean (1) the declaration in accordance with any applicable long-term disability insurance policy that Employee is disabled, or (2) Employee’s inability, due to illness, accident, injury, physical or mental incapacity or other disability or similar cause, to perform the essential functions of his job, with reasonable accommodation, for a period of at least 90 consecutive days or for shorter periods aggregating at least 90 days (whether or not consecutive) during any 12-month period. A determination of disability shall be made by a physician satisfactory to both Employee and the Company; provided, that if Employee and the Company are unable to agree on the physician, Employee and the Company shall each select a physician and the two physicians selected by the Parties shall together select a third physician, whose determination as to the existence of a disability shall be binding on all Parties.
5.3 Termination after Resignation without Good Reason. Employee may resign his employment immediately, at any time, upon sixty (60) days’ written notice to the Company of Employee’s resignation without Good Reason.
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5.4 |
Effect of Termination. |
(a) If Employee’s employment is terminated pursuant to Sections 5.1-5.3, (i) the Company shall pay Employee his base salary and any bonus amount that is earned and accrued but unpaid through the date of employment termination (but in no event shall Employee be eligible to receive any bonus and/or commission related to Pre-Tax Hybrid Income booked after Employee’s employment is terminated), (ii) the Company shall reimburse Employee in accordance with Section 4.4 for reasonable expenses incurred but not reimbursed prior to such termination of employment, and (iii) Employee shall be entitled to receive any nonforfeitable benefits already earned and payable to Employee in accordance with the terms and provisions of any agreements, plans or programs of the Company.
(b) Except as otherwise expressly provided herein, Employee shall not be entitled to any other salary, salary continuation, severance, bonuses, employee benefits or compensation or payments of any kind from any Company Party after the termination of his employment under Sections 5.1-5.3, and all of Employee’s rights to salary, bonuses, employee benefits and other compensation and payments of any kind which would have been earned and accrued or become payable after his termination shall cease upon such termination, other than as expressly required under applicable law (such as the federal law known as COBRA).
(c) If, during the Term of Employment set forth in Section 2, Employee’s employment is (i) terminated pursuant to a Change in Control Termination; or (ii) Employee resigns his employment for Good Reason; or (iii) is terminated by the Company for any reason other than those provided for in Section 5.1 or Section 5.2 (such as a termination by the Company without Cause), in addition to the items detailed in Section 5.4(a), the Company will pay Employee an amount equal to 2.0 times Employee’s highest total annual compensation, as determined by the sum of Employee’s single highest base salary during the preceding three-year period and the average of the annual cash bonuses paid or payable to Employee that were calculated based on the results of the three (3) full fiscal years ended immediately before Employee’s termination of employment (regardless of when paid) or, if greater, the three (3) full fiscal years ended immediately prior to a Change in Control (or, if applicable, such lesser period for which cash annual bonuses were paid or payable to Employee) (“Separation Payment”). The Separation Payment shall be paid in a single lump sum, no later than sixty (60) days after Employee’s employment is terminated pursuant to this Section 5.4(c). Notwithstanding anything to the contrary, and without limitation of any remedies to which the Company may be entitled under this Agreement or applicable law: (i) the Company shall not be required to make any payment of the Separation Payment unless and until Employee signs and delivers a Release (defined below) and the period (if any) during which such Release can be revoked expires without any revocation, and (ii) Employee shall not be entitled to any payment of the Separation Payment during the period in which Employee is violating any of his obligations under Sections 6-10 or under the Restrictive Covenants Agreement among BAMKO, Original BAMKO, and its shareholders or under the separate Confidentiality Agreement between Employee and the Company. For purposes of this Agreement, a “Release” means a written release, in form and substance reasonably satisfactory to the Company, whereby Employee waives and releases the Company, its officers, directors, employees and Affiliates from any and all claims that Employee may have against any of them (including, without limitation, any claims in connection with Employee’s employment or the termination thereof) and affirms his post-termination obligations hereunder, provided, that the Release will not apply to any vested benefit under the Company’s qualified retirement plan, any rights under the Purchase Agreement, or any other employee benefit required to be provided by applicable law.
(d) For purposes of this Agreement, “Good Reason” shall mean (i) a material, adverse reduction in Employee’s authority, duties, or responsibilities (other than temporarily while Employee is physically or mentally incapacitated or as required by applicable law); (ii) Employee is required by the Company to reside in a location not of his choosing; or (iii) the Company’s uncured breach of a material provision of this Agreement. Prior to resignation for Good Reason, Employee is required to give written notice to the Company of the intent to resign for Good Reason, describing the reason for the resignation in sufficient detail in order to allow the Company the opportunity to address the situation. Such notice must be provided within thirty (30) days of the event(s) constituting Good Reason and must be given at least thirty (30) days in advance of the effective date of resignation. The Company shall be entitled to ninety (90) days after the date of Employee’s written notice during which it can cure the situation. If the situation has not been cured within ninety (90) days after the date of Employee’s written notice, Employee may then resign for Good Reason, by written notice, effective immediately, which date shall be the Effective Date of resignation.
(e) A “Change in Control Termination” means the termination of Employee by the Company or its successor without Cause within twelve (12) months after the consummation of a Change in Control. In this Agreement, “Change in Control” means any of the following occurs: (A) the Company sells all or substantially all of its assets to an entity that is not an Affiliate (in a transaction requiring shareholder approval), (B) any person or group of persons within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than the Company’s Affiliates, becomes the beneficial owner, directly or indirectly, of more than 50% of the Company’s equity securities or outstanding voting stock (whether by way of purchase of stock or other equity securities, merger or otherwise), or (C) any transaction that qualified as a liquidation, dissolution, or winding up of the Company. Notwithstanding the foregoing, the following transactions shall in no event constitute a Change in Control: (x) any equity or debt financing transaction pursuant to which the Company sells securities with the principal purpose of raising capital, or (y) any ownership or acquisition of stock by any of the Benstock family or their Affiliates, including pursuant to transfers for estate planning purposes. In this Agreement, “Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person. A Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise, and such control will be presumed if any Person owns 10% or more of the voting capital stock or other ownership interests, directly or indirectly, of any other Person. In this Agreement, “Person” means any individual, association (incorporated or unincorporated), corporation, partnership (of any designation - limited partnership, general partnership, limited liability partnership, or otherwise), limited liability company, trust, or any other entity or organization, public or private, including a governmental entity.
(f) The Parties mutually agree and acknowledge that the termination of Employee’s employment (whether by termination or resignation) and/or the termination of this Agreement, by either party, for any reason, shall have no impact on the rights and obligations of either Party under the terms of the Purchase Agreement, except as may be expressly stated and provided therein.
6. Restrictive Covenants - Definitions. In this Agreement, the following terms shall have the meanings defined below. Terms may be used in the singular or plural.
(a) “Business” means the business of (i) designing, manufacturing, and marketing of employee uniforms, image apparel, scrubs, patient apparel, and personal protective equipment (PPE), (ii) designing, manufacturing, marketing, selling and distributing promotional products, gifts to a third party’s employees and/or customers, point of sale (POS), point of purchase (POP), accessories, and related goods and services, including product sourcing, ideation, quality control, (iii) global logistics related to (i) and/or (ii), and (iv) the provision of business process and contact center outsourced solutions. For clarity, the Business includes all sourcing of products for customers, whether through distribution or direct supply arrangements.
(b) “Company Parties” means Superior Group of Companies, Inc., and any of its direct or indirect parents, subsidiaries, and/or Affiliates, and any of their successors or assigns.
(c) “Confidential Information” means all data or information that is related to the Company or the Business (including any data or information that relates to or results from any historical or projected financial results or financial information, products, services, vendors, customers or research or development of any Company Party), regardless of whether it constitutes a “trade secret” under applicable common law or statute, is labeled or identified as “confidential” or is now existing or to be developed in the future, in any form of medium, that was disclosed to Employee or became known by Employee as a consequence of, or through, Employee’s employment with Original BAMKO, BAMKO, or the Company and/or Employee’s affiliation with Original BAMKO, BAMKO, or the Company (including information conceived, originated, discovered, or developed in whole or in part by Employee, including while he was employed by Original BAMKO), having value to the Company, not generally known to competitors of the Company, and about the Company’s and the Company Parties’ business, finances, operating results, products, processes, and services, including, but not limited to, (i) information relating to research, development, inventions, computer program designs, flow charts, source and object codes, products and services under development, pricing and pricing strategies, marketing and selling strategies, servicing, purchasing, accounting, engineering, cost and costing strategies, sources of supply, customer lists, customer requirements, business methods or practices, training and training programs, financial records, the documentation thereof, and similar information, (ii) confidential information of Original BAMKO and its subsidiaries that was acquired by BAMKO from Original BAMKO under the Purchase Agreement, (iii) identities of, individual requirements of, specific contractual arrangements with, and information about, the Company’s current, former or prospective employees, suppliers, distributors, customers, customer prospects, independent contractors and other business relations and their confidential information, (iv) trade secrets, technology, know-how, compilations of data and analyses, techniques, systems, formulae, records, reports, manuals, documentation, models, data and data bases relating thereto, (v) proprietary software, (vi) innovations, ideas, devices, improvements, developments, methods, processes, designs, analyses, drawings and all similar or related information (whether or not patentable and whether or not reduced to practice), (vii) copyrightable works, and (viii) intellectual property of every kind and description; provided, however, that Confidential Information shall not mean data or information (x) which has been voluntarily disclosed to the public by the Company, except where such public disclosure has been made by Employee or any other party to the Purchase Agreement (other than BAMKO) without authorization from the Company; (y) which has been independently developed and disclosed by others not in breach of a confidentiality obligation, or (z) which has otherwise entered the public domain through lawful means and through no fault of Employee. Confidential Information will be interpreted as broadly as possible to include all information of any sort (whether merely remembered or embodied in a tangible or intangible form) that is (1) related to any Company Party’s current or potential business or operations, and (2) is not generally or publicly known. Notwithstanding the foregoing obligations, pursuant to 18 U.S.C. § 1833(b), Employee understands and acknowledges that he shall not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of a trade secret that is made: (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (2) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and protected from public disclosure. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).
(d) “Prohibited Term” means the period commencing on the Effective Date and ending two (2) years after Employee’s termination or resignation of employment for any reason.
(e) “Territory” means such geographic area in which Employee is working, worked, and/or over which Employee has or had managerial responsibility during Employee’s employment with the Company, including, but not limited to, the United States of America and Canada.
7. Confidentiality. Employee warrants and agrees that he will not at any time reproduce, use, distribute, disclose, publish, misappropriate, or otherwise disseminate any Confidential Information and will not take any action causing, or fail to take any action to prevent, any Confidential Information to lose its character as Confidential Information until and unless such Confidential Information loses its status as Confidential Information through no fault, either directly or indirectly, of Employee, either during the term of Employee’s employment or engagement by the Company (the “Service Period”) or thereafter, except when such disclosure or use is directly related to and required by Employee’s performance of duties assigned by the Company.
Employee will safeguard all Confidential Information and will not take any action causing, or fail to take any action to prevent, any Confidential Information to lose its character as Confidential Information until and unless such Confidential Information loses its status as Confidential Information through no fault, either directly or indirectly, of Employee. Employee will safeguard all documents and things that contain or embody Confidential Information, including but not limited to Confidential Information stored in an electronic format on any Company computer or personal computer owned or used by Employee.
Employee will not, in any communication, including but not limited to with the media, social media, prospective or actual employers, current and former employees of Company Parties, and current and prospective suppliers, vendors, business partners or customers, make any derogatory, disparaging, or critical statement, orally, written, or otherwise, against any Company Party.
8. Return of Documents.
(a) Upon termination of Employee’s employment with the Company for any reason, Employee will return to or leave with the Company all documents, records, notebooks, and other repositories of or containing Confidential Information, including all copies thereof, as well as all originals and copies of work made for hire, including all electronic copies of Confidential Information, or other tangible property of any Company Party, whether prepared by Employee or others, then in Employee’s possession or under Employee’s control.
(b) Upon request or immediately upon termination of employment for any reason, Employee shall promptly (and in any event within three (3) days) provide Company access to all computers, mobile phones, tablets, other electronic devices, thumb drives, portable hard drives, any other type of electronic storage device, and any and all email or cloud accounts/services that Employee used at any time during Employee’s employment with the Company to ensure all Confidential Information is identified and permanently deleted or removed from such locations and Employee shall disclose in writing any and all computer, cloud, software, and other passwords and related security protection information Employee used in relation to Employee’s work with the Company.
9. Non-Solicitation.
(a) Employees. During the Prohibited Term, unless Employee receives express written consent from the Company, Employee shall not, directly or indirectly, solicit, recruit, induce or attempt to solicit, recruit, or induce any then current or former employee, of a Company Party to leave the employ of, any Company Party; provided however, that the restrictions set forth in this Section 9 shall apply only to employees with whom Employee had business contact during the last twenty-four (24) months as of the date of Employee’s employment termination.
(b) Contractors. During the Prohibited Term, unless Employee receives express written consent from the Company, Employee shall not, directly or indirectly, solicit, recruit, or induce any independent contractor of a Company Party to cease performing services for a Company Party or reduce the amount or quality of the services performed for a Company Party, other than in response to general solicitations not targeted to such independent contractors.
(c) Customers. During the Prohibited Term, unless Employee receives express written consent from the Company, Employee shall not, directly or indirectly, on behalf of any Person other than a Company Party, solicit business from any customer or customer prospect of a Company Party, or any representative of the same, with a view toward the sale or providing of any service or product competitive with the Business; provided, however, the restrictions set forth in this Section 9(c) shall apply only to customers or prospects of a Company Party, or representatives of the same, with which Employee or the Company Party had Material Contact during the last twenty-four (24) months immediately prior to the date of Employee's employment termination. “Material Contact” means contact between Employee or the Company Party and each customer or customer prospect: (i) with whom or which Employee dealt on behalf of the Company Party; (ii) whose dealings with the Company Party were directly or indirectly coordinated or supervised by Employee; (iii) about whom Employee obtained Confidential Information in the course of Employee's employment for the Company; and/or (iv) who receives products or services authorized by the Company Party, the sale or provision of which results or resulted in revenue to the Company Party or compensation, commissions, or earnings for Employee within two years prior to the date of Employee's termination.
10. RESTRICTIONS ON COMPETITION. During the Prohibited Term, unless performed for or provided on behalf of a Company Party, and unless Employee receives express written consent from the Chief Executive Officer of the Company, Employee shall not (a) directly or indirectly, in the Territory, provide the same or similar duties that Employee performed on behalf of a Company Party within the two years prior to the cessation of Employee’s employment for any person or business which competes with a Company Party in the Business, (b) directly or indirectly provide the same or similar duties that Employee performed on behalf of a Company Party related to any customer or customer prospect of a Company Party on whose account Employee worked and/or over which Employee had managerial responsibility within the two years prior to the cessation of Employee’s employment for any person or business which competes with a Company Party in the Business, and/or (c) directly or indirectly, own, control, manage, or participate in the ownership, control, or management of any business (whether as principal, agent, shareholder, participant, partner, promoter, director, officer, manager, member, equity lender, employee, consultant, sales representative, or otherwise) which competes with a Company Party in the Business within the Territory, however, notwithstanding the foregoing, Employee shall not be prohibited from owning, as a passive investment, not more than 1.0% of the capital stock of any corporation that competes with a Company Party in the Business that is traded on a national securities exchange so long as neither Employee nor any family member of Employee has active participation in the business of such corporation.
11. Intellectual Property, Inventions and Patents.
(a) In the event that Employee, during the Service Period, individually or in conjunction with another Person, generates, authors, conceives, develops, acquires, makes, reduces to practice or contributes to any discovery, formula, trade secret, invention, innovation, improvement, development, method of doing business, process, program, design, analysis, drawing, report, data, software, firmware, logo, device, method, product or any similar or related information, any copyrightable work or any Confidential Information (collectively, “Intellectual Property”), Employee expressly acknowledges and agrees that such Intellectual Property is and shall be the exclusive property of the Company; provided, however, that such Intellectual Property relates to the Business or results from any work performed by Employee for the Company. Any copyrightable work prepared in whole or in part by Employee and relating to the actual or contemplated business of any Company Party shall be deemed “a work made for hire” to the maximum extent permitted under Section 201(b) of the 1976 Copyright Act as amended, and the Company shall own all of the rights comprised in the copyright therein. Employee hereby assigns his entire right, title and interest in and to all Intellectual Property to the Company. During and after the Service Period, Employee shall promptly disclose all Intellectual Property to the Company and shall cooperate with the Company to establish, confirm and protect all rights, title and interest of the Company to such Intellectual Property (including, without limitation, providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company). Employee agrees that he will not use or disclose any work made for hire of any Company Party to benefit a Person that competes with the Company Parties, any current, former or prospective vendors, suppliers, distributors, customers, customer prospects, independent contractors and other business relations of any Company Party, or any other individual or entity (except in performing his obligations to the Company during his employment with the Company), without the express, written permission of the Company.
(b) Nonassignable Inventions. Notwithstanding any provision of this Agreement to the contrary, this Agreement does not apply to work that does not relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company or result from any work performed by the Employee for the Company. Employee agrees to disclose promptly in writing to the Company all inventions created, conceived, developed or reduced to practice by Employee during the term of his employment, whether or not Employee believes such inventions are subject to this Agreement, to permit a determination by the Company as to whether or not the inventions should be the property of the Company. Any such information will be received in confidence by the Company.
(c) Prior Inventions. Employee represents and warrants that he has not, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice any work prior to the commencement of Employee's employment with or services to the Company which Employee considers to be Employee's property or the property of third parties (collectively referred to as “Prior Inventions”). If, in the course of Employee's employment with or services to the Company, Employee incorporates a Prior Invention into a Company product, service or item of content, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to make, have made, modify, use and sell such Prior Invention. Notwithstanding the foregoing, Employee agrees that Employee will not incorporate, or permit to be incorporated, Prior Inventions in any work without the Company's prior written consent.
12. Duty Of Loyalty. While employed by the Company, Employee agrees that he will not engage in or deal with any activities, products, or services that are competitive with the Company Parties’ activities, products, business, or services, and that Employee will not usurp any Company Party business opportunity, without the express prior written consent of the Company. Employee further agrees to faithfully render Employee’s services to the Company and to devote Employee’s best efforts, ability, skill, and attention, in good faith, to the Company’s business while employed by the Company.
13. Notice to Future Employers. Employee agrees to provide to any subsequent, anticipated, and/or contemplated employer an executed copy of this Agreement and to provide written notice to the Company of such event occurring within two (2) business days after such event. These requirements shall cease only after the expiration of the Prohibited Term and/or required by law expire. During the Prohibited Term, Employee authorizes the Company to provide an executed copy of this Agreement to third parties, including but not limited to, Employee’s subsequent, anticipated, and/or contemplated future employers.
14. Assignability. All of Employee’s obligations under this Agreement shall be binding upon Employee’s heirs, assigns, and legal representatives. The terms and provisions of this Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company shall have the right to assign this Agreement to any Company Party or to any successor or assignee of all or substantially all of the business or assets of the Company. This Agreement is personal to Employee, and he shall not have the right to assign this Agreement without the express written consent of the Company, and any attempted assignment in violation thereof shall be invalid and ineffective against the Company.
15. Obligations Survive Termination Of Employment. Any termination of Employee’s employment with the Company shall not impair or relieve Employee of his obligations hereunder that otherwise survive the termination of this Agreement pursuant to their respective terms or by their nature.
16. Governing Law and Forum Selection. This Agreement shall be deemed to have been made and entered into in the State of Delaware and shall be construed and enforced in accordance with the laws of the State of Delaware, without regard to the conflicts of laws provisions therein. Employee acknowledges that this Agreement is governed by 6 DE Code § 2708 and it shall conclusively be presumed to be a significant, material and reasonable relationship with this State of Delaware and it shall be enforced whether or not there are other relationships with this State of Delaware. To the extent that any dispute, controversy, or claim under this Agreement arises that is not subject to Arbitration pursuant to Section 23 of this Agreement (“Claim”) or a party breaches Section 23 of this Agreement, the parties agree that the exclusive venue and jurisdiction with respect to any such Claim or dispute shall be in either the Superior Court of Delaware or the federal courts for the District of Delaware. Employee indicates that he has in fact been represented by counsel of his choice and received advice from such counsel in entering this Agreement, including this Section 16. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING UNDER SECTION 16 AND ARBITRATION IN DELAWARE AND HEREBY AND THEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE PARTIES ACKNOWLEDGE THAT DELAWARE HAS PERSONAL JURISDICTION OVER THEM AND THAT THEY SHALL NOT CHALLENGE PERSONAL JURISDICTION IN ANY ACTION OR ARBITRATION BROUGHT IN THOSE FORUMS AS APPLICABLE PURSUANT TO THIS AGREEMENT.
17. Severability. The Parties believe that the restrictions and covenants in this Agreement are, under the circumstances, reasonable and enforceable. However, if any one or more of the restrictions, covenants, or provisions contained in this Agreement shall, for any reason under the law as it shall then be construed, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other restriction, covenant, or provision of this Agreement. In such an instance, this Agreement shall be construed as if such invalid, illegal, or unenforceable restriction, covenant, or provision had never been contained herein. Additionally, if any one or more of the restrictions, covenants, or provisions contained in this Agreement shall for any reason be held to be excessively broad as to time, duration, geographical scope, activity, or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.
18. Remedy. Employee acknowledges that the covenants specified in Sections 6-12 contain reasonable limitations as to time, geographic area, and scope of activities to be restricted, and that such promises do not impose a greater restraint on Employee than is necessary to protect the goodwill, Confidential Information, customer and employee relations, and other legitimate business interests of the Company. Employee also acknowledges and agrees that any violation of the restrictive covenants set forth in Sections 6-12 would bestow an unfair competitive advantage upon any Person which might benefit from such violation, in part because of the special, unique, unusual, extraordinary, and intellectual character of the services provided by Employee which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages, and would necessarily result in substantial and irreparable damage and loss to the Company. Accordingly, in the event of a breach or a threatened breach by Employee of Sections 6-12 of this Agreement, the Company shall have grounds to terminate the employment of Employee and will therefore be entitled to cease salary, benefits, and any and all remaining contingent future payments to Employee that have not already vested. The Company also shall be entitled to an injunction restraining Employee from such breach or threatened breach in Court or arbitration. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from Employee. In the event that the Company should seek an injunction, Employee waives any requirements that the Company post a bond or any other security.
19. Independent Covenants. The covenants specified in Sections 6-14 are intended by each Party hereto to be, and shall be construed as, agreements independent of each other and of any other agreement between the Parties, and the existence of any claim or cause of action of Employee or any of his affiliates (including Original BAMKO) against the Company Parties, whether predicated on this Agreement, the Purchase Agreement or any other agreement between Employee and a Company Party, shall not constitute a defense to the enforcement by the Company of such covenants. Further, Employee acknowledges that he is also bound by restrictive covenants in the Purchase Agreement, which were agreed to by Employee as a material inducement to the Company to enter into Purchase Agreement and consummate the Transaction. The Parties agree that the restrictive covenants in the Purchase Agreement are separate, independent of, and in addition to the restrictive covenants in this Agreement, and nothing in this Agreement shall be interpreted as modifying, replacing, terminating, or otherwise affecting the enforceability of the restrictive covenants in the Purchase Agreement, which remain in full force and effect in accordance with their terms.
20. Blue-Pencil; Modification; Enforcement. If a court holds that the duration, scope or area restrictions in Sections 6-10 are unenforceable, the maximum duration, scope or area enforceable shall be substituted, or, if such substitution is not permissible by law, only the unenforceable or unlawful portion should be stricken and all remaining portions should remain enforceable. Because Employee’s services are unique and Employee has access to Confidential Information, in the event of a breach or a threatened breach by Employee of any of Sections 6-10, the Parties acknowledge and agree that the Company and other Company Parties would suffer irreparable and continuing harm for which money damages would be an inadequate remedy. Accordingly, in addition and supplementary to all other rights and remedies that may be available, the Company Parties shall be entitled to specific performance and/or injunctive or other equitable relief in order to enforce or prevent any violations of this Agreement (without posting a bond or security, if permitted by applicable law, and without proof of monetary damages or an inadequate remedy at law). In addition, (i) the Prohibited Term shall be tolled until the activity causing a breach of any of Sections 6-10 has been stopped, and (ii) the Company Parties shall be entitled to recover from Employee all profit Employee gains from such breach or violation in addition to any damages that the Company Parties suffer. Employee acknowledges and agrees that the Company Parties may exercise any of the foregoing remedies concurrently, independently or successively. Employee acknowledges that the restrictions contained in Sections 6-10 are reasonable.
21. Amendments Or Modifications; Waiver. No amendments or modifications to this Agreement shall be binding on any of the Parties, unless such amendment or modification is in writing and executed by all of the Parties to this Agreement. No term, provision, or clause of this Agreement shall be deemed waived and no breach excused, unless such waiver or consent shall be in writing and executed by Employee and on behalf of the Company. No delay or course of dealing by a Party to this Agreement in exercising any right, power, or remedy under this Agreement will operate as a waiver of any right, power, or remedy of that Party, except to the extent expressly manifested in such a writing. The failure at any time of either Party to require performance by the other Party of any provision of this Agreement will in no way affect the Party’s right thereafter to enforce the provision or this Agreement. In addition, the waiver by a Party of a breach of any provision of this Agreement will not constitute a waiver of any succeeding breach of the provision or a waiver of the provision itself.
22. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) if delivered personally or actually received, as of the date received, (b) if delivered by certified mail, return receipt requested, five (5) business days after being mailed or, if earlier, the actual date of receipt evidenced by the written receipt, (c) if delivered by a nationally recognized overnight delivery service, one (1) business day after being deposited with such delivery service for next business day delivery, or (d) if sent via electronic mail in portable document format (.pdf) or similar electronic transmission with proof of receipt and a hard copy to follow by first class mail or overnight delivery, as of the date received, to such party at its address set forth below (or such other address as it may from time to time designate in writing to the other parties hereto):
If to Company:
Superior Group of Companies, Inc.
10055 Seminole Boulevard
Seminole, Florida 33772-2539
Attn: Chief Executive Officer
email: mbenstock@superiorgroupofcompanies.com
With copy to:
Superior Group of Companies, Inc.
10055 Seminole Boulevard
Seminole, Florida 33772-2539
Attn: General Counsel
email: SGC-Legal@superiorgroupofcompanies.com
If to Employee:
Philip Koosed
[***]
[***]
email: [***]
23. WAIVER OF JURY TRIAL; ARBITRATION; WAIVER OF CLASS AND COLLECTIVE CLAIMS.
WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.
ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement, Employee’s employment by the Company or Employee’s compensation and benefits shall be settled exclusively by final and binding arbitration in Dover, Delaware by an arbitrator in accordance with the Comprehensive Rules of Judicial Arbitration & Mediation Service, Inc. (“JAMS”) in effect at the time of submission to arbitration. The rules can be found at https://www.jamsadr.com/rules-comprehensive-arbitration/.
The following claims are excluded from this arbitration provision: claims arising under the National Labor Relations Act which are brought before the National Labor Relations Board, workers' compensation claims under applicable workers’ compensation laws, Employment Development Department claims, ERISA claims covered by an ERISA plan with a dispute resolution provision, or any other claims that are non-arbitrable under applicable state or federal law. Nothing herein shall prevent Employee from filing and pursuing proceedings before the Department of Fair Employment and Housing, the Division of Labor Standards Enforcement, or the United States Equal Employment Opportunity Commission (although if Employee chooses to pursue a claim following the exhaustion of such remedies, that claim would be subject to the provisions of this Agreement).
The statutes of limitations otherwise applicable under law shall apply to all Claims made in arbitration. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The arbitration shall be conducted in a procedurally fair manner by a mutually agreed upon neutral arbitrator selected in accordance with the applicable JAMS rules (“Rules”) or if none can be mutually agreed upon, then by one arbitrator appointed pursuant to the Rules; the arbitration shall be conducted confidentially in accordance with the Rules unless provided otherwise by applicable law; the arbitration fees shall be paid by the Company; each party shall have the right to conduct reasonable discovery including depositions, requests for production of documents and such other discovery as permitted under the Rules or ordered by the arbitrator; the arbitrator shall have the authority to award any damages authorized by law for the claims presented, including punitive damages; the decision of the arbitrator shall be final and binding on all parties and shall be the exclusive remedy of the parties; and the award shall be in writing in accordance with the Rules, and shall be subject to judicial enforcement and review in accordance with applicable law.
WAIVER OF CLASS AND COLLECTIVE CLAIMS. THE PARTIES AGREE THAT ALL CLAIMS WILL BE ARBITRATED (OR LITIGATED, IF APPLICABLE) ONLY ON AN INDIVIDUAL BASIS, AND THAT BOTH PARTIES WAIVE THE RIGHT TO BRING, PARTICIPATE IN, JOIN, OR RECEIVE MONEY OR ANY OTHER RELIEF FROM ANY CLASS, COLLECTIVE, OR REPRESENTATIVE PROCEEDING. NO PARTY MAY BRING A CLAIM ON BEHALF OF OTHER INDIVIDUALS (WHETHER IN ARBITRATION OR IN COURT), AND AN ARBITRATOR MAY NOT (AND EMPLOYEE MAY NOT ASK A COURT TO): (I) COMBINE MORE THAN ONE INDIVIDUAL’S CLAIM OR CLAIMS INTO A SINGLE CASE; (II) PARTICIPATE IN OR FACILITATE NOTIFICATION OF OTHERS OF POTENTIAL CLAIMS; OR (III) ARBITRATE (OR LITIGATE) ANY FORM OF A CLASS, COLLECTIVE, OR REPRESENTATIVE PROCEEDING.
24. Entire Agreement. This Agreement represents the entire agreement between the Parties and supersedes any and all other prior oral or written agreements, proposals, representations, communications, and/or understandings between Employee and the Company related to the subject matter of this Agreement, and Employee has not relied upon any representation that is not expressly set forth in this Agreement; provided that the following agreements remain applicable and enforceable in accordance with their respective terms and that nothing contained in this Agreement shall be interpreted as waiving, modifying, amending, replacing, terminating, or accelerating or giving rise to any rights under such previous agreements: (a) the separate Confidentiality Agreement between Employee and the Company; (b) the Performance Shares Agreement between Employee and the Company; (c) the Restrictive Covenants Agreement among BAMKO, Original BAMKO, and its shareholders (including Employee); and (d) the Purchase Agreement, the Transaction Documents, and the other agreements, instruments and documents delivered in connection with the Purchase Agreement and closing of the transactions contemplated therein (except the 2016 Employment Agreement, which upon the effectiveness of this Agreement, will be superseded by this Agreement in its entirety, other than any terms and/or conditions of that Employment Agreement that explicitly or by their nature survive termination or expiration and that do not conflict with this Agreement).
25. Counterparts; Electronic Signatures; Effectiveness. This Agreement may be executed in one or more counterpart signature pages, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement, which shall be binding upon all of the Parties hereto notwithstanding the fact that all Parties are not signatory to the same counterpart. The exchange and delivery of executed copies of this Agreement and of signature pages by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature and shall be binding for all purposes hereof. A Party’s receipt of a facsimile signature page or electronic copy of a signature page to this Agreement shall be treated as the Party’s receipt of an original signature page. Alternatively, an electronic signature (whether digital or encrypted, such as one transmitted via DocuSign or RightSignature) shall be effective to bind the Party that transmitted the signature to the same extent as would a handwritten signature.
26. Tax Provisions.
26.1 The Company will have no obligation to Employee or any other Person entitled to payment or benefits under this Agreement with respect to any tax obligation Employee or such other Person incurs as a result of or attributable to this Agreement or arising from any payments made or to be made under this Agreement.
26.2 The Company shall have the right to deduct from any payment made to Employee any amount required to be withheld for any federal, state or local income, employment or other taxes. In the event the Company does not make such deductions or withholdings, Employee shall indemnify the Company for any amounts paid with respect to any such taxes, together (if such failure to withhold was at the written direction of Employee or if Employee was informed that such deductions or withholdings were not made) with any interest, penalties and related expenses thereto.
26.3 409A Provisions.
(a) The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.
(b) For purposes of determining Employee’s entitlement to any compensation payable upon his termination of employment with the Company that is subject to Section 409A, if any, Employee’s employment will be deemed to have terminated on the date of Employee’s “separation from service” from the Company within the meaning of Section 409A of the Internal Revenue Code. If Employee is a “specified employee” of the Company as of such date, any such benefit or payment that Employee is entitled to receive before the date that is six (6) months after the separation from service date that is not otherwise exempt from the requirements of Section 409A of the Internal Revenue Code shall not be provided or paid on the date such benefit or payment is otherwise required to be provided or paid. Instead, the payment of all such amounts shall be accumulated and paid in a single lump sum payment on the first business day after the date that is six months after the separation from service date (or, if earlier, within fifteen (15) days following Employee’s date of death). All benefits or payments otherwise required to be provided or paid on or after the date that is six (6) months after the separation from service date shall not be affected by the preceding sentence, and shall be provided and paid in accordance with the payment schedule otherwise applicable to such payment or benefit.
(c) Notwithstanding anything to the contrary in this Agreement, if the specified period during which the Release may be returned and become effective spans two calendar years, any payments conditioned upon the execution of the Release shall not be paid earlier than the first day of the second calendar year.
(d) To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Employee shall be paid to Employee no later than December 31 of the year following the year in which the expense was incurred; provided, that Employee submits Employee’s reimbursement request promptly following the date the expense is incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Employee’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.
(e) Employee’s right to receive any installment payments under this Agreement, including without limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A. Except as otherwise permitted under Section 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interest pursuant to Section 409A.
(f) Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.
27. Acknowledgements. Employee acknowledges that he has read and understands the provisions of this Agreement, that Employee has been given an opportunity for his legal counsel to review this Agreement, that Employee’s legal counsel has reviewed and advised Employee regarding this Agreement (including, but not limited to, its choice of law, venue, and forum provisions), that the provisions of this Agreement are reasonable, that Employee enters into this Agreement voluntarily without duress or pressure from the Company and with full knowledge and understanding of the contents, nature, and effect of this Agreement, and that Employee has received a copy of this Agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this Agreement as of the Effective Date.
EMPLOYEE:
/s/ Philip Koosed_____________________
Philip Koosed
Date Signed: ___________________
COMPANY:
SUPERIOR GROUP OF COMPANIES, INC.
By: ___________________________
Name: _________________________
Title: __________________________
Exhibit 1
Bonus Plan
Pre-Tax Hybrid Income Bonus - Employee shall be paid a Pre-Tax Hybrid Income Bonus for each of the calendar years 2022, 2023, 2024, 2025, and 2026, that shall be calculated as follows for the applicable year or any portion thereof in which Employee remains employed by the Company:
|
Low PTHI |
High PTHI |
Bonus % |
Incremental Bonus |
Total Bonus |
|
|
Tier 1* |
$0 |
$[***] |
1.00% |
$[***] |
$[***] |
|
Tier 2 |
$[***] |
$[***] |
[***]% |
$[***] |
$[***] |
|
Tier 3 |
$[***] |
$[***] |
[***]% |
$[***] |
$[***] |
|
Tier 4 |
$[***] |
$[***] |
[***]% |
$[***] |
$[***] |
|
Tier 5 |
$[***] |
$[***] |
[***]% |
$[***] |
$[***] |
|
Tier 6 |
$[***] |
$[***] |
[***]% |
$[***] |
$[***] |
|
Tier 7 |
$[***] |
uncapped |
3.70% |
TBD |
TBD |
*No Pre-Tax Hybrid Income Bonus shall be earned until the Company’s Pre-Tax Hybrid Income equals $[***] for the applicable calendar year. If the Company’s Pre-Tax Hybrid Income equals or exceeds $[***], Employee shall earn the bonus beginning with the first dollar of Pre-Tax Hybrid Income.
This bonus is non-discretionary and shall be paid to Employee regardless of personal performance. This bonus shall be paid by no later than March 15th in the year after it is earned.
For purposes of this Exhibit 1 (Bonus Plan), “Company” shall mean Superior Group of Companies, Inc., including all of its present and future-formed subsidiaries.
“Pre-Tax Hybrid Income” (also called “PTHI”) shall be calculated as follows: the Company’s EBITDA for the applicable calendar year plus the accrual, if any, for Employee’s Pre-Tax Hybrid Income Bonus and the annual incentive bonuses for any and all SGC-level employees of the Company included in the SGC Director and Officers Bonus Plan. For purposes of this bonus calculation, the Company’s pre-tax income shall be calculated in accordance with accounting principles generally accepted in the United States of America, based upon the Company’s financial statements.
“EBITDA” shall mean earnings before interest, taxes, depreciation, and amortization.
For illustrative purposes:
|
● |
If the Company’s Pre-Tax Hybrid Income for 2023 is $[***], Employee shall earn a Pre-Tax Hybrid Income Bonus in the amount of $[***]. |
|
● |
If the Company’s Pre-Tax Hybrid Income for 2023 is $[***], Employee shall earn a Pre-Tax Hybrid Income Bonus in the amount of $[***]. |
|
● |
If the Company’s Pre-Tax Hybrid Income for 2023 is $[***], Employee shall earn a Pre-Tax Hybrid Income Bonus in the amount of $[***]. |
Exhibit 10.2
Exhibit Includes Redactions
Certain information identified with brackets ([$***]) has been excluded from this exhibit in accordance with Item 601(b) of Regulation S-K because it is both not material and is the type that the registrant treats as private or confidential.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the “Agreement”) is effective as of July 1, 2021 (the “Effective Date”) by and between THE OFFICE GURUS, LLC, a Florida limited liability company (the “Company”), and DOMINIC LEIDE (“Employee”). Employee and the Company are each referred to herein as a “Party” and collectively as the “Parties.”
BACKGROUND
A. Employee has been employed as President of the Company since January 1, 2015, and currently holds the titles of President.
B. Employee’s services are of a special, unique, unusual, extraordinary, and intellectual character.
C. Employee acknowledges that he is and will continue to be employed in a key senior management role with the Company, and that the Company bestows upon and expects from Employee a great deal of responsibility, trust, and reliance.
D. During the course of Employee’s employment with the Company, the Company has and will impart to Employee certain proprietary, confidential, and/or trade secret information, data, and/or materials of a Company Party (defined below).
E. It is essential to the conduct of the Company’s business, the sale of its products, and the provision of its services that all proprietary, confidential, and/or trade secret information, data, and/or materials of the Company Parties be kept confidential and that the professional and business relationships of the Company Parties be protected.
AGREEMENT
The Parties agree as follows:
1. Incorporation. The provisions set forth under the heading “Background” are true and correct and are hereby incorporated into and made a part of this Agreement for all purposes.
2. Term of Employment. The Company agrees to employ Employee, and Employee accepts employment with the Company, on the terms set forth in this Agreement, for a period commencing on the Effective Date and ending on December 31, 2026 (the “Initial Term”), unless sooner terminated in accordance with the provisions of Section 5. The Agreement shall automatically renew for successive periods of twelve (12) consecutive months (each, a “Subsequent Term”), unless written notice of termination is given by a Party at least ninety (90) days prior to the expiration of the Initial Term or applicable Subsequent Term. The Initial Term and any Subsequent Terms may be referred to collectively as the “Term”.
3. Position and Duties. The Company will employ Employee, and Employee agrees to work for the Company, as the President of the Company, to perform the duties and responsibilities inherent in such position and such other duties and responsibilities as the Company shall from time to time assign to Employee. Employee will initially report to Chief Executive Officer of Superior Group of Companies, Inc. The Company may at any time alter the internal organizational structure of the Company, including the reporting responsibilities of Employee. Employee shall devote his full business time and reasonable best efforts in the performance of the foregoing services in a diligent, trustworthy, professional and efficient manner and, in performing such services, Employee shall comply with the Company’s and all relevant Parent (as defined below) policies and procedures in effect from time to time and fully support and implement the business and strategic plans of the Company. Employee will act in the best interest of the Company and any other Company Parties (as appropriate) and, except as may be specifically permitted by the Company in writing, will not engage in any other business activity which conflicts with his role at the Company or otherwise causes a conflict of interest. However, Employee may hold passive investment interests or serve in a passive advisory role in other business enterprises that would not constitute a violation of the restrictions described in Sections 6-10 of this Agreement and which would not interfere with Employee’s ability to perform his duties under this Agreement.
4. Compensation and Benefits. During the term of Employee’s employment with the Company under this Agreement:
4.1 Salary Compensation. The Company shall pay Employee an annualized base salary of TWO HUNDRED AND SIXTY-FOUR THOUSAND EIGHT HUNDRED NINETY-FIVE DOLLARS AND TWENTY-EIGHT CENTS ($264,895.28), payable in accordance with the Company’s customary payroll practices, no less frequently than monthly.
4.2 Bonus. Beginning January 1, 2022, Employee shall be eligible for a bonus pursuant to the terms set forth in Exhibit 1 to this Agreement. Employee will also be eligible to participate in such bonus plans as the Company may in its sole and absolute discretion offer to Employee, which may be similar to or entirely different from those available to other similarly situated employees of the Company or any other Company Party. Employee will be paid by March 15, 2022 all bonuses due to him for calendar year 2021.
4.3 Fringe Benefits. During his employment, Employee shall be entitled to receive all of the Company’s other fringe benefits of employment available to its other employees when and as he becomes eligible for them. The Company reserves the right to modify, suspend or discontinue any and all of its benefit plans as long as such action is taken generally with respect to similarly situated persons and does not single out employee.
4.4 Reimbursement of Certain Expenses. Employee shall be reimbursed for such reasonable and necessary business expenses incurred by him while he is employed by the Company, which are directly related to the furtherance of the Company’s business. Employee must submit any request for reimbursement in accordance with the Company’s reimbursement policy regarding same and business expenses must be substantiated by appropriate receipts and documentation as required by applicable Company policy.
5. Termination of Employment. Employee’s employment shall terminate upon the occurrence of any of the following:
5.1 Termination for Cause. At the election of the Company, the Company may terminate Employee’s employment immediately for Cause upon written notice by the Company to Employee. For the purposes of this Agreement, “Cause” for termination shall be deemed to exist upon the occurrence of any of the following:
(a) gross negligence or willful misconduct by Employee with respect to any Company Party or in the performance of Employee’s duties hereunder;
(b) Employee’s continued failure to substantially perform his employment duties, which failure is not cured to the good faith reasonable satisfaction of the Company within thirty (30) days after Employee’s receipt of written notice from the Company specifically describing the nature of such failure;
(c) Employee’s material breach of the provisions of Sections 7, 9, 10, 11 or 12;
(d) Employee commits any felony or criminal offense that involves moral turpitude;
(e) Employee commits or engages in any act or omission constituting fraud, theft, dishonesty (including relating to financial matters), deceit, embezzlement, misappropriation or misconduct against or at the expense of any Company Party, or which results in, material harm to the business or reputation of any Company Party; or
(f) Employee commits or engages in any act or omission constituting a material violation of applicable law or a material violation of the Company’s published policies and procedures applicable to senior management employees, including those related to the workplace environment (such as laws or policies relating to sexual harassment or age, race, sex or other prohibited discrimination) and insider trading.
5.2 Death or Disability. Employee’s employment shall terminate automatically and immediately upon his death. At the election of the Company, the Company may terminate Employee’s employment immediately upon Employee’s disability by sending written notice of such election to Employee. The term “disability” shall mean (1) the declaration in accordance with any applicable long-term disability insurance policy that Employee is disabled, or (2) Employee’s inability, due to illness, accident, injury, physical or mental incapacity or other disability or similar cause, to perform the essential functions of his job, with reasonable accommodation, for a period of at least 90 consecutive days or for shorter periods aggregating at least 90 days (whether or not consecutive) during any 12-month period. A determination of disability shall be made by a physician satisfactory to both Employee and the Company; provided, that if Employee and the Company are unable to agree on the physician, Employee and the Company shall each select a physician and the two physicians selected by the Parties shall together select a third physician, whose determination as to the existence of a disability shall be binding on all Parties.
5.3 Termination after Resignation without Good Reason. Employee may resign his employment immediately, at any time, upon sixty (60) days’ written notice to the Company of Employee’s resignation without Good Reason.
|
5.4 |
Effect of Termination. |
(a) If Employee’s employment is terminated pursuant to Sections 5.1-5.3, (i) the Company shall pay Employee his base salary and any bonus amount that is earned and accrued but unpaid through the date of employment termination (but in no event shall Employee be eligible to receive any bonus and/or commission related to Pre-Tax Hybrid Income booked after Employee’s employment is terminated), (ii) the Company shall reimburse Employee in accordance with Section 4.4 for reasonable expenses incurred but not reimbursed prior to such termination of employment, and (iii) Employee shall be entitled to receive any nonforfeitable benefits already earned and payable to Employee in accordance with the terms and provisions of any agreements, plans or programs of the Company.
(b) Except as otherwise expressly provided herein, Employee shall not be entitled to any other salary, salary continuation, severance, bonuses, employee benefits or compensation or payments of any kind from any Company Party after the termination of his employment under Sections 5.1-5.3, and all of Employee’s rights to salary, bonuses, employee benefits and other compensation and payments of any kind which would have been earned and accrued or become payable after his termination shall cease upon such termination, other than as expressly required under applicable law (such as the federal law known as COBRA).
(c) If, during the Term of Employment set forth in Section 2, Employee’s employment is (i) terminated pursuant to a Change in Control Termination; or (ii) Employee resigns his employment for Good Reason; or (iii) is terminated by the Company for any reason other than those provided for in Section 5.1 or Section 5.2 (such as a termination by the Company without Cause), in addition to the items detailed in Section 5.4(a), the Company will pay Employee an amount equal to (y) 2.0 times Employee’s highest total compensation, as determined by the sum of Employee’s single highest base salary during the preceding three-year period and the average of the annual cash bonuses paid or payable to Employee that were calculated based on the results of the three (3) full fiscal years ended immediately before Employee’s termination of employment (regardless of when paid) or, if greater, the three (3) full fiscal years ended immediately prior to a Change in Control (or, if applicable, such lesser period for which cash annual bonuses were paid or payable to Employee) and (z) the Company’s share of the monthly cost of medical, dental, vision, short term disability, long term disability and any similar benefits that the Employee was receiving on his or her behalf and his or her dependents’ behalf on the date immediately prior to the termination of employment multiplied by twenty-four (24) (collectively, the “Separation Payment”). The Separation Payment shall be paid in a single lump sum, no later than sixty (60) days after Employee’s employment is terminated pursuant to this Section 5.4(c). Notwithstanding anything to the contrary, and without limitation of any remedies to which the Company may be entitled under this Agreement or applicable law: (i) the Company shall not be required to make any payment of the Separation Payment unless and until Employee signs and delivers a Release (defined below) and the period (if any) during which such Release can be revoked expires without any revocation, and (ii) Employee shall not be entitled to any payment of the Separation Payment during the period in which Employee is violating any of his obligations under Sections 6-10 or under the separate Confidentiality Agreement between Employee and the Company. For purposes of this Agreement, a “Release” means a written release, in form and substance reasonably satisfactory to the Company, whereby Employee waives and releases the Company, its officers, directors, employees and Affiliates from any and all claims that Employee may have against any of them (including, without limitation, any claims in connection with Employee’s employment or the termination thereof) and affirms his post-termination obligations hereunder, provided, that the Release will not apply to any vested benefit under the Company’s qualified retirement plan or any other employee benefit required to be provided by applicable law.
(d) For purposes of this Agreement, “Good Reason” shall mean (i) a material, adverse reduction in Employee’s authority, duties, or responsibilities (other than temporarily while Employee is physically or mentally incapacitated or as required by applicable law); (ii) Employee is required by the Company to reside in a location not of his choosing; or (iii) the Company’s uncured breach of a material provision of this Agreement. Prior to resignation for Good Reason, Employee is required to give written notice to the Company of the intent to resign for Good Reason, describing the reason for the resignation in sufficient detail in order to allow the Company the opportunity to address the situation. Such notice must be provided within thirty (30) days of the event(s) constituting Good Reason and must be given at least thirty (30) days in advance of the effective date of resignation. The Company shall be entitled to ninety (90) days after the date of Employee’s written notice during which it can cure the situation. If the situation has not been cured within ninety (90) days after the date of Employee’s written notice, Employee may then resign for Good Reason, by written notice, effective immediately, which date shall be the Effective Date of resignation.
(e) A “Change in Control Termination” means the termination of Employee by the Company or its successor without Cause within twelve (12) months after the consummation of a Change in Control. In this Agreement, “Change in Control” means any of the following occurs: (A) Superior Group of Companies, Inc., a Florida corporation (“Parent”) or the Company sells all or substantially all of its assets to an entity that is not an Affiliate of the Parent (in a transaction requiring Parent shareholder approval), (B) any person or group of persons within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than the Parent and its Affiliates, becomes the beneficial owner, directly or indirectly, of more than 50% of the Company’s equity securities or the Parent’s outstanding voting stock (whether by way of purchase of stock or other equity securities, merger or otherwise), or (C) any transaction that qualified as a liquidation, dissolution, or winding up of the Parent or the Company. Notwithstanding the foregoing, the following transactions shall in no event constitute a Change in Control: (x) any equity or debt financing transaction pursuant to which the Company or Parent sells securities with the principal purpose of raising capital, or (y) any ownership or acquisition of stock by any of the Benstock family or their Affiliates, including pursuant to transfers for estate planning purposes. In this Agreement, “Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person, including, but not limited to, The Office Gurus, Ltda. de C.V., The Office Gurus, Ltd., and The Office Gurus, Limited. A Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise, and such control will be presumed if any Person owns 10% or more of the voting capital stock or other ownership interests, directly or indirectly, of any other Person. In this Agreement, “Person” means any individual, association (incorporated or unincorporated), corporation, partnership (of any designation - limited partnership, general partnership, limited liability partnership, or otherwise), limited liability company, trust, or any other entity or organization, public or private, including a governmental entity.
6. Restrictive Covenants - Definitions. In this Agreement, the following terms shall have the meanings defined below. Terms may be used in the singular or plural.
(a) “Business” means the provision of business process and contact center outsourced solutions.
(b) “Company Parties” means The Office Gurus, LLC, and any of its direct or indirect parents, subsidiaries, and/or Affiliates, and any of their successors or assigns.
(c) “Confidential Information” means all data or information that is related to the Company or the Business (including any data or information that relates to or results from any historical or projected financial results or financial information, products, services, vendors, customers or research or development of any Company Party), regardless of whether it constitutes a “trade secret” under applicable common law or statute, is labeled or identified as “confidential” or is now existing or to be developed in the future, in any form of medium, that was disclosed to Employee or became known by Employee as a consequence of, or through, Employee’s employment with the Company (including information conceived, originated, discovered, or developed in whole or in part by Employee), having value to the Company, not generally known to competitors of the Company, and about the Company’s business, finances, operating results, products, processes, and services, including, but not limited to, (i) information relating to research, development, inventions, computer program designs, flow charts, source and object codes, products and services under development, pricing and pricing strategies, marketing and selling strategies, servicing, purchasing, accounting, engineering, cost and costing strategies, sources of supply, customer lists, customer requirements, business methods or practices, training and training programs, financial records, the documentation thereof, and similar information, (ii) identities of, individual requirements of, specific contractual arrangements with, and information about, the Company’s current, former or prospective employees, suppliers, distributors, customers, customer prospects, independent contractors and other business relations and their confidential information, (iii) trade secrets, technology, know-how, compilations of data and analyses, techniques, systems, formulae, records, reports, manuals, documentation, models, data and data bases relating thereto, (iv) proprietary software, (v) innovations, ideas, devices, improvements, developments, methods, processes, designs, analyses, drawings and all similar or related information (whether or not patentable and whether or not reduced to practice), (vi) copyrightable works, and (vii) intellectual property of every kind and description; provided, however, that Confidential Information shall not mean data or information (x) which has been voluntarily disclosed to the public by the Company, except where such public disclosure has been made by Employee without authorization from the Company; (y) which has been independently developed and disclosed by others not in breach of a confidentiality obligation, or (z) which has otherwise entered the public domain through lawful means and through no fault of Employee. Confidential Information will be interpreted as broadly as possible to include all information of any sort (whether merely remembered or embodied in a tangible or intangible form) that is (1) related to any Company Party’s current or potential business or operations, and (2) is not generally or publicly known. Notwithstanding the foregoing obligations, pursuant to 18 U.S.C. § 1833(b), Employee understands and acknowledges that he shall not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of a trade secret that is made: (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (2) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and protected from public disclosure. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).
(d) “Prohibited Term” means the period commencing on the Effective Date and ending two (2) years after Employee’s termination or resignation of employment for any reason.
(e) “Territory” means such geographic area in which Employee is working, worked, and/or over which Employee has or had managerial responsibility during Employee’s employment with the Company, including, but not limited to, the United States of America and Canada.
7. Confidentiality. Employee warrants and agrees that he will not at any time reproduce, use, distribute, disclose, publish, misappropriate, or otherwise disseminate any Confidential Information and will not take any action causing, or fail to take any action to prevent, any Confidential Information to lose its character as Confidential Information until and unless such Confidential Information loses its status as Confidential Information through no fault, either directly or indirectly, of Employee, either during the term of Employee’s employment or engagement by the Company (the “Service Period”) or thereafter, except when such disclosure or use is directly related to and required by Employee’s performance of duties assigned by the Company.
Employee will safeguard all Confidential Information and will not take any action causing, or fail to take any action to prevent, any Confidential Information to lose its character as Confidential Information until and unless such Confidential Information loses its status as Confidential Information through no fault, either directly or indirectly, of Employee. Employee will safeguard all documents and things that contain or embody Confidential Information, including but not limited to Confidential Information stored in an electronic format on any Company computer or personal computer owned or used by Employee.
Employee will not, in any communication, including but not limited to with the media, social media, prospective or actual employers, current and former employees of Company Parties, and current and prospective suppliers, vendors, business partners or customers, make any derogatory, disparaging, or critical statement, orally, written, or otherwise, against any Company Party.
8. Return of Documents.
(a) Upon termination of Employee’s employment with the Company for any reason, Employee will return to or leave with the Company all documents, records, notebooks, and other repositories of or containing Confidential Information, including all copies thereof, as well as all originals and copies of work made for hire, including all electronic copies of Confidential Information, or other tangible property of any Company Party, whether prepared by Employee or others, then in Employee’s possession or under Employee’s control.
(b) Upon request or immediately upon termination of employment for any reason, Employee shall promptly (and in any event within three (3) days) provide Company access to all computers, mobile phones, tablets, other electronic devices, thumb drives, portable hard drives, any other type of electronic storage device, and any and all email or cloud accounts/services that Employee used at any time during Employee’s employment with the Company to ensure all Confidential Information is identified and permanently deleted or removed from such locations and Employee shall disclose in writing any and all computer, cloud, software, and other passwords and related security protection information Employee used in relation to Employee’s work with the Company.
9. Non-Solicitation.
(a) Employees. During the Prohibited Term, unless Employee receives express written consent from the Company, Employee shall not, directly or indirectly, solicit, recruit, induce or attempt to solicit, recruit, or induce any then current or former employee, of a Company Party to leave the employ of, any Company Party; provided however, that the restrictions set forth in this Section 9 shall apply only to employees with whom Employee had business contact during the last twenty-four (24) months as of the date of Employee’s employment termination.
(b) Contractors. During the Prohibited Term, unless Employee receives express written consent from the Company, Employee shall not, directly or indirectly, solicit, recruit, or induce any independent contractor of the Company to cease performing services for the Company or reduce the amount or quality of the services performed for the Company, other than in response to general solicitations not targeted to such independent contractors.
(c) Customers. During the Prohibited Term, unless Employee receives express written consent from the Company, Employee shall not, directly or indirectly, on behalf of any Person other than the Company, solicit business from any customer or customer prospect of the Company, or any representative of the same, with a view toward the sale or providing of any service or product competitive with the Business; provided, however, the restrictions set forth in this Section 9(c) shall apply only to customers or prospects of the Company, or representatives of the same, with which Employee or the Company had Material Contact during the last twenty-four (24) months immediately prior to the date of Employee's employment termination. “Material Contact” means contact between Employee or the Company and each customer or customer prospect: (i) with whom or which Employee dealt on behalf of the Company; (ii) whose dealings with the Company were directly or indirectly coordinated or supervised by Employee; (iii) about whom Employee obtained Confidential Information in the course of Employee's employment for the Company; and/or (iv) who receives products or services authorized by the Company, the sale or provision of which results or resulted in revenue to the Company or compensation, commissions, or earnings for Employee within two years prior to the date of Employee's termination.
10. RESTRICTIONS ON COMPETITION. During the Prohibited Term, unless performed for or provided on behalf of a Company Party, and unless Employee receives express written consent from the Chief Executive Officer of Superior Group of Companies, Inc., Employee shall not (a) directly or indirectly, in the Territory, provide the same or similar duties that Employee performed on behalf of a Company Party within the two years prior to the cessation of Employee’s employment for any person or business which competes with a Company Party in the Business, (b) directly or indirectly provide the same or similar duties that Employee performed on behalf of a Company Party related to any customer or customer prospect of a Company Party on whose account Employee worked and/or over which Employee had managerial responsibility within the two years prior to the cessation of Employee’s employment for any person or business which competes with a Company Party in the Business, and/or (c) directly or indirectly, own, control, manage, or participate in the ownership, control, or management of any business (whether as principal, agent, shareholder, participant, partner, promoter, director, officer, manager, member, equity lender, employee, consultant, sales representative, or otherwise) which competes with a Company Party in the Business within the Territory, however, notwithstanding the foregoing, Employee shall not be prohibited from owning, as a passive investment, not more than 1.0% of the capital stock of any corporation that competes with a Company Party in the Business that is traded on a national securities exchange so long as neither Employee nor any family member of Employee has active participation in the business of such corporation.
11. Intellectual Property, Inventions and Patents.
(a) In the event that Employee, during the Service Period, individually or in conjunction with another Person, generates, authors, conceives, develops, acquires, makes, reduces to practice or contributes to any discovery, formula, trade secret, invention, innovation, improvement, development, method of doing business, process, program, design, analysis, drawing, report, data, software, firmware, logo, device, method, product or any similar or related information, any copyrightable work or any Confidential Information (collectively, “Intellectual Property”), Employee expressly acknowledges and agrees that such Intellectual Property is and shall be the exclusive property of the Company; provided, however, that such Intellectual Property relates to the Business or results from any work performed by Employee for the Company. Any copyrightable work prepared in whole or in part by Employee and relating to the actual or contemplated business of any Company Party shall be deemed “a work made for hire” to the maximum extent permitted under Section 201(b) of the 1976 Copyright Act as amended, and the Company shall own all of the rights comprised in the copyright therein. Employee hereby assigns his entire right, title and interest in and to all Intellectual Property to the Company. During and after the Service Period, Employee shall promptly disclose all Intellectual Property to the Company and shall cooperate with the Company to establish, confirm and protect all rights, title and interest of the Company to such Intellectual Property (including, without limitation, providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company). Employee agrees that he will not use or disclose any work made for hire of any Company Party to benefit a Person that competes with the Company Parties, any current, former or prospective vendors, suppliers, distributors, customers, customer prospects, independent contractors and other business relations of any Company Party, or any other individual or entity (except in performing his obligations to the Company during his employment with the Company), without the express, written permission of the Company.
(b) Nonassignable Inventions. Notwithstanding any provision of this Agreement to the contrary, this Agreement does not apply to work that does not relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company or result from any work performed by the Employee for the Company. Employee agrees to disclose promptly in writing to the Company all inventions created, conceived, developed or reduced to practice by Employee during the term of his employment, whether or not Employee believes such inventions are subject to this Agreement, to permit a determination by the Company as to whether or not the inventions should be the property of the Company. Any such information will be received in confidence by the Company.
(c) Prior Inventions. Employee represents and warrants that he has not, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice any work prior to the commencement of Employee's employment with or services to the Company which Employee considers to be Employee's property or the property of third parties (collectively referred to as “Prior Inventions”). If, in the course of Employee's employment with or services to the Company, Employee incorporates a Prior Invention into a Company product, service or item of content, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to make, have made, modify, use and sell such Prior Invention. Notwithstanding the foregoing, Employee agrees that Employee will not incorporate, or permit to be incorporated, Prior Inventions in any work without the Company's prior written consent.
12. Duty Of Loyalty. While employed by the Company, Employee agrees that he will not engage in or deal with any activities, products, or services that are competitive with the Company’s activities, products, business, or services, and that Employee will not usurp any Company business opportunity, without the express prior written consent of the Company. Employee further agrees to faithfully render Employee’s services to the Company and to devote Employee’s best efforts, ability, skill, and attention, in good faith, to the Company’s business while employed by the Company.
13. Notice to Future Employers. Employee agrees to provide to any subsequent, anticipated, and/or contemplated employer an executed copy of this Agreement and to provide written notice to the Company of such event occurring within two (2) business days after such event. These requirements shall cease only after the expiration of the Prohibited Term and/or required by law expire. During the Prohibited Term, Employee authorizes the Company to provide an executed copy of this Agreement to third parties, including but not limited to, Employee’s subsequent, anticipated, and/or contemplated future employers.
14. Assignability. All of Employee’s obligations under this Agreement shall be binding upon Employee’s heirs, assigns, and legal representatives. The terms and provisions of this Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company shall have the right to assign this Agreement to any Company Party or to any successor or assignee of all or substantially all of the business or assets of the Company. This Agreement is personal to Employee, and he shall not have the right to assign this Agreement without the express written consent of the Company, and any attempted assignment in violation thereof shall be invalid and ineffective against the Company.
15. Obligations Survive Termination Of Employment. Any termination of Employee’s employment with the Company shall not impair or relieve Employee of his obligations hereunder that otherwise survive the termination of this Agreement pursuant to their respective terms or by their nature.
16. Governing Law and Forum Selection. This Agreement shall be deemed to have been made and entered into in the State of Florida and shall be construed and enforced in accordance with the laws of the State of Florida, without regard to the conflicts of laws provisions therein. Employee acknowledges that this Agreement shall conclusively be presumed to be a significant, material and reasonable relationship with the State of Florida and it shall be enforced whether or not there are other relationships with the State of Florida. To the extent that any dispute, controversy, or claim under this Agreement arises that is not subject to Arbitration pursuant to Section 23 of this Agreement (“Claim”) or a party breaches Section 23 of this Agreement, the parties agree that the exclusive venue and jurisdiction with respect to any such Claim or dispute shall be in either the Sixth Judicial Circuit for the State of Florida, located in Pinellas County, Florida, or the federal courts of the Middle District of Florida, Tampa Division. Employee indicates that he has in fact been represented by counsel of his choice and received advice from such counsel in entering this Agreement, including this Section 16. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING UNDER SECTION 16 AND ARBITRATION IN FLORIDA AND HEREBY AND THEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE PARTIES ACKNOWLEDGE THAT FLORIDA HAS PERSONAL JURISDICTION OVER THEM AND THAT THEY SHALL NOT CHALLENGE PERSONAL JURISDICTION IN ANY ACTION OR ARBITRATION BROUGHT IN THOSE FORUMS AS APPLICABLE PURSUANT TO THIS AGREEMENT
17. Severability. The Parties believe that the restrictions and covenants in this Agreement are, under the circumstances, reasonable and enforceable. However, if any one or more of the restrictions, covenants, or provisions contained in this Agreement shall, for any reason under the law as it shall then be construed, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other restriction, covenant, or provision of this Agreement. In such an instance, this Agreement shall be construed as if such invalid, illegal, or unenforceable restriction, covenant, or provision had never been contained herein. Additionally, if any one or more of the restrictions, covenants, or provisions contained in this Agreement shall for any reason be held to be excessively broad as to time, duration, geographical scope, activity, or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.
18. Remedy. Employee acknowledges that the covenants specified in Sections 6-12 contain reasonable limitations as to time, geographic area, and scope of activities to be restricted, and that such promises do not impose a greater restraint on Employee than is necessary to protect the goodwill, Confidential Information, customer and employee relations, and other legitimate business interests of the Company. Employee also acknowledges and agrees that any violation of the restrictive covenants set forth in Sections 6-12 would bestow an unfair competitive advantage upon any Person which might benefit from such violation, in part because of the special, unique, unusual, extraordinary, and intellectual character of the services provided by Employee which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages, and would necessarily result in substantial and irreparable damage and loss to the Company. Accordingly, in the event of a breach or a threatened breach by Employee of Sections 6-12 of this Agreement, the Company shall have grounds to terminate the employment of Employee and will therefore be entitled to cease salary, benefits, and any and all remaining contingent future payments to Employee that have not already vested. The Company also shall be entitled to an injunction restraining Employee from such breach or threatened breach in Court or arbitration. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from Employee. In the event that the Company should seek an injunction, Employee waives any requirements that the Company post a bond or any other security.
19. Independent Covenants. The covenants specified in Sections 6-14 are intended by each Party hereto to be, and shall be construed as, agreements independent of each other and of any other agreement between the Parties, and the existence of any claim or cause of action of Employee or any of his affiliates against the Company, whether predicated on this Agreement or any other agreement between Employee and a Company Party, shall not constitute a defense to the enforcement by the Company of such covenants.
20. Blue-Pencil; Modification; Enforcement. If a court holds that the duration, scope or area restrictions in Sections 6-10 are unenforceable, the maximum duration, scope or area enforceable shall be substituted, or, if such substitution is not permissible by law, only the unenforceable or unlawful portion should be stricken and all remaining portions should remain enforceable. Because Employee’s services are unique and Employee has access to Confidential Information, in the event of a breach or a threatened breach by Employee of any of Sections 6-10, the Parties acknowledge and agree that the Company and other Company Parties would suffer irreparable and continuing harm for which money damages would be an inadequate remedy. Accordingly, in addition and supplementary to all other rights and remedies that may be available, the Company Parties shall be entitled to specific performance and/or injunctive or other equitable relief in order to enforce or prevent any violations of this Agreement (without posting a bond or security, if permitted by applicable law, and without proof of monetary damages or an inadequate remedy at law). In addition, (i) the Prohibited Term shall be tolled until the activity causing a breach of any of Sections 6-10 has been stopped, and (ii) the Company Parties shall be entitled to recover from Employee all profit Employee gains from such breach or violation in addition to any damages that the Company Parties suffer. Employee acknowledges and agrees that the Company Parties may exercise any of the foregoing remedies concurrently, independently or successively. Employee acknowledges that the restrictions contained in Sections 6-10 are reasonable.
21. Amendments Or Modifications; Waiver. No amendments or modifications to this Agreement shall be binding on any of the Parties, unless such amendment or modification is in writing and executed by all of the Parties to this Agreement. No term, provision, or clause of this Agreement shall be deemed waived and no breach excused, unless such waiver or consent shall be in writing and executed by Employee and on behalf of the Company. No delay or course of dealing by a Party to this Agreement in exercising any right, power, or remedy under this Agreement will operate as a waiver of any right, power, or remedy of that Party, except to the extent expressly manifested in such a writing. The failure at any time of either Party to require performance by the other Party of any provision of this Agreement will in no way affect the Party’s right thereafter to enforce the provision or this Agreement. In addition, the waiver by a Party of a breach of any provision of this Agreement will not constitute a waiver of any succeeding breach of the provision or a waiver of the provision itself.
22. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) if delivered personally or actually received, as of the date received, (b) if delivered by certified mail, return receipt requested, five (5) business days after being mailed or, if earlier, the actual date of receipt evidenced by the written receipt, (c) if delivered by a nationally recognized overnight delivery service, one (1) business day after being deposited with such delivery service for next business day delivery, or (d) if sent via electronic mail in portable document format (.pdf) or similar electronic transmission with proof of receipt and a hard copy to follow by first class mail or overnight delivery, as of the date received, to such party at its address set forth below (or such other address as it may from time to time designate in writing to the other parties hereto):
If to Company:
The Office Gurus, LLC
c/o Superior Group of Companies, Inc.
10055 Seminole Boulevard
Seminole, Florida 33772-2539
Attn: Chief Executive Officer
email: mbenstock@superiorgroupofcompanies.com
With copy to:
Superior Group of Companies, Inc.
10055 Seminole Boulevard
Seminole, Florida 33772-2539
Attn: General Counsel
email: SGC-Legal@superiorgroupofcompanies.com
If to Employee:
Dominic Leide
[***]
[***]
email: [***]
23. WAIVER OF JURY TRIAL; ARBITRATION; WAIVER OF CLASS AND COLLECTIVE CLAIMS.
WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.
ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement, Employee’s employment by the Company or Employee’s compensation and benefits shall be settled exclusively by final and binding arbitration in either St. Petersburg, Florida or Tampa, Florida by an arbitrator in accordance with the Comprehensive Rules of Judicial Arbitration & Mediation Service, Inc. (“JAMS”) in effect at the time of submission to arbitration. The rules can be found at: https://www.jamsadr.com/rules-comprehensive-arbitration/.
The following claims are excluded from this arbitration provision: claims arising under the National Labor Relations Act which are brought before the National Labor Relations Board, workers' compensation claims under applicable workers’ compensation laws, Employment Development Department claims, ERISA claims covered by an ERISA plan with a dispute resolution provision, or any other claims that are non-arbitrable under applicable state or federal law. Nothing herein shall prevent Employee from filing and pursuing proceedings before the Department of Fair Employment and Housing, the Division of Labor Standards Enforcement, or the United States Equal Employment Opportunity Commission (although if Employee chooses to pursue a claim following the exhaustion of such remedies, that claim would be subject to the provisions of this Agreement).
The statutes of limitations otherwise applicable under law shall apply to all Claims made in arbitration. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The arbitration shall be conducted in a procedurally fair manner by a mutually agreed upon neutral arbitrator selected in accordance with the applicable JAMS rules (“Rules”) or if none can be mutually agreed upon, then by one arbitrator appointed pursuant to the Rules; the arbitration shall be conducted confidentially in accordance with the Rules unless provided otherwise by applicable law; the arbitration fees shall be paid by the Company; each party shall have the right to conduct reasonable discovery including depositions, requests for production of documents and such other discovery as permitted under the Rules or ordered by the arbitrator; the arbitrator shall have the authority to award any damages authorized by law for the claims presented, including punitive damages; the decision of the arbitrator shall be final and binding on all parties and shall be the exclusive remedy of the parties; and the award shall be in writing in accordance with the Rules, and shall be subject to judicial enforcement and review in accordance with applicable law.
WAIVER OF CLASS AND COLLECTIVE CLAIMS. THE PARTIES AGREE THAT ALL CLAIMS WILL BE ARBITRATED (OR LITIGATED, IF APPLICABLE) ONLY ON AN INDIVIDUAL BASIS, AND THAT BOTH PARTIES WAIVE THE RIGHT TO BRING, PARTICIPATE IN, JOIN, OR RECEIVE MONEY OR ANY OTHER RELIEF FROM ANY CLASS, COLLECTIVE, OR REPRESENTATIVE PROCEEDING. NO PARTY MAY BRING A CLAIM ON BEHALF OF OTHER INDIVIDUALS (WHETHER IN ARBITRATION OR IN COURT), AND AN ARBITRATOR MAY NOT (AND EMPLOYEE MAY NOT ASK A COURT TO): (I) COMBINE MORE THAN ONE INDIVIDUAL’S CLAIM OR CLAIMS INTO A SINGLE CASE; (II) PARTICIPATE IN OR FACILITATE NOTIFICATION OF OTHERS OF POTENTIAL CLAIMS; OR (III) ARBITRATE (OR LITIGATE) ANY FORM OF A CLASS, COLLECTIVE, OR REPRESENTATIVE PROCEEDING.
24. Entire Agreement. This Agreement represents the entire agreement between the Parties and supersedes any and all other prior oral or written agreements, proposals, representations, communications, and/or understandings between Employee and the Company related to the subject matter of this Agreement, and Employee has not relied upon any representation that is not expressly set forth in this Agreement.
25. Counterparts; Electronic Signatures; Effectiveness. This Agreement may be executed in one or more counterpart signature pages, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement, which shall be binding upon all of the Parties hereto notwithstanding the fact that all Parties are not signatory to the same counterpart. The exchange and delivery of executed copies of this Agreement and of signature pages by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature and shall be binding for all purposes hereof. A Party’s receipt of a facsimile signature page or electronic copy of a signature page to this Agreement shall be treated as the Party’s receipt of an original signature page. Alternatively, an electronic signature (whether digital or encrypted, such as one transmitted via DocuSign or RightSignature) shall be effective to bind the Party that transmitted the signature to the same extent as would a handwritten signature.
26. Tax Provisions.
26.1 The Company will have no obligation to Employee or any other Person entitled to payment or benefits under this Agreement with respect to any tax obligation Employee or such other Person incurs as a result of or attributable to this Agreement or arising from any payments made or to be made under this Agreement.
26.2 The Company shall have the right to deduct from any payment made to Employee any amount required to be withheld for any federal, state or local income, employment or other taxes. In the event the Company does not make such deductions or withholdings, Employee shall indemnify the Company for any amounts paid with respect to any such taxes, together (if such failure to withhold was at the written direction of Employee or if Employee was informed that such deductions or withholdings were not made) with any interest, penalties and related expenses thereto.
26.3 409A Provisions.
(a) The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.
(b) For purposes of determining Employee’s entitlement to any compensation payable upon his termination of employment with the Company that is subject to Section 409A, if any, Employee’s employment will be deemed to have terminated on the date of Employee’s “separation from service” from the Company within the meaning of Section 409A of the Internal Revenue Code. If Employee is a “specified employee” of the Company as of such date, any such benefit or payment that Employee is entitled to receive before the date that is six (6) months after the separation from service date that is not otherwise exempt from the requirements of Section 409A of the Internal Revenue Code shall not be provided or paid on the date such benefit or payment is otherwise required to be provided or paid. Instead, the payment of all such amounts shall be accumulated and paid in a single lump sum payment on the first business day after the date that is six months after the separation from service date (or, if earlier, within fifteen (15) days following Employee’s date of death). All benefits or payments otherwise required to be provided or paid on or after the date that is six (6) months after the separation from service date shall not be affected by the preceding sentence, and shall be provided and paid in accordance with the payment schedule otherwise applicable to such payment or benefit.
(c) Notwithstanding anything to the contrary in this Agreement, if the specified period during which the Release may be returned and become effective spans two calendar years, any payments conditioned upon the execution of the Release shall not be paid earlier than the first day of the second calendar year.
(d) To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Employee shall be paid to Employee no later than December 31 of the year following the year in which the expense was incurred; provided, that Employee submits Employee’s reimbursement request promptly following the date the expense is incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Employee’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.
(e) Employee’s right to receive any installment payments under this Agreement, including without limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A. Except as otherwise permitted under Section 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interest pursuant to Section 409A.
(f) Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.
27. Acknowledgements. Employee acknowledges that he has read and understands the provisions of this Agreement, that Employee has been given an opportunity for his legal counsel to review this Agreement, that Employee’s legal counsel has reviewed and advised Employee regarding this Agreement (including, but not limited to, its choice of law, venue, and forum provisions), that the provisions of this Agreement are reasonable, that Employee enters into this Agreement voluntarily without duress or pressure from the Company and with full knowledge and understanding of the contents, nature, and effect of this Agreement, and that Employee has received a copy of this Agreement.
28. Mobile Telephone Number. In addition to and separate from any other compensation or benefit provided by this Agreement, the Company acknowledges and agrees that the mobile telephone number [***] (“Phone Number”) is owned by and is the property of Employee, and only Employee. Neither the Company nor any entity within the Company Group, or any affiliate or individual of it or them, have any rights in and/or to the Phone Number. The Company acknowledges that Employee owned the Phone Number prior to his employment with the Company and shall maintain sole ownership of the Phone Number after his Termination of Employment from the Company or any of its affiliates. The Company and its affiliates shall use all reasonable best efforts to ensure that the Phone Number is owned by Employee and that Employee maintains ownership and use of the Phone Number at all times during his employment with the Company (and/or its affiliates or Buyer) and after his Termination of Employment with the Company (and/or its affiliates or Buyer) for any reason. This shall include, but not be limited to, communicating with the phone carrier to port the number to Employee upon Employee’s Termination of Employment. Additionally, the Company shall continue to pay for Employee’s use of the Phone Number while he is employed with the Company (and/or its affiliates), regardless of whether the Phone Number is listed as a Company number with the phone carrier (in which case the Company shall pay the phone carrier directly) or paid for directly by Employee (in which case Employee shall be reimbursed in full by the Company (and/or its affiliates)).
[Signature Page Follows.]
IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this Agreement as of the Effective Date.
EMPLOYEE:
/s/ Dominic Leide__________________
Dominic Leide
Date Signed: ___________________
COMPANY:
THE OFFICE GURUS, LLC
a Florida limited liability company
By its Sole Member, Superior Group of Companies, Inc.
By: ___________________________
Name: _________________________
Title: __________________________
Exhibit 1
Bonus Plan
Pre-Tax Hybrid Income Bonus - Employee shall be paid a Pre-Tax Hybrid Income Bonus for each of the calendar years 2022, 2023, 2024, 2025, and 2026, that shall be calculated as four percent (4.0%) multiplied by the Company’s Pre-Tax Hybrid Income (as defined below) for the applicable year or any portion thereof in which Employee remains employed by the Company. This bonus is non-discretionary and shall be paid to Employee regardless of personal performance. This bonus shall be paid by no later than March 15th in the year after it is earned.
For purposes of this Exhibit 1 (Bonus Plan), “Company” shall mean The Office Gurus, LLC, The Office Gurus, Ltda. de C.V., The Office Gurus, Ltd., and The Office Gurus, Limited, including all of its and their present and future-formed subsidiaries and any other entities that Employee and the Chief Executive Officer of Superior Group of Companies, Inc, agree in writing shall be included in the definition of “Company”.
“Pre-Tax Hybrid Income” shall be calculated as follows: the Company’s EBITDA for the applicable calendar year minus any interest expense on debt related to any new acquisitions plus the accrual, if any, for Employee’s Pre-Tax Hybrid Income Bonus. For purposes of this bonus calculation, the Company’s pre-tax income shall be calculated in accordance with accounting principles generally accepted in the United States of America, based upon the Company’s financial statements.
“EBITDA” shall mean earnings before interest, taxes, depreciation, and amortization.
For illustrative purposes:
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If the Company’s Pre-Tax Hybrid Income for 2023 is $[***], Employee shall earn a Pre-Tax Hybrid Income Bonus in the amount of $[***]. |
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If the Company’s Pre-Tax Hybrid Income for 2023 is $[***], Employee shall earn a Pre-Tax Hybrid Income Bonus in the amount of $[***]. |
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If the Company’s Pre-Tax Hybrid Income for 2023 is $[***], Employee shall earn a Pre-Tax Hybrid Income Bonus in the amount of $[***]. |
Exhibit 10.3
Exhibit Includes Redactions
Certain information identified with brackets ([$***]) has been excluded from this exhibit in accordance with Item 601(b) of Regulation S-K because it is both not material and is the type that the registrant treats as private or confidential.
CHANGE IN CONTROL AGREEMENT
This is a CHANGE IN CONTROL AGREEMENT (the “Agreement”) made as of July 8, 2021 (the “Effective Date”), by and between Superior Group of Companies, Inc., a Florida corporation (the “Company”) and Jordan Alpert, an individual resident of the State of Florida (the “Employee”).
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the “Board”) recognizes that the possibility of a Change in Control exists; and
WHEREAS, the Board has determined that it is important and in the best interest of the Company Group and the Company’s shareholders to retain the services of the Employee in the event of the possibility or occurrence of a Change in Control and to seek to ensure the Employee’s continued dedication and efforts in such event without undue concern for the Employee’s personal financial and employment security; and
WHEREAS, to induce the Employee to remain in the employ of a member of the Company Group, particularly in the event of a possibility or the occurrence of a Change in Control, the Company desires to enter into this Agreement with the Employee to provide the Employee with certain benefits in the event the Employee’s employment is terminated as a result of, or in connection with, a Change in Control of the Company.
NOW, THEREFORE, the parties agree as follows:
1. Term of Agreement. Term. This Agreement is effective on the Effective Date and, unless sooner terminated by Employee pursuant to Good Reason, shall remain in full force and effect until the earlier of (a) Employee’s Termination of Employment, if such Termination of Employment (i) occurs prior to the date the Protected Period begins, (ii) is by Employee without Good Reason, or (iii) is by the Company (or another member of the Company Group) for Cause; (b) the end of the Protected Period, if the Employee has not had a Termination of Employment prior to the end of the Protected Period; or (c) the date that the Company has fully performed its obligations under Sections 3, 4.1, 4.2 and 4.3 of this Agreement, if Employee experiences a Qualifying Termination during the Protected Period or an Extended Qualifying Termination (the “Term”)
2. Certain Definitions. In addition to any other definitions contained in this Agreement, the capitalized terms set forth below (in their singular and plural forms, as applicable) shall have the followings meanings:
2.1.“ Accrued Compensation” shall mean an amount which shall include all amounts earned or accrued through the Termination Date but not paid as of the Termination Date, including (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Employee on behalf of the Company (or another member of the Company Group) during the period ending on the Termination Date, (iii) vacation pay and/or paid time off, (iv) bonuses and incentive compensation (other than the Pro Rata Bonus), and (v) all other amounts the Employee would have received with respect to services rendered prior to the Termination Date had he or she remained employed through the end of the calendar year in which the Termination Date occurred, such as commission payments.
2.2.“ Base Amount” shall mean the greater of the Employee’s annual base salary (i) at the rate in effect on the Termination Date or (ii) at the highest rate in effect at any time during the ninety (90) day period prior to a Change in Control, and shall include all amounts of the Employee’s base salary that are deferred under any qualified or non-qualified employee benefit plan of the Company or any other agreement or arrangement.
2.3.“ Bonus Amount” shall mean the average of the annual cash bonuses paid or payable to the Employee that were calculated based on the results of the three (3) full fiscal years ended immediately before the Termination Date (regardless of when paid) or, if greater, the three (3) full fiscal years ended immediately prior to a Change in Control.
2.4.“ Cause” shall have the same meaning as such term in any effective individual employment agreement that the Employee has entered into with the Company; provided, however, that in the event that the Employee does not have such an employment agreement or such an employment agreement does not define the term “Cause,” then “Cause” shall mean: (i) the Employee’s conviction under the laws of the United States or any state thereof, or pleading nolo contendere to, a crime constituting a felony under the laws of the United States or any state thereof, (ii) the Employee’s breach of a material term of this Agreement, (iii) the Employee’s breach of a material provision of any other agreement with the Company or other member of the Company Group addressing the terms of the Employee’s employment (“Employment Agreement”), (iv) a material breach of any restrictive covenant or confidentiality provision set forth in this Agreement or any Employment Agreement, or (v) the Employee’s (A) intentional and continual, and without justification, (1) failure to substantially to perform his or her reasonably assigned duties with the Company or other member of the Company Group or (2) failure to comply with corporate policies (other than a failure resulting from the Employee’s incapacity due to physical or mental illness, in each case without regard to whether such conduct occurred before or after a Change in Control), which failure continued for a period of at least thirty (30) days after a written notice of demand for substantial performance has been delivered to the Employee specifying in reasonable detail the manner in which the Employee has failed substantially to perform without the Employee undertaking actions reasonably likely to remedy or cure such non-performance, or (B) intentionally engaging in illegal conduct or gross misconduct which has directly caused material economic harm to the Company or any member of the Company Group.
2.5.“ Change in Control” shall mean the occurrence of one (1) of the following:
2.5.1. an acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any person, immediately after which such person has “Beneficial Ownership” (within the meaning of Rule 13D-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of thirty percent (30%) or more of the combined voting power of the Company’s then-outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a Non-Control Transaction (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control;
2.5.2. a merger, consolidation, reorganization or similar transaction or series of transactions involving the Company or involving any entity of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company (a “Subsidiary”), unless (A) the Voting Securities of the Company, immediately before such merger, consolidation or reorganization, continue immediately following such merger, consolidation or reorganization to represent, either by remaining outstanding or by being converted into voting securities of the surviving corporation resulting from such merger, consolidation or reorganization or its parent (the “Surviving Corporation”), at least two-thirds of the combined voting power of the outstanding voting securities of the Surviving Corporation; (B) the individuals who were members of the Board immediately before the execution of the agreement providing for such merger, consolidation or reorganization constitute two-thirds or more of the members of the board of directors of the Surviving Corporation; and (C) no person (other than the Company, any Subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any Subsidiary, or any person who, immediately before such merger, consolidation or reorganization had Beneficial Ownership of thirty percent (30%) or more of the then outstanding Voting Securities) has Beneficial Ownership of thirty percent (30%) or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities (a transaction described in clauses (A) through (C) above shall herein be referred to as a “Non-Control Transaction”). Further, any transaction in which a Benstock Family Member or an affiliate of a Benstock Family Member acquires any capital stock of the Company, including pursuant to transfers for estate planning purposes, will be considered a Non-Control Transaction. For this purpose, the Benstock Family Members will include any descendent of Gerald Benstock or his siblings, by marriage or blood.
2.5.3. the approval by the Company’s shareholders of a complete liquidation or dissolution of the Company; or
2.5.4. the consummation of a sale, lease, transfer, conveyance or other disposition of all or substantially all of the assets of the Company to any person (other than a transfer to a Subsidiary) effected in one transaction or in a series of transactions.
2.5.5. Notwithstanding the foregoing, in the event any payment due to Employee under this Agreement would also constitute “deferred compensation” within the meaning of the Code Section 409A, either by design or due to a subsequent modification in the terms of such payment or as a result in a change in the law occurring after the Effective Date, then to the extent such payment is not exempt from the requirements of Code Section 409A by an applicable exemption, the term “Change in Control” shall mean an event that constitutes not only one (1) of the Change in Control events described above, but also constitutes a “change in control” within the meaning of the provisions of Code Section 409A. For purposes of the definition of a “Change in Control” under this Agreement, the provisions of section 318(a) of the Code regarding the constructive ownership of stock will apply to determine stock ownership; provided, that, Company stock underlying unvested stock options (including options exercisable for stock that is not substantially vested) will not be treated as owned by the individual who holds such stock options.
2.5.6. For purposes of the definition of a “Change in Control” under this Agreement, “Company” includes (x) the Company, (y) the member of the Company Group for whom the Employee performs services, and (z) an entity that is a stockholder owning more than 50% of the total fair market value and total voting power (a “Majority Shareholder”) of the Company or the entity identified in (y) above, or any entity in a chain of entities in which each entity is a Majority Shareholder of another entity in the chain, ending in the Company or the entity identified in (y) above.
2.6.“ Code” shall mean the Internal Revenue Code of 1986, as amended.
2.7.“ Company Group” shall mean the Company and its current and future affiliates and subsidiaries or any of their successors or assignees.
2.8.“ Disability” shall mean the Employee’s inability to perform his or her material services for the Company (or other member of the Company Group) for a period of one hundred eighty (180) consecutive days as a result of incapacity due to mental or physical illness, which is determined to be total and permanent. A determination of Disability shall be made by a physician reasonably satisfactory to both the Employee (or his or her guardian) and the Company, provided that the Employee (or his or her guardian) and the Company do not agree on a physician, the Employee and the Company shall each select a physician and these two together shall select a third physician, whose determination as to Disability shall be final, binding and conclusive with respect to all parties. Notwithstanding the above, eligibility for disability benefits under any policy for long-term disability benefits provided to the Employee by the Company shall conclusively establish the Employee’s Disability.
2.9.“ Good Reason” shall mean the occurrence of any one or more of the following events or conditions, without the Employee’s express written consent, during the Protected Period:
2.9.1. the material reduction or diminution in the Employee’s authority, duties or responsibilities with the Company with regard to the Legal Department, including, but not limited to, the continuous assignment of Employee of any duties materially inconsistent with Employee’s position with the Company, or a material negative change in the nature or status of Employee’s responsibilities or the conditions of Employee’s employment with the Company with regard to the Legal Department from those in effect immediately prior to the Protected Period;
2.9.2. a material reduction in Employee’s annualized cash and benefits compensation opportunity, which shall include Employee’s base compensation, Employee’s annual target bonus opportunity and Employee’s aggregate employee benefits, as in effect immediately prior to the Protected Period, provided however that any changes in the compensation structure that are applied to all similarly situated individuals as a direct result of the changes to the corporate structure following a Change in Control will not constitute Good Reason; or
2.9.3. the relocation of the Employee to an office or location which would increase his or her daily commute distance by more than (50) miles (one-way) from the location at which the Employee normally performed Employee’s services immediately prior to the Protected Period, except for travel reasonably required in the performance of the Employee’s responsibilities or the Employee being required to travel away from his or her office in the course of discharging his or her responsibilities or duties hereunder significantly more (in terms of either consecutive days or aggregate days in any calendar year) than was required of the Employee prior to the Protected Period.
Notwithstanding the foregoing, Employee is required to give written notice to Company of his or her intent to resign for Good Reason, describing the reason for the resignation in sufficient detail in order to allow Company the opportunity to address the situation. Such notice must be provided within sixty (60) days of the event(s) constituting Good Reason and must be given at least thirty (30) days in advance of the effective date of resignation. Company shall be entitled to thirty (30) days after the date of Employee’s written notice during which it can cure the situation. If the situation has not been cured within thirty (30) days after the date of Employee’s written notice, Employee may then resign for Good Reason, by written notice, effective immediately, which date shall be the effective date of resignation; provided, that, if Employee does not resign within thirty (30) days following such cure period, then such situation shall not constitute Good Reason. For avoidance of doubt, Good Reason shall not exist following an isolated, insubstantial or inadvertent action that is remedied within the cure period described in the preceding sentences.
2.10.“ Pro Rata Bonus” shall mean an amount equal to the annual incentive cash bonus earned and/or reasonably expected to be earned by the Employee for the calendar year in which the Termination of Employment occurred multiplied by a fraction the numerator of which is the number of days in the fiscal year through the Termination Date and the denominator of which is 365.
2.11.“ Protected Period” shall mean the period commencing thirty (30) days prior to a Change in Control and ending twenty-four (24) months following a Change in Control.
2.12.“ Successor” shall mean a person which has acquired or succeeded to all or substantially all of the assets or business of the Company (or another member of the Company Group for which the Employee provides services), including this Agreement, whether by operation of law or otherwise. To the extent that a division or subsidiary of the Company that employs employee is sold or otherwise divested, the Company shall ensure that this Agreement is assumed by the buyer.
2.13.“ Qualifying Termination” shall mean a Termination of Employment that occurs at any time during the Protected Period as a result of either (A) the Employee’s involuntary termination for any reason other than Cause, death or Disability or (B) the Employee’s termination for Good Reason.
2.14.“ Extended Qualifying Termination” shall mean a Termination of Employment that occurs at any time during the thirty-six (36) months immediately following the conclusion of the Protected Period as a result of either (A) the Employee’s involuntary termination for any reason other than Cause, death or Disability or (B) the Employee’s termination for Good Reason.
2.15.“ Termination Date” shall mean the date of the Termination of Employment.
2.16.“ Termination of Employment” shall mean the Employee’s “separation from service” with the Company (or another member of the Company Group) within the meaning of Treas. Reg. § 1.409A-1(h)(1)(ii).
3. Vesting of Incentive and Equity Awards. Upon a Change in Control, all restrictions or performance criteria on any outstanding incentive awards under any incentive plan or arrangement shall lapse and be deemed to have been fully satisfied, as the case may be, and all such incentive awards shall become fully vested. If Employee experiences a Qualifying Termination during the Protected Period but prior to a Change in Control, Employee shall be deemed to be employed on the Change in Control for purposes of this Section 3.
4. Payment Upon Qualifying Termination or Extended Qualifying Termination.
4.1. Qualifying Termination Benefits and Compensation. If, during the term of this Agreement, the Employee incurs a Qualifying Termination within the Protected Period the Employee shall be entitled to the following compensation and benefits:
4.1.1. The Company shall pay the Employee all Accrued Compensation and a Pro Rata Bonus.
4.1.2. The Company shall pay the Employee as severance pay in lieu of any further compensation for periods subsequent to the Termination Date, a single payment in an amount equal to two (2) times the sum of (A) the Base Amount and (B) the Bonus Amount.
4.1.3. The Company shall pay the Employee a single payment in an amount equal to the Company’s share of the monthly cost of medical, dental, vision, short term disability, long term disability and any similar benefits that the Employee was receiving on his or her behalf and his or her dependents’ behalf on the date immediately prior to the Qualifying Termination multiplied by twelve (12);
4.1.4. The Company shall pay to the Employee a single payment equal to the greatest amount of annual employer contributions made on behalf of the Employee under the provisions of any qualified retirement plan in which the employee was a participant as of the date of the Qualifying Termination during any one of the last three completed fiscal years prior to the date of the Qualifying Termination.
4.2. Extended Qualifying Termination Benefits and Compensation. If, during the term of this Agreement, the Employee incurs an Extended Qualifying Termination the Employee shall be entitled to the following compensation and benefits:
4.2.1. The Company shall pay the Employee all Accrued Compensation and a Pro Rata Bonus.
4.2.2. The Company shall pay the Employee as severance pay in lieu of any further compensation for periods subsequent to the Termination Date, a single payment in an amount equal to one (1) times the Base Amount.
4.3. Timing and Conditions of Payment.
4.3.1. The amounts provided for in Sections 4.1.1 and 4.2.1 shall be paid in a lump sum in cash within thirty (30) days following the Employee’s Termination Date.
4.3.2. The payment of the amounts provided in Sections 4.1.2, 4.1.3, 4.1.4, and 4.2.2 of this Agreement shall be conditioned upon the execution, non-revocation, and delivery of a Release and Separation Agreement in a form similar to the one attached hereto as Exhibit A (the “Release”) by Employee within forty-five (45) days of the date of Employee’s Termination Date. The payments due under Sections 4.1.2, 4.1.3, 4.1.4, and 4.2.2 of this Agreement shall be made to the Employee on the sixtieth (60th) day following the Employee’s Termination Date, provided that the Company has received a properly executed Release by the Employee no later than the forty-fifth (45th) day following the Termination Date. If the Employee fails to properly execute and deliver the Release during the allowed forty-five (45) day period following the Employee’s Termination Date, the Employee agrees that he or she shall not be entitled to receive the benefits described in Sections 4.1.2, 4.1.3, 4.14, and 4.2.2 of this Agreement.
4.4. Confidential Information and Restrictive Covenants. By becoming a party to this Agreement, the Employee hereby agrees to the provisions of this Section 3.3 provided that such covenants are in addition to, and do not supplant, supersede, modify or limit in any manner, any other confidentiality, non-disclosure, non-competition, non-solicitation, non-acceptance, non-piracy or other similar obligations imposed on Employee, whether imposed by law (including laws governing trade secrets, and Employee’s fiduciary duties to the Company Group), by contract, by generally applicable Company Group policy, or otherwise.
4.4.1. Employee hereby acknowledges that, as an employee of the Company, he or she will be making use of, acquiring and adding to confidential information of a special and unique nature and value relating to the Company and its strategic plan and financial operations. Confidential Information shall mean, for purposes of this Agreement, all proprietary and other information relating to the business and operations of the Company and/or any affiliate which has not been specifically designated for release to the public. The Employee further recognizes and acknowledges that all Confidential Information is the exclusive property of the Company, is material and confidential, and is critical to the successful conduct of the business of the Company. Accordingly, the Employee hereby covenants and agrees that he or she will use confidential information for the benefit of the Company only, that he or she shall not at any time, directly or indirectly, divulge, reveal, acknowledge or communicate any confidential information to any person, firm, employer or entity whatsoever other than an employee of the Company that is authorized to possess such Confidential Information, or use any confidential information for his or her own benefit or for the benefit of others. This provision does not replace or supersede any other confidentiality agreement between the Employee and the Company or an affiliate.
4.4.2. Employee agrees not to make negative comments or otherwise disparage any member of the Company Group or its officers, directors, employees, shareholders or agents, in any manner likely to be harmful to them or their business, business reputation or personal reputation. The foregoing shall not be violated by truthful statements in response to legal process or required governmental testimony or filings.
4.4.3. Employee acknowledges and agrees that a breach of the provisions contained in this section 4.3 will cause irreparable harm to Company (or another member of the Company Group); that damages arising from any such breach may be difficult to ascertain; that no adequate legal remedy exists; and that Company (or another member of the Company Group) has a legitimate business interest protected by this section 4.3. Accordingly, Company (or another member of the Company Group) shall be entitled to seek injunctive relief, damages, and any and all other legal and equitable remedies to which the Company (or another member of the Company Group) may be entitled, without the necessity of posting bond. Every right and remedy of Company (or another member of the Company Group) shall be cumulative, and Company (or another member of the Company Group), in its sole discretion, may exercise any and all rights or remedies stated in this Agreement and those otherwise available at law or in equity. The parties specifically covenant and agree that should any of the provisions set forth in this section 4.3 be declared by a court of competent jurisdiction to exceed the maximum time or areas of restriction which such court deems reasonable and enforceable, then said provisions shall be deemed amended to conform with the time and area restriction which such court considers reasonable and enforceable and shall be enforced as so amended. The parties agree that all members of the Company Group are intended third party beneficiaries of this section 4.3 and that the terms of this section 4.3 shall survive termination of this Agreement.
4.5. No Additional Severance. Except as otherwise provided in Section 4.5 of this Agreement, the severance pay and benefits provided for in this Section 4 shall be in lieu of any other severance or termination pay to which the Employee may be entitled under any Company severance or termination plan, program, practice or arrangement.
4.6. Employment and Retention Agreements. The benefits provided in this Section 4 shall not reduce or override any benefits, separation pay or compensation awards set forth in an individual employment, retention, or similar agreement between the Employee and the Company or any Successor.
4.7. Coordination with Other Compensation and Benefits. The Employee’s entitlement to any other compensation or benefits shall be determined in accordance with the Company’s employee benefit plans and other applicable programs, policies and practices then in effect.
4.8. Limitation. Notwithstanding the foregoing, the payments otherwise due under this Section 3 may be limited to the extent provided in Section 5 below.
5. Excess Parachute Payments.
5.1. Reduction. In the event that it shall be determined, based upon the advice of the independent public accountants for the Company (the “Accountants”), that any payment, benefit or distribution by the Company or affiliates (a “Payment”) constitute “parachute payments” under Section 280G(b)(2) of the Code, then, if the aggregate present value of all such Payments (collectively, the “Parachute Amount”) exceeds 2.99 times the Employee’s “base amount”, as defined in Section 280G(b)(3) of the Code (the “Employee Base Amount”), the amounts constituting “parachute payments” which would otherwise be payable to or for the benefit of the Employee shall be reduced to the extent necessary so that the Parachute Amount is equal to 2.99 times the Employee Base Amount (the “Reduced Amount”), provided that such amounts shall not be so reduced if the Company determines, based upon the advice of the Accountants, that without such reduction the Employee would be entitled to receive and retain, on a net after tax basis (including any excise taxes payable under Section 4999 of the Code), an amount which is greater than the amount, on a net after tax basis, that the Employee would be entitled to retain upon his or her receipt of the Reduced Amount. The Company’s determination shall be final and binding on the Employee.
5.2. Manner of Reduction. If the determination made pursuant to Section 5.1 results in a reduction of the payments that would otherwise be paid to the Employee except for the application of Section 5.1, the Employee may then elect, in his or her sole discretion, which and how much of any particular entitlement shall be eliminated or reduced and shall advise the Company in writing of his or her election within ten (10) days of the determination of the reduction in payments. Notwithstanding the foregoing, however, none of the selected Payments may be “nonqualified deferred compensation” subject to Section 409A of the Code. In the event the Employee fails to select an order in which Payments are to be reduced, or cannot select such an order without selecting payments that would be “nonqualified deferred compensation” subject to Section 409A of the Code, the Company shall (to the extent feasible) make the determination as to the the order in which such payments would be made (with reduction of payments in reverse chronological order (that is, the payment owed on the latest date following the occurrence of the event triggering the excise taxes under Section 4999 of the Code will be the first payment to be reduced)
6. Binding Agreement; Nonalienation.
6.1. Binding Agreement.
6.1.1. This Agreement and all rights of the Employee hereunder shall inure to the benefit of and be enforceable by the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while any amounts would still be payable to him hereunder if he or she had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Employee’s devisee, legatee or other designee or, if there be no such designee, to the Employee’s estate.
6.1.2. This Agreement shall be binding upon and shall inure to the benefit of the Company and its Successors, and the Company shall require any Successor to enter into a written undertaking to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The failure of the Company to obtain such a written agreement shall not adversely affect the right of the Employee to enforce the terms of this Agreement against any Successor.
6.2. Nonalienation. Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Employee or by the Employee’s beneficiaries or legal representatives, except by will or by the laws of descent and distribution.
7. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service, or sent by email transmission, to the recipient at the address below indicated:
In the case of Employee, to Employee at the most recent address set forth in the payroll records of the Company, or by email at the email address included in the signature page to this Agreement or, if none is listed, the most recent email address set forth in the payroll records of the Company.
In the case of the Company, to:
Superior Group of Companies, Inc.
10055 Seminole Blvd.
Seminole, FL 33772
Attn: Chief Executive Officer
Email: mbenstock@superiorgroupofcompanies.com
Or, in each case, such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered, sent or mailed.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company, or other member of the Company Group (except during the Protected Period for any severance or termination policies, plans, programs or practices) and for which the Employee may qualify, nor shall anything herein limit or reduce such rights as the Employee may have under any other agreements with the Company or other member of the Company Group (except during the Protected Period for any severance or termination agreement). Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan or program of the Company or other member of the Company Group shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.
9. Modification or Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Employee and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No representations, oral or otherwise, express or implied, with respect to the subject matter hereof, have been made by either party which are not expressly set forth in this Agreement.
10. Further Assurances. The parties to this Agreement will execute and deliver, or cause to be executed and delivered, such additional or further documents, agreements or instruments and shall cooperate with one another in all respects for the purpose of carrying out the transactions contemplated by this Agreement.
11. Governing Law; Etc.
11.1. Florida Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Florida without giving effect to the conflict of laws principles thereof.
11.2. Venue; Process. The parties to this Agreement agree that jurisdiction and venue in any action brought pursuant to this Agreement to enforce its terms or otherwise with respect to the relationships between the parties shall properly lie in and only in the Circuit Court of the Sixth Judicial Circuit of the State of Florida in and for Pinellas County (the “Circuit Court”) and the parties agree that jurisdiction shall not properly lie in any other jurisdiction provided, however, if jurisdiction does not properly lie with the Circuit Court, the parties agree that jurisdiction and venue shall properly lie in and only in the United States District Court for the Middle District of Florida, Tampa Division. The parties hereby waive any objections which they may now or hereafter have based on venue and/or forum non conveniens and irrevocably submit to the jurisdiction of any such court in any legal suit, action or proceeding arising out of or relating to this Agreement. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without the necessity for service by any other means provided by statute or rule of court. Employee affirms that Employee has sufficient contact with Florida such that Employee would reasonably anticipate being haled into said courts in Florida regarding this Agreement or any other contract or issues arising between the parties to this Agreement. Company shall have the right, alternatively, to elect to enforce this Agreement in a state in which Employee resides and, if the Company (or another member of the Company Group) so elects that state’s jurisdiction, Employee also agrees that Employee waives any and all personal rights under the laws of that state to object to jurisdiction and venue therein for purposes of the Company (or another member of the Company Group) seeking to enforce this Agreement in that state using that state’s laws.
11.3. WAIVER OF JURY TRIAL/CLASS OR COLLECTIVE ACTION. (EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LAWSUIT, ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT AND/OR EMPLOYEE’S EMPLOYMENT WITH THE COMPANY (OR ANOTHER MEMBER OF THE COMPANY GROUP). EMPLOYEE AGREES TO WAIVE ANY RIGHT EMPLOYEE MAY HAVE TO BE A MEMBER OF A CLASS OR COLLECTIVE ACTION LAWSUIT OR A REPRESENTATIVE OF A CLASS OR COLLECTIVE ACTION LAWSUIT AGAINST THE COMPANY OR ANOTHER MEMBER OF THE COMPANY GROUP (AND/OR ITS OR THEIR OWNERS, DIRECTORS, OFFICERS, MANAGERS, EMPLOYEES, OR AGENTS) ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH EMPLOYEE’S EMPLOYMENT WITH THE COMPANY (OR ANOTHER MEMBER OF THE COMPANY GROUP) AND/OR THE TERMINATION OF THAT EMPLOYMENT.
12. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the provisions hereof and the remaining provisions of this Agreement shall remain in full force and effect. If any provision or term of this Agreement is susceptible to two or more constructions or interpretations, one or more of which would render the provision or term void or unenforceable, the parties agree that a construction or interpretation which renders the term or provision valid shall be favored.
13. Construction. Unless the context of this Agreement otherwise clearly requires, (a) references to the plural include the singular, and references to the singular include the plural; (b) references to any gender include the other genders; (c) the words “include,” “includes” and “including” do not limit the preceding terms or words and shall be deemed to be followed by the words “without limitation”; (d) the terms “hereof”, “herein”, “hereunder”, “hereto” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement; (e) the term “person” means and refers to any individual, corporation, partnership, joint venture, limited liability company, trust, unincorporated organization or governmental entity; and (f) the term “Company,” as used in this Agreement, shall mean the Company as hereinbefore defined and any Successor or assignee to the business or assets which by reason hereof becomes bound by this Agreement.
14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.
15. Counterparts; Electronic Signature; Transmittal. This Agreement may be executed in one or more counterparts, each of which when executed and delivered shall be an original, and all of which together shall constitute one and the same instrument. An electronic signature (whether digital or encrypted, such as one transmitted via DocuSign) and/or a signature transmitted via electronic means (such as one transmitted via facsimile or in a PDF format via email) shall be effective to bind the party that transmitted the signature to the same extent as would a handwritten signature.
16. No Implied Employment Contract. This Agreement shall not be deemed to give the Employee any right to be retained in the employ of the Company (or any other member of the Company Group).
17. Deduction for Tax Purposes. The Company’s obligations to make payments under this Agreement are independent of whether any or all of such payments are deductible expenses of the Company for federal income tax purposes.
18. Successor to Company. This Agreement shall bind any Successor of the Company or another member of the Company Group, its assets or its businesses (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Company would be obligated under this Agreement if no succession had taken place. In the case of any transaction in which a Successor would not by the foregoing provision or by operation of law be bound by this Agreement, the Company (or such other member of the Company Group) shall require such Successor expressly and unconditionally to assume and agree to perform the Company’s obligations under this Agreement, in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
19. Withholding. All payments to the Employee in accordance with the provisions of this Agreement shall be subject to applicable withholding of local, state, federal and foreign taxes, as determined in the sole discretion of the Company.
20. Power and Authority of the Company. The Company (or another member of the Company Group that may be a party to this Agreement) represents and warrants that it has full power and authority to enter into this Agreement and that the person signing this Agreement on behalf of the Company has been duly authorized and empowered by the proper authority of the Company, or such other member of the Company Group that may be party to the Agreement, if required, to effect that execution.
21. Acknowledgements. Employee acknowledges that he has read and understands the provisions of this Agreement, that Employee has been given an opportunity for his legal counsel to review this Agreement, that Employee’s legal counsel has reviewed and advised Employee regarding this Agreement (including, but not limited to, its choice of law, venue, and forum provisions), that the provisions of this Agreement are reasonable, that Employee enters into this Agreement voluntarily without duress or pressure from the Company (or any other member of the Company Group) and with full knowledge and understanding of the contents, nature, and effect of this Agreement, and that Employee has received a copy of this Agreement.
22. Section 409A. It is intended that any amounts payable pursuant to this Agreement will either be exempt from or comply with the requirements of Section 409A of the Code (and any regulations and guidelines issued thereunder) and the Agreement shall be interpreted on a basis consistent with such intent. Notwithstanding any provision to the contrary in this Agreement, if Employee is deemed on the date of Employee’s “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) to be a “specified employee” (within the meaning of Treas. Reg. Section 1.409A-1(i)), then with regard to any payment that is required to be delayed pursuant to Section 409A(a)(2)(B) of the Code, such payment shall not be made prior to the earlier of (a) the expiration of the six (6)-month period measured from the date of Employee’s “separation from service,” or (b) the date of Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments delayed pursuant to this Section 22 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid to Employee in a lump sum and any remaining payments due under this Agreement shall be paid in accordance with the normal payment dates specified for them herein. Notwithstanding any provision of this Agreement to the contrary, to the extent required to comply with Section 409A of the Code or an exemption thereto, for purposes of determining Employee’s entitlement to any compensation payable upon Employee’s termination of employment, Employee’s employment will be deemed to have terminated on the date of Employee’s “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the Company Group. Whenever payments under this Agreement are to be made (i) pursuant to different provisions hereof or (ii) in installments, each such payment or installment shall be deemed to be a separate payment for purposes of Section 409A of the Code. No action or failure to act, pursuant to this Section 22 shall subject the Company Group to any claim, liability, or expense, and the Company Group shall not have any obligation to indemnify or otherwise protect Employee from the obligation to pay any taxes pursuant to Section 409A of the Code. With respect to any reimbursement or in-kind benefit arrangements of the Company Group that constitute deferred compensation for purposes of Section 409A of the Code, the following conditions shall be applicable: (A) the amount eligible for reimbursement, or in-kind benefits provided, under any such arrangement in one calendar year may not affect the amount eligible for reimbursement, or in-kind benefits to be provided, under such arrangement in any other calendar year (except that the health and dental plans may impose a limit on the amount that may be reimbursed or paid if such limit is imposed on all participants), (B) any reimbursement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred, and (C) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the Effective Date.
EMPLOYEE
By: /s/ Jordan Alpert
Printed Name: Jordan Alpert
Email: [***]
SUPERIOR GROUP OF COMPANIES, INC.
By:
Printed Name:
Title:
Email: [***]
Exhibit 10.4
Exhibit Includes Redactions
Certain information identified with brackets ([$***]) has been excluded from this exhibit in accordance with Item 601(b) of Regulation S-K because it is both not material and is the type that the registrant treats as private or confidential.
RETENTION AGREEMENT
This RETENTION AGREEMENT (this “Agreement”) is made and entered into as of July 8, 2021 (the “Effective Date”), by and between Superior Group of Companies, Inc. (the “Company”) and Jordan Alpert (the “Employee”).
RECITALS
WHEREAS, Employee is employed by the Company; and
WHEREAS, Employee must be free to make decisions in the best interest of the Company and its members without being concerned about the immediate impact to Employee’s job security or compensation from a possible Change in Control of the Company (as defined below); and
WHEREAS, the Company desires to incentivize Employee to remain continuously employed by the Company from the date of this Agreement through the closing date of a Change in Control and beyond.
TERMS OF AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and of the mutual promises and undertakings of the parties as hereinafter set forth, the parties covenant and agree as follows:
1. Term of Agreement. This Agreement is effective on the Effective Date and shall remain in full force and effect until the date of the Employee’s Termination of Employment or, if the Employee becomes entitled to payment under Section 3 of this Agreement, the date the Company has fully performed its obligations under Section 3 of this Agreement, as applicable.
2. Definitions.As used in this Agreement, the following terms shall be defined as set forth below:
“Base Salary” shall mean the annualized base salary payable to Employee by the Company as of any particular date, and excludes all other cash and non-cash compensation paid or payable to Employee.
“Buyer” shall mean the person or entity acquiring the Company in a Change in Control.
“Cause” shall mean: (i) the Employee’s conviction under the laws of the United States of America or any state thereof, or pleading nolo contendere to, a crime constituting a felony under the laws of the United States of America or any state thereof, (ii) the Employee’s breach of a material term of this Agreement, (iii) the Employee’s breach of a material provision of any other agreement with the Company addressing the terms of the Employee’s employment (“Employment Agreement”), (iv) a material breach of any restrictive covenant or confidentiality provision set forth in this Agreement or any Employment Agreement, or (v) the Employee’s (A) intentional and continual, and without justification, (1) failure to substantially to perform his or her reasonably assigned duties with the Company or (2) failure to comply with corporate policies (other than a failure resulting from the Employee’s incapacity due to physical or mental illness, in each case without regard to whether such conduct occurred before or after a Change in Control), which failure continued for a period of at least thirty (30) days after a written notice of demand for substantial performance has been delivered to the Employee specifying in reasonable detail the manner in which the Employee has failed substantially to perform without the Employee undertaking actions reasonably likely to remedy or cure such non-performance, or (B) intentionally engaging in illegal conduct or gross misconduct which has directly caused material economic harm to the Company.
“Change in Control” shall mean the occurrence of one (1) of the following:
(i) an acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any person, immediately after which such person has “Beneficial Ownership” (within the meaning of Rule 13D-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of thirty percent (30%) or more of the combined voting power of the Company’s then-outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a Non-Control Transaction (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control;
(ii) a merger, consolidation, reorganization or similar transaction or series of transactions involving the Company or involving any entity of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company (a “Subsidiary”), unless (A) the Voting Securities of the Company, immediately before such merger, consolidation or reorganization, continue immediately following such merger, consolidation or reorganization to represent, either by remaining outstanding or by being converted into voting securities of the surviving corporation resulting from such merger, consolidation or reorganization or its parent (the “Surviving Corporation”), at least two-thirds of the combined voting power of the outstanding voting securities of the Surviving Corporation; (B) the individuals who were members of the Board immediately before the execution of the agreement providing for such merger, consolidation or reorganization constitute two-thirds or more of the members of the board of directors of the Surviving Corporation; and (C) no person (other than the Company, any Subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any Subsidiary, or any person who, immediately before such merger, consolidation or reorganization had Beneficial Ownership of thirty percent (30%) or more of the then outstanding Voting Securities) has Beneficial Ownership of thirty percent (30%) or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities (a transaction described in clauses (A) through (C) above shall herein be referred to as a “Non-Control Transaction”). Further, any transaction in which a Benstock Family Member or an affiliate of a Benstock Family Member acquires any capital stock of the Company (or its direct or indirect parent), including pursuant to transfers for estate planning purposes, will be considered a Non-Control Transaction. For this purpose, the Benstock Family Members will include any descendent of Gerald Benstock or his siblings, by marriage or blood.
(iii) the approval by the Company’s shareholders of a complete liquidation or dissolution of the Company; or the consummation of a sale, lease, transfer, conveyance or other disposition of all or substantially all of the assets of the Company to any person (other than a transfer to a Subsidiary) effected in one transaction or in a series of transactions.
(iv) Notwithstanding the foregoing, in the event any payment due to Employee under this Agreement would also constitute “deferred compensation” within the meaning of the Section 409A of the Code, either by design or due to a subsequent modification in the terms of such payment or as a result in a change in the law occurring after the Effective Date, then to the extent such payment is not exempt from the requirements of Section 409A of the Code by an applicable exemption, the term “Change in Control” shall mean an event that constitutes not only one (1) of the Change in Control events described above, but also constitutes a “change in control” within the meaning of the provisions of Section 409A of the Code. For purposes of the definition of a “Change in Control” under this Agreement, the provisions of Section 318(a) of the Code regarding the constructive ownership of stock will apply to determine stock ownership; provided, that, Company stock underlying unvested stock options (including options exercisable for stock that is not substantially vested) will not be treated as owned by the individual who holds such stock options.
(v) For purposes of the definition of a “Change in Control” under this Agreement, “Company” includes (x) the Company, (y) the parent of the Company, and (z) an entity that is a stockholder owning more than 50% of the total fair market value and total voting power (a “Majority Shareholder”) of the Company or the entity identified in (y) above, or any entity in a chain of entities in which each entity is a Majority Shareholder of another entity in the chain, ending in the Company or the entity identified in (y) above. “
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Company Group” shall mean the Company and its current and future affiliates and subsidiaries or any of their successors or assignees.
“Disability” shall mean the Employee’s inability to perform his or her material services for the Company for a period of one hundred eighty (180) consecutive days as a result of incapacity due to mental or physical illness, which is determined to be total and permanent. A determination of Disability shall be made by a physician reasonably satisfactory to both the Employee (or his or her guardian) and the Company, provided that the Employee (or his or her guardian) and the Company do not agree on a physician, the Employee and the Company shall each select a physician and these two together shall select a third physician, whose determination as to Disability shall be final, binding and conclusive with respect to all parties. Notwithstanding the above, eligibility for disability benefits under any policy for long-term disability benefits provided to the Employee by the Company shall conclusively establish the Employee’s Disability.
“Good Reason” shall mean the occurrence of any one or more of the following events or conditions, without the Employee’s express written consent:
(i) the material reduction or diminution in the Employee’s authority, duties or responsibilities with the Company with regard to the Legal Department, including, but not limited to, the continuous assignment of Employee of any duties materially inconsistent with Employee’s position with the Company, or a material negative change in the nature or status of Employee’s responsibilities or the conditions of Employee’s employment with the Company with regard to the Legal Department from those in effect immediately prior to the Protected Period; or
(ii) a material reduction in Employee’s annualized cash and benefits compensation opportunity, which shall include Employee’s base compensation, Employee’s annual target bonus opportunity and Employee’s aggregate employee benefits, as in effect immediately prior to the Protected Period, provided however that any changes in the compensation structure that are applied to all similarly situated individuals as a direct result of the changes to the corporate structure following a Change in Control will not constitute Good Reason; or
(iii) the relocation of the Employee to an office or location which would increase his or her daily commute distance by more than fifty (50) miles (one-way) from the location at which the Employee normally performed Employee’s services immediately prior to the Protected Period, except for travel reasonably required in the performance of the Employee’s responsibilities or the Employee being required to travel away from his or her office in the course of discharging his or her responsibilities or duties hereunder significantly more (in terms of either consecutive days or aggregate days in any calendar year) than was required of the Employee prior to the Protected Period.
Notwithstanding the foregoing, Employee is required to give written notice to Company of his or her intent to resign for Good Reason, describing the reason for the resignation in sufficient detail in order to allow Company the opportunity to address the situation. Such notice must be provided within sixty (60) days of the event(s) constituting Good Reason and must be given at least thirty (30) days in advance of the effective date of resignation. Company shall be entitled to ninety (90) days after the date of Employee’s written notice during which it can cure the situation. If the situation has not been cured within ninety (90) days after the date of Employee’s written notice, Employee may then resign for Good Reason, by written notice, effective immediately, which date shall be the effective date of resignation; provided, that, if Employee does not resign within thirty (30) days following such cure period, then such situation shall not constitute Good Reason. For avoidance of doubt, Good Reason shall not exist following an isolated, insubstantial or inadvertent action that is remedied within the cure period described in the preceding sentences.
“Protected Period” shall mean the period commencing thirty (30) days prior to a Change in Control and ending twenty-four (24) months following a Change in Control.
“Qualifying Termination” shall mean a Termination of Employment as result of either (A) the Employee’s involuntary termination for any reason other than Cause, death or Disability or (B) the Employee’s resignation for Good Reason.
“Termination Date” shall mean the date of the Termination of Employment.
“Termination of Employment” shall mean the Employee’s “separation from service” with the Company within the meaning of Treas. Reg. § 1.409A-1(h)(1)(ii).
3. Retention Bonus Following a Change in Control.
(a) In the event the Employee remains employed with the Company for the twelve (12) month period immediately following a Change in Control, the Company shall pay the Employee an amount equal to one (1) times the Employee’s Base Salary as of the date that the twelve (12) month period ends (the “Retention Bonus”). For this purpose, the Company will be deemed to include the Buyer and any affiliate of the Buyer.
(b) Notwithstanding the foregoing, in the event the Employee incurs a Qualifying Termination after a Change in Control but prior to the expiration of the twelve (12) month period required under Section 3(a) above, the Employee will be entitled to receive the Retention Bonus described in Section 3(a) based on the Employee’s Base Salary as of the Termination Date or the Change in Control, whichever is higher. Any Retention Bonus paid under this Section 3(b) shall be in addition to any payment or benefit under any other section of this Agreement.
4. Timing and Conditions of Payment
(a) Amounts that the Employee is entitled to receive pursuant to Section 3(a) of this Agreement shall be paid within 30 days from the date the Employee completes twelve (12) months of employment following the Change in Control.
(b) The payment of any amounts under Section 3(b) of this Agreement shall be conditioned upon the execution, non-revocation, and delivery of a general release that is similar in form to the general release attached hereto as Exhibit 1 (the “Release”) within forty-five (45) days of the date of Employee’s Termination Date. The payments due under Section 3(b) of this Agreement shall be made to the Employee on the sixtieth (60th) day following the Employee’s Termination Date, provided that the Company has received a properly executed Release by the Employee no later than the forty-fifth (45th) day following the Termination Date which has not been revoked by Employee. If the Employee fails to properly execute and deliver the Release during the allowed forty-five (45) day period following the Employee’s Termination Date, the Employee agrees that he or she shall not be entitled to receive the benefits described in Section 3(b) of this Agreement (if applicable).
5. Confidential Information. Employee hereby acknowledges that, as an employee of the Company, the Employee will be making use of, acquiring and adding to confidential information of a special and unique nature and value relating to the Company and its strategic plan and financial operations. Confidential Information shall mean, for purposes of this Agreement, all proprietary and other information relating to the business and operations of the Company and/or any affiliate which has not been specifically designated for release to the public. The Employee further recognizes and acknowledges that all Confidential Information is the exclusive property of the Company, is material and confidential, and is critical to the successful conduct of the business of the Company. Accordingly, the Employee hereby covenants and agrees that he or she will use confidential information for the benefit of the Company only, that he or she shall not at any time, directly or indirectly, divulge, reveal, acknowledge or communicate any confidential information to any person, firm, employer or entity whatsoever other than an employee of the Company that is authorized to possess such Confidential Information, or use any confidential information for his or her own benefit or for the benefit of others. This provision does not replace or supersede any other confidentiality agreement between the Employee and the Company or an affiliate.
6. Employment, Severance and Retention Agreements. The Retention Bonus provided in Section 3 shall not reduce or override any benefits, separation pay or compensation awards set forth in an individual employment, retention, change in control, or similar agreement between the Employee and the Company.
7. Coordination with Other Compensation and Benefits. The Employee’s entitlement to any other compensation or benefits shall be determined in accordance with the Company’s employee benefit plans and other applicable programs, policies and practices then in effect.
8. Binding Agreement.
(a) This Agreement and all rights of the Employee hereunder shall inure to the benefit of and be enforceable by the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while any amounts would still be payable to him hereunder if he or she had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Employee’s devisee, legatee or other designee or, if there be no such designee, to the Employee’s estate.
(b) This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors, and the Company shall require any Buyer or other successor to enter into a written undertaking to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The failure of the Company to obtain such a written agreement shall not adversely affect the right of the Employee to enforce the terms of this Agreement against any Buyer or other successor.
9. Nonalienation. Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Employee or by the Employee’s beneficiaries or legal representatives, except by will or by the laws of descent and distribution.
10. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service, or sent by email transmission, to the recipient at the address below indicated:
In the case of Employee, to Employee at the most recent address set forth in the payroll records of the Company, or by email at the email address included in the signature page to this Agreement or, if none is listed, the most recent email address set forth in the payroll records of the Company.
In the case of the Company, to:
Superior Group of Companies, Inc.
10055 Seminole Blvd.
Seminole, FL 33772
Attn: General Counsel
Email: SGC-Legal@superiorgroupofcompanies.com
Or, in each case, such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered, sent or mailed.
11. Modification or Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Employee and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No representations, oral or otherwise, express or implied, with respect to the subject matter hereof, have been made by either party which are not expressly set forth in this Agreement.
12. Further Assurances. The parties to this Agreement will execute and deliver, or cause to be executed and delivered, such additional or further documents, agreements or instruments and shall cooperate with one another in all respects for the purpose of carrying out the transactions contemplated by this Agreement.
13. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Florida without giving effect to the conflict of laws principles thereof.
14. Venue; Process. The parties to this Agreement agree that jurisdiction and venue in any action brought pursuant to this Agreement to enforce its terms or otherwise with respect to the relationships between the parties shall properly lie in and only in the Circuit Court of the Sixth Judicial Circuit of the State of Florida in and for Pinellas County (the “Circuit Court”) and the parties agree that jurisdiction shall not properly lie in any other jurisdiction provided, however, if jurisdiction does not properly lie with the Circuit Court, the parties agree that jurisdiction and venue shall properly lie in and only in the United States District Court for the Middle District of Florida, Tampa Division. The parties hereby waive any objections which they may now or hereafter have based on venue and/or forum non conveniens and irrevocably submit to the jurisdiction of any such court in any legal suit, action or proceeding arising out of or relating to this Agreement. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without the necessity for service by any other means provided by statute or rule of court. Employee affirms that Employee has sufficient contact with Florida such that Employee would reasonably anticipate being hauled into said courts in Florida regarding this Agreement or any other contract or issues arising between the parties to this Agreement. Company shall have the right, alternatively, to elect to enforce this Agreement in a state in which Employee resides and, if the Company so elects that state’s jurisdiction, Employee also agrees that Employee waives any and all personal rights under the laws of that state to object to jurisdiction and venue therein for purposes of the Company seeking to enforce this Agreement in that state using that state’s laws.
15. WAIVER OF JURY TRIAL/CLASS OR COLLECTIVE ACTION. (EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LAWSUIT, ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT AND/OR EMPLOYEE’S EMPLOYMENT WITH THE COMPANY. EMPLOYEE AGREES TO WAIVE ANY RIGHT EMPLOYEE MAY HAVE TO BE A MEMBER OF A CLASS OR COLLECTIVE ACTION LAWSUIT OR A REPRESENTATIVE OF A CLASS OR COLLECTIVE ACTION LAWSUIT AGAINST THE COMPANY (AND/OR ITS OR THEIR OWNERS, DIRECTORS, OFFICERS, MANAGERS, EMPLOYEES, OR AGENTS) ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH EMPLOYEE’S EMPLOYMENT WITH THE COMPANY AND/OR THE TERMINATION OF THAT EMPLOYMENT.
16. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the provisions hereof and the remaining provisions of this Agreement shall remain in full force and effect. If any provision or term of this Agreement is susceptible to two or more constructions or interpretations, one or more of which would render the provision or term void or unenforceable, the parties agree that a construction or interpretation which renders the term or provision valid shall be favored.
17. Construction. Unless the context of this Agreement otherwise clearly requires, (a) references to the plural include the singular, and references to the singular include the plural; (b) references to any gender include the other genders; (c) the words “include,” “includes” and “including” do not limit the preceding terms or words and shall be deemed to be followed by the words “without limitation”; (d) the terms “hereof”, “herein”, “hereunder”, “hereto” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement; (e) the term “person” means and refers to any individual, corporation, partnership, joint venture, limited liability company, trust, unincorporated organization or governmental entity; and (f) the term “Company,” as used in this Agreement, shall mean the Company as hereinbefore defined and any Buyer or other successor or assignee to the business or assets which by reason hereof becomes bound by this Agreement.
18. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.
19. Counterparts; Electronic Signature; Transmittal. This Agreement may be executed in one or more counterparts, each of which when executed and delivered shall be an original, and all of which together shall constitute one and the same instrument. An electronic signature (whether digital or encrypted, such as one transmitted via DocuSign) and/or a signature transmitted via electronic means (such as one transmitted via facsimile or in a PDF format via email) shall be effective to bind the party that transmitted the signature to the same extent as would a handwritten signature.
20. No Implied Employment Contract. This Agreement shall not be deemed to give the Employee any right to be retained in the employ of the Company.
21. Deduction for Tax Purposes. The Company’s obligations to make payments under this Agreement are independent of whether any or all of such payments are deductible expenses of the Company for federal income tax purposes.
22. Successor to Company. This Agreement shall bind any Buyer or other successor of the Company, its assets or its businesses (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Company would be obligated under this Agreement if no succession had taken place. In the case of any transaction in which the Buyer would not by the foregoing provision or by operation of law be bound by this Agreement, the Company (or the applicable affiliate of the Company) shall require such Buyer or other successor expressly and unconditionally to assume and agree to perform the Company’s obligations under this Agreement, in the same manner and to the same extent that the Company would be required to perform if no such transaction or Change in Control had taken place and in such case all references in this Agreement to the “Company” shall include and be a reference to the Buyer.
23. Withholding. All payments to the Employee in accordance with the provisions of this Agreement shall be subject to applicable withholding of local, state, federal and foreign taxes, as determined in the sole discretion of the Company.
24. Power and Authority of the Company. The Company represents and warrants that it has full power and authority to enter into this Agreement and that the person signing this Agreement on behalf of the Company has been duly authorized and empowered by the proper authority of the Company to effect that execution.
25. Acknowledgements. Employee acknowledges that he or she has read and understands the provisions of this Agreement, that Employee has been given an opportunity for his or her legal counsel to review this Agreement, that Employee’s legal counsel has reviewed and advised Employee regarding this Agreement (including, but not limited to, its choice of law, venue, and forum provisions), that the provisions of this Agreement are reasonable, that Employee enters into this Agreement voluntarily without duress or pressure from the Company (or any affiliate and with full knowledge and understanding of the contents, nature, and effect of this Agreement, and that Employee has received a copy of this Agreement.
26. Section 409A. It is intended that any amounts payable pursuant to this Agreement will either be exempt from or comply with the requirements of Section 409A of the Code (and any regulations and guidelines issued thereunder) and the Agreement shall be interpreted on a basis consistent with such intent. Notwithstanding any provision to the contrary in this Agreement, if Employee is deemed on the date of Employee’s “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) to be a “specified employee” (within the meaning of Treas. Reg. Section 1.409A-1(i)), then with regard to any payment that is required to be delayed pursuant to Section 409A(a)(2)(B) of the Code, such payment shall not be made prior to the earlier of (a) the expiration of the six (6)-month period measured from the date of Employee’s “separation from service,” or (b) the date of Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments delayed pursuant to this Section 26 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid to Employee in a lump sum and any remaining payments due under this Agreement shall be paid in accordance with the normal payment dates specified for them herein. Notwithstanding any provision of this Agreement to the contrary, to the extent required to comply with Section 409A of the Code or an exemption thereto, for purposes of determining Employee’s entitlement to any compensation payable upon Employee’s termination of employment, Employee’s employment will be deemed to have terminated on the date of Employee’s “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the Company Group. Whenever payments under this Agreement are to be made (i) pursuant to different provisions hereof or (ii) in installments, each such payment or installment shall be deemed to be a separate payment for purposes of Section 409A of the Code. No action or failure to act, pursuant to this Section 26 shall subject the Company Group to any claim, liability, or expense, and the Company Group shall not have any obligation to indemnify or otherwise protect Employee from the obligation to pay any taxes pursuant to Section 409A of the Code. With respect to any reimbursement or in-kind benefit arrangements of the Company Group that constitute deferred compensation for purposes of Section 409A of the Code, the following conditions shall be applicable: (A) the amount eligible for reimbursement, or in-kind benefits provided, under any such arrangement in one calendar year may not affect the amount eligible for reimbursement, or in-kind benefits to be provided, under such arrangement in any other calendar year (except that the health and dental plans may impose a limit on the amount that may be reimbursed or paid if such limit is imposed on all participants), (B) any reimbursement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred, and (C) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
27. Mobile Telephone Number. In addition to and separate from any other compensation or benefit provided by this Agreement, the Company acknowledges and agrees that the mobile telephone number [***] (“Phone Number”) is owned by and is the property of Employee, and only Employee. Neither the Company nor any entity within the Company Group, or any affiliate or individual of it or them, have any rights in and/or to the Phone Number. The Company acknowledges that Employee owned the Phone Number prior to his employment with the Company and shall maintain sole ownership of the Phone Number after his Termination of Employment from the Company or any of its affiliates. The Company and its affiliates shall use all reasonable best efforts to ensure that the Phone Number is owned by Employee and that Employee maintains ownership and use of the Phone Number at all times during his employment with the Company (and/or its affiliates or Buyer) and after his Termination of Employment with the Company (and/or its affiliates or Buyer) for any reason. This shall include, but not be limited to, communicating with the phone carrier to port the number to Employee upon Employee’s Termination of Employment. Additionally, the Company shall continue to pay for Employee’s use of the Phone Number while he is employed with the Company (and/or its affiliates), regardless of whether the Phone Number is listed as a Company number with the phone carrier (in which case the Company shall pay the phone carrier directly) or paid for directly by Employee (in which case Employee shall be reimbursed in full by the Company (and/or its affiliates)).
[Signature Page Follows.]
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the Effective Date.
EMPLOYEE
By: /s/ Jordan Alpert
Printed Name: Jordan Alpert
Email: [***]
SUPERIOR GROUP OF COMPANIES, INC.
By:
Printed Name:
Title:
Email: [***]
Exhibit 10.5
Exhibit Includes Redactions
Certain information identified with brackets ([$***]) has been excluded from this exhibit in accordance with Item 601(b) of Regulation S-K because it is both not material and is the type that the registrant treats as private or confidential.
CONFIDENTIAL
SUPERIOR GROUP OF COMPANIES, INC.
AMENDED AND RESTATED PERFORMANCE SHARES AGREEMENT
THIS AMENDED AND RESTATED PERFORMANCE SHARES AWARD, dated July 1, 2021, amends, restates and replaces that certain PERFORMANCE SHARES AWARD, dated the 14th day of May, 2021 (the “Date of Grant”), granted by Superior Group of Companies, Inc., a Florida corporation (the “Company”) to Dominic Leide (the “Grantee”) pursuant to the Company’s 2013 Incentive Stock and Awards Plan (the “Plan”). Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings given to them in the Plan.
WHEREAS, the Company believes it to be in the best interests of the Company, its subsidiaries and its shareholders for its officers and other key employees to obtain or increase their stock ownership interest in the Company so that they will have a greater incentive to work for and manage the Company’s affairs in such a way that its shares may become more valuable; and
WHEREAS, the Grantee is employed by the Company or one of its subsidiaries as an officer or other key employee and has been selected by the Board of Directors of the Company, directly or acting through its Compensation Committee (the “Committee”), to receive a Performance Shares award;
NOW, THEREFORE, in consideration of the premises and of the services to be performed by the Grantee, the Company and the Grantee hereby agree as follows:
1. GRANT
(a) Number of Performance Shares. Subject to the terms and conditions of this Agreement and the Plan, the Company grants to the Grantee an Award of 19,135 Performance Shares (as defined in the Plan) subject to vesting under Section 2 (the “Stretch Performance Shares” or “Performance Shares”). The price of the Performance Shares granted shall be determined using the closing price of a Share on the date immediately preceding the Date of Grant.
(b) Performance Shares. Each Performance Share is a bookkeeping entry that records the equivalent of one Share. Upon the vesting of the Performance Shares as provided in Section 2, the vested Performance Shares will be settled as provided in Section 3.
2. VESTING
(a) Vesting of Stretch Performance Shares.
(i) Fifty percent (50%) of the Stretch Performance Shares shall vest on May 14, 2026 (the “Vesting Date”), but if, and only if, (x) the Grantee remains continuously employed by the Company or one of its subsidiaries from the Date of Grant until the Vesting Date, and (y) the Cumulative Brand Sales (as defined below) equals $[***];
(ii) One hundred percent (100%) of the Stretch Performance Shares shall vest on the Vesting Date, but if, and only if, (x) the Grantee remains continuously employed by the Company or one of its subsidiaries from the Date of Grant until the Vesting Date, and (y) the Cumulative Brand Sales (as defined below) equals or exceeds $[***];
(iii) A prorated amount of the Stretch Performance Shares shall vest on the Vesting Date, but if, and only if, (x) the Grantee remains continuously employed by the Company or one of its subsidiaries from the Date of Grant until the Vesting Date, and (y) the Cumulative Brand Sales (as defined below) is between $[***] and $[***]; and
(iv) No Stretch Performance Shares shall vest if the Cumulative Brand Sales (as defined below) is less than $[***] and no additional Stretch Performance Shares in excess of one hundred percent (100%) of the Stretch Performance Shares shall vest if the Cumulative Brand Sales (as defined below) is more than $[***]. In no event shall the total number of Stretch Performance Shares that vest exceed 19,135.
(b) Change of Control. Notwithstanding anything to the contrary in this Agreement, if a Change of Control of the Company occurs prior to the Vesting Date, then all of the Stretch Performance Shares shall immediately vest.
(c) Definitions.
(i)“ Performance Period” means the period of January 1, 2021 through December 31, 2025.
(ii)“ Brand Sales” means the sales of the Company from products or services comprising its Remote Staffing Solutions (The Office Gurus®) business segment, net of intersegment eliminations, all as determined in the sole discretion of the Company based on its normal accounting methods, principles and practices.
(iii)“ Cumulative Brand Sales” means Brand Sales for the Performance Period.
3. SETTLEMENT
The Company shall settle the vested Performance Shares after the Vesting Date on a date selected by the Company (the “Settlement Date”), but not later than thirty (30) days after the Vesting Date. On the Settlement Date, the vested Performance Shares shall be settled by issuing and delivering to the Grantee one Share for each vested Performance Share, and the Company shall enter the Grantee’s name on the books of the Company as the shareholder of record with respect thereto. Upon such issuance, each settled Performance Share shall be cancelled.
4. RESTRICTIONS
(a) No Transfer. The Performance Shares granted hereunder may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of; provided, that if the Grantee dies after the Vesting Date but prior to the Settlement Date, the vested Performance Shares shall be transferable by will or the laws of descent and distribution. The Company has the right, by notice to the Grantee, to cause the Performance Shares to be forfeited effective as of the date of the prohibited transfer or purported prohibited transfer thereof. In addition, the Grantee acknowledges that any Shares issued upon settlement of the Performance Shares may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed without (i) an effective registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to such shares, or (ii) an opinion of counsel presented to the Company and satisfactory to the Company to the effect that the proposed disposition of such shares by the Grantee may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement. Any prohibited transfer will be null and avoid ab initio and will be invalid and ineffective as to the Company, and the Company shall not be required (i) to transfer on its books any Performance Shares, or any shares issued upon settlement thereof, which shall have been sold, assigned, transferred, pledged, hypothecated or otherwise disposed of in violation of any of the provisions set forth in this Agreement, or (ii) to treat as owner of any such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so sold, assigned, transferred, pledged, or hypothecated.
(b) No Rights of a Shareholder. The Grantee shall not have any of the rights or privileges of a shareholder (including the right to vote or receive dividends) or otherwise be deemed the holder of the Shares underlying the Performance Shares for any purpose, and nothing in this Agreement shall be construed to confer upon the Grantee any of the rights, privileges or obligations of a shareholder of the Company, unless and until Common Stock is actually issued to and held of record by the Grantee upon settlement of the Performance Shares under this Agreement.
5. FORFEITURE; TERMINATION OF EMPLOYMENT
(a) Forfeiture of Unvested Performance Shares. If the Grantee’s employment with the Company and its subsidiaries terminates for any reason prior to the Vesting Date (including by reason of death, disability, retirement, resignation for any reason or termination by the Company or one of its subsidiaries for any reason (whether with or without cause)), then all of the Performance Shares shall be forfeited to the Company under Section 5(c) simultaneously with the employment termination. If, under the terms of Section 2, any of the Performance Shares do not vest based on the performance of the Company, such Performance Shares shall be forfeited to the Company under Section 5(c) as of the end of the Performance Period.
(b) Leave of Absence. In addition, if the Grantee takes a military, sick leave or other bona fide leave of absence from the Company and its subsidiaries, and the period of such leave exceeds 3 months, the Grantee will be considered to have terminated employment from the Company and its subsidiaries for purposes hereof on the later of (i) the first day immediately following such 3-month period, or (ii) the last day that the Grantee’s right to reemployment following the end of such leave is guaranteed by law or contract with the Company or a subsidiary.
(c) Effect of Forfeiture. If Performance Shares are forfeited, then, effective as of the time of forfeiture, such Performance Shares shall be automatically and immediately cancelled and forfeited to the Company and shall no longer be outstanding, without payment of any consideration by the Company and without the need for notice from or any further action by the Company, and neither the Grantee nor any of Grantee’s successors, heirs, assigns or personal representatives shall thereafter have any further right, title or interest in or to such forfeited Performance Shares or the benefits of ownership thereof.
6. TAX WITHHOLDING
The Grantee shall make appropriate arrangements with the Company, in accordance with the Plan and in a manner deemed satisfactory to the Committee, to provide for the withholding or payment of the amount that the Company considers necessary to satisfy its withholding obligations upon the grant, vesting, lapse or settlement of the Performance Shares. The Grantee may satisfy any tax withholding obligation of the Company arising from settlement of this Award, in whole or in part, by paying such tax obligation in cash or by check made payable to the Company, or by electing to have the Company withhold shares of Common Stock having a Fair Market Value on the date of settlement equal to the amount required to be withheld, subject to such rules as the Committee may adopt. In any event, the Company reserves the right to withhold from any compensation otherwise payable to the Grantee such amount as the Company determines is necessary to satisfy the Company’s tax withholding obligations arising from this Award.
7. AMENDMENT OR MODIFICATION
Except as provided otherwise herein, no term or provision of this Agreement may be amended, modified or supplemented orally, but only by an instrument in writing signed by the party against which or whom the enforcement of the amendment, modification or supplement is sought; provided, however, that this Agreement may be amended, modified, supplemented or cancelled without the Grantee’s consent in accordance with the terms of the Plan.
8. LIMITED INTEREST
(a) No Right to Employment. The grant of this Award shall not confer on the Grantee any right to continue as an employee, nor interfere in any way with the right of the Company or any subsidiary to terminate the Grantee at any time.
(b) Capital Structure. The grant of this Award shall not affect in any way the right or power of the Company or any of its subsidiaries to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s or any subsidiary’s capital structure or its business, or any merger, consolidation or business combination of the Company or any subsidiary, or any issuance or modification of any term, condition, or covenant of any bond, debenture, debt, preferred stock or other instrument ahead of or affecting the Common Stock or the rights of the holders of Common Stock, or the dissolution or liquidation of the Company or any subsidiary, or any sale or transfer of all or any part of its assets or business or any other Company or subsidiary act or proceeding, whether of a similar character or otherwise.
9. GOVERNING LAW; PLAN
This Agreement shall be governed by the internal laws of the state of Florida as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. Any legal action or proceeding with respect to the Plan or the Performance Shares may only be brought and determined in a court sitting in the County of Hillsborough, or the Federal District Court for the Middle District of Florida sitting in the County of Hillsborough, in the State of Florida. The Company may require that the action or proceeding be determined in a bench trial.
ALL PARTIES ACKNOWLEDGE THAT THIS PERFORMANCE SHARES AWARD IS GRANTED UNDER AND PURSUANT TO THE PLAN, WHICH SHALL GOVERN ALL RIGHTS, INTERESTS, OBLIGATIONS, AND UNDERTAKINGS OF BOTH THE COMPANY AND THE GRANTEE. ALL CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THIS PERFORMANCE SHARES AGREEMENT SHALL HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE PLAN.
10. SEVERABILITY
If any provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable, or would disqualify this Award under any law the Committee deems applicable, then such provision will be construed or deemed amended to conform to the applicable law, or if the Committee determines that the provision cannot be construed or deemed amended without materially altering the intent of this Agreement, then the provision will be stricken and the remainder of this Agreement will remain in full force and effect.
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Grantee has executed this Agreement all as of the day and date first above written.
SUPERIOR GROUP OF COMPANIES, INC.
/s/ Michael Benstock___________________
By: Michael Benstock
Chief Executive Officer
/s/ Dominic Leide
Dominic Leide
(Grantee)
Exhibit 10.6
Exhibit Includes Redactions
Certain information identified with brackets ([$***]) has been excluded from this exhibit in accordance with Item 601(b) of Regulation S-K because it is both not material and is the type that the registrant treats as private or confidential.
CONFIDENTIAL
SUPERIOR GROUP OF COMPANIES, INC.
PERFORMANCE SHARES AGREEMENT
THIS PERFORMANCE SHARES AWARD (”Agreement”), dated July 1, 2021 (the “Date of Grant”), is granted by Superior Group of Companies, Inc., a Florida corporation (the “Company”) to Philip Koosed (the “Grantee”) pursuant to the Company’s 2013 Incentive Stock and Awards Plan (the “Plan”). Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings given to them in the Plan.
WHEREAS, the Company believes it to be in the best interests of the Company, its subsidiaries and its shareholders for its officers and other key employees to obtain or increase their stock ownership interest in the Company so that they will have a greater incentive to work for and manage the Company’s affairs in such a way that its shares may become more valuable; and
WHEREAS, the Grantee is employed by the Company or one of its subsidiaries as an officer or other key employee and has been selected by the Board of Directors of the Company, directly or acting through its Compensation Committee (the “Committee”), to receive a Performance Shares award;
NOW, THEREFORE, in consideration of the premises and of the services to be performed by the Grantee, the Company and the Grantee hereby agree as follows:
1. GRANT
(a) Number of Performance Shares. Subject to the terms and conditions of this Agreement and the Plan, the Company grants to the Grantee an Award of 51,419 Performance Shares (as defined in the Plan) subject to vesting under Section 2(a) (the “Performance Shares”).
(b) Performance Shares. Each Performance Share is a bookkeeping entry that records the equivalent of one Share. Upon the vesting of the Performance Shares as provided in Section 2, the vested Performance Shares will be settled as provided in Section 3.
2. VESTING
(a) Vesting of Performance Shares.
(i) Fifty percent (50%) of the Performance Shares shall vest on December 31, 2026 (the “Vesting Date”), but if, and only if, (x) the Grantee remains continuously employed by the Company or one of its subsidiaries from the Date of Grant until the Vesting Date, and (y) the Cumulative Pre-Tax Hybrid Income (as defined below) equals $[***];
(ii) One hundred percent (100%) of the Performance Shares shall vest on the Vesting Date, but if, and only if, (x) the Grantee remains continuously employed by the Company or one of its subsidiaries from the Date of Grant until the Vesting Date, and (y) the Cumulative Pre-Tax Hybrid Income (as defined below) equals or exceeds $[***];
(iii) A prorated amount between fifty percent (50%) and one hundred percent (100%) of the Performance Shares shall vest on the Vesting Date, but if, and only if, (x) the Grantee remains continuously employed by the Company or one of its subsidiaries from the Date of Grant until the Vesting Date, and (y) the Cumulative Pre-Tax Hybrid Income is between $[***] and $[***]; with the number of Performance Shares becoming vested determined by linear interpolation for achievement of a Cumulative Pre-Tax Hybrid Income between the two amounts; and
(iv) No Performance Shares shall vest if the Cumulative Pre-Tax Hybrid Income is less than $[***] and no additional Performance Shares in excess of one hundred percent (100%) of the Performance Shares shall vest if the Cumulative Pre-Tax Hybrid Income is more than $[***]. In no event shall the total number of Performance Shares that vest exceed the number of Performance Shares calculated pursuant to Section 1(a).
(v) Notwithstanding anything to the contrary in Section 2(a), if Grantee is terminated without Cause (as defined in Grantee’s Employment Agreement with the Company, effective as of July 1, 2021 (the “Employment Agreement”)) or resigns with Good Reason (as defined in the Employment Agreement) (each, an “Involuntary Termination”) at any time after the third (3rd) anniversary of the Date of Grant but prior to the Vesting Date (“Involuntary Termination Date”), the Company shall grant to Grantee an Award equal to a prorated amount of the Performance Shares (“Stub Period Performance Shares”), with the amount of the Stub Period Performance Shares to be granted determined according to the following process: (1) determine the amount of time Grantee was employed by the Company since the Date of Grant as a fraction of the amount of time from Date of Grant through the Vesting Date (i.e., solve for the number of full months employed from Date of Grant through the date of termination/60) (the “Stub Period”), (2) multiply the Performance Shares by the Stub Period to determine the maximum amount of Stub Period Performance Shares for which Grantee is potentially eligible to receive, (3) multiply each of $[***] and $[***] by the Stub Period to obtain the prorated minimum and maximum Cumulative Pre-Tax Hybrid Income amounts that are relevant to the Stub Period Performance Shares determination (“Stub Period Minimum” and “Stub Period Maximum”, respectively), (4) determine the Cumulative Pre-Tax Hybrid Income for the Stub Period (“Stub Period Income”), (5) determine the amount of Stub Period Performance Shares to be awarded as follows:
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i. |
Fifty percent (50%) of the Stub Period Performance Shares shall vest on the Involuntary Termination Date, but if, and only if, (x) an Involuntary Termination occurs, (y) the Grantee remains continuously employed by the Company or one of its subsidiaries from the Date of Grant until the Involuntary Termination Date, and (z) the Stub Period Income equals the Stub Period Minimum; |
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ii. |
One hundred percent (100%) of the Stub Period Performance Shares shall vest on the Involuntary Termination Date, but if, and only if, (x) an Involuntary Termination occurs, (y) the Grantee remains continuously employed by the Company or one of its subsidiaries from the Date of Grant until the Involuntary Termination Date, and (z) the Stub Period Income equals or exceeds the Stub Period Maximum; |
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iii. |
A prorated amount of the Stub Period Performance Shares shall vest on the Involuntary Termination Date, but if, and only if, (x) an Involuntary Termination occurs, (y) the Grantee remains continuously employed by the Company or one of its subsidiaries from the Date of Grant until the Involuntary Termination Date, and (z) the Stub Period Income is between the Stub Period Minimum and the Stub Period Maximum; and |
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iv. |
No Stub Period Performance Shares shall vest if the Stub Period Income is less than the Stub Period Minimum and no additional Stub Period Performance Shares in excess of one hundred percent (100%) of the Stub Period Performance Shares shall vest if the Stub Period Income is more than the Stub Period Maximum. In no event shall the total number of Stub Period Performance Shares that vest exceed the number of Stub Period Performance Shares calculated pursuant to Section 2(a)(v). |
(b) Change of Control. Notwithstanding anything to the contrary in this Agreement, if a Change of Control of the Company occurs prior to the Vesting Date, then all of the Performance Shares shall immediately vest.
(c) Definitions.
(i)“ Pre-Tax Hybrid Income” means the Company’s EBITDA for the applicable calendar year. For purposes of this calculation, the Company’s pre-tax income shall be calculated in accordance with accounting principles generally accepted in the United States of America, based upon the Company’s financial statements.
(ii)“ Cumulative Pre-Tax Hybrid Income” means the sum of the Company’s Pre-Tax Hybrid Income for the calendar years 2022, 2023, 2024, 2025, and 2026.
3. SETTLEMENT
The Company shall settle all vested Performance Shares on a date selected by the Company in its sole discretion (the “Settlement Date”), but in no event later than thirty (30) days after the date on which such Performance Shares become vested. On the Settlement Date, the vested Performance Shares shall be settled by issuing and delivering to the Grantee one Share for each vested Performance Share, and the Company shall enter the Grantee’s name on the books of the Company as the shareholder of record with respect thereto. Upon such issuance, each settled Performance Share shall be cancelled.
4. RESTRICTIONS
(a) No Transfer. Except as otherwise provided in the Plan, the Performance Shares granted hereunder may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of; provided, that if the Grantee dies after the Vesting Date but prior to the Settlement Date, the vested Performance Shares shall be transferable by will or the laws of descent and distribution. The Company has the right, by notice to the Grantee, to cause the Performance Shares to be forfeited effective as of the date of the prohibited transfer or purported prohibited transfer thereof. In addition, the Grantee acknowledges that any Shares issued upon settlement of the Performance Shares may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed without (i) an effective registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to such shares, or (ii) an opinion of counsel presented to the Company and satisfactory to the Company to the effect that the proposed disposition of such shares by the Grantee may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement. Any prohibited transfer will be null and avoid ab initio and will be invalid and ineffective as to the Company, and the Company shall not be required (i) to transfer on its books any Performance Shares, or any shares issued upon settlement thereof, which shall have been sold, assigned, transferred, pledged, hypothecated or otherwise disposed of in violation of any of the provisions set forth in this Agreement, or (ii) to treat as owner of any such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so sold, assigned, transferred, pledged, or hypothecated.
(b) No Rights of a Shareholder. The Grantee shall not have any of the rights or privileges of a shareholder (including the right to vote or receive dividends) or otherwise be deemed the holder of the Shares underlying the Performance Shares for any purpose, and nothing in this Agreement shall be construed to confer upon the Grantee any of the rights, privileges or obligations of a shareholder of the Company, unless and until Common Stock is actually issued to and held of record by the Grantee upon settlement of the Performance Shares under this Agreement.
5. FORFEITURE; TERMINATION OF EMPLOYMENT
(a) Forfeiture of Unvested Performance Shares. If the Grantee’s employment with the Company and its subsidiaries terminates for any reason prior to the third (3rd) anniversary of the Date of Grant (including by reason of death, disability, retirement, resignation for any reason or termination by the Company or one of its subsidiaries for any reason (whether with or without cause)), then all of the Performance Shares shall be forfeited to the Company under Section 5(c) simultaneously with the employment termination. If, under the terms of Section 2, any of the Performance Shares do not vest based on the performance of the Company, such Performance Shares shall be forfeited to the Company under Section 5(c) as of the Vesting Date.
(b) Leave of Absence. In addition, if the Grantee takes a military, sick leave or other bona fide leave of absence from the Company and its subsidiaries, and the period of such leave exceeds 3 months, the Grantee will be considered to have terminated employment from the Company and its subsidiaries for purposes hereof on the later of (i) the first day immediately following such 3-month period, or (ii) the last day that the Grantee’s right to reemployment following the end of such leave is guaranteed by law or contract with the Company or a subsidiary.
(c) Effect of Forfeiture. If Performance Shares are forfeited, then, effective as of the time of forfeiture, such Performance Shares shall be automatically and immediately cancelled and forfeited to the Company and shall no longer be outstanding, without payment of any consideration by the Company and without the need for notice from or any further action by the Company, and neither the Grantee nor any of Grantee’s successors, heirs, assigns or personal representatives shall thereafter have any further right, title or interest in or to such forfeited Performance Shares or the benefits of ownership thereof.
6. RESTRICTIVE COVENANTS
(a) Restrictive Covenants. The Grantee acknowledges and recognizes the highly competitive nature of the businesses of the Company and the other Company Parties, that the Grantee will be allowed and given access to confidential and proprietary information (including but not limited to trade secrets) about those businesses, as well as access to the prospective and actual customers, suppliers, investors, clients and partners involved in those businesses, and the goodwill associated with the Company Parties. Grantee agrees to comply with all of the terms, provisions and restrictions set forth in this Section of this Agreement (the “Restrictive Covenants”). Grantee confirms that the Restrictive Covenants are valid and legally binding obligations of Grantee and are enforceable against Grantee in accordance with their terms. Grantee acknowledges and agrees that the Restrictive Covenants are reasonable as to time, geographic area, and scope of activities to be restricted, and that such promises do not impose a greater restraint on Grantee than is necessary to protect the goodwill, Confidential Information, customer and employee relations, and other legitimate business interests of the Company and the other Company Parties. Grantee also acknowledges and agrees that any violation of the Restrictive Covenants would bestow an unfair competitive advantage upon any person or entity which might benefit from such violation, and would necessarily result in substantial and irreparable damage and loss to the Company and other Company Parties. Grantee specifically acknowledges that, but for his or her agreement to be bound by the Restrictive Covenants, the Company would not have granted the Award to Grantee. For the avoidance of doubt, the Restrictive Covenants contained in this Agreement are in addition to, and not in lieu of, any other restrictive covenants or similar covenants or agreements between the Grantee and any Company Party.
(b) Restrictive Covenants - Definitions. In this Agreement, the following terms shall have the meanings defined below. Terms may be used in the singular or plural.
i.“ Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person. A Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise, and such control will be presumed if any Person owns 10% or more of the voting capital stock or other ownership interests, directly or indirectly, of any other Person.
ii.“ Business” means the business of (i) designing, manufacturing, and marketing of employee uniforms, image apparel, scrubs, patient apparel, and personal protective equipment (PPE), (ii) designing, manufacturing, marketing, selling and distributing promotional products, gifts to a third party’s employees and/or customers, point of sale (POS), point of purchase (POP), accessories, and related goods and services, including product sourcing, ideation, quality control, (iii) global logistics related to (i) and/or (ii), and (iv) the provision of business process and contact center outsourced solutions. For clarity, the Business includes all sourcing of products for customers, whether through distribution or direct supply arrangements.
iii.“ Company Parties” means the Company and any of its direct or indirect parents, subsidiaries, and/or Affiliates, and any of their successors or assigns.
iv.“ Confidential Information” means all data or information that is related to the Company or the Business (including any data or information that relates to or results from any historical or projected financial results or financial information, products, services, vendors, customers or research or development of any Company Party), regardless of whether it constitutes a “trade secret” under applicable common law or statute, is labeled or identified as “confidential” or is now existing or to be developed in the future, in any form of medium, that was disclosed to Grantee or became known by Grantee as a consequence of, or through, Grantee’s employment with the Company, Original BAMKO, or BAMKO, LLC (“BAMKO”) and/or Grantee’s affiliation with the Company, Original BAMKO, or BAMKO (including information conceived, originated, discovered, or developed in whole or in part by Grantee, including while he was employed by Original BAMKO), having value to the Company, not generally known to competitors of the Company, and about the Company Parties’ business, finances, operating results, products, processes, and services, including, but not limited to, (i) information relating to research, development, inventions, computer program designs, flow charts, source and object codes, products and services under development, pricing and pricing strategies, marketing and selling strategies, servicing, purchasing, accounting, engineering, cost and costing strategies, sources of supply, customer lists, customer requirements, business methods or practices, training and training programs, financial records, the documentation thereof, and similar information, (ii) confidential information of Original BAMKO and its subsidiaries that was acquired by BAMKO from Original BAMKO under the Purchase Agreement, (iii) identities of, individual requirements of, specific contractual arrangements with, and information about, the Company Parties’ current, former or prospective employees, suppliers, distributors, customers, customer prospects, independent contractors and other business relations and their confidential information, (iv) trade secrets, technology, know-how, compilations of data and analyses, techniques, systems, formulae, records, reports, manuals, documentation, models, data and data bases relating thereto, (v) proprietary software, (vi) innovations, ideas, devices, improvements, developments, methods, processes, designs, analyses, drawings and all similar or related information (whether or not patentable and whether or not reduced to practice), (vii) copyrightable works, and (viii) intellectual property of every kind and description; provided, however, that Confidential Information shall not mean data or information (x) which has been voluntarily disclosed to the public by the Company, except where such public disclosure has been made by Grantee without authorization from the Company; (y) which has been independently developed and disclosed by others not in breach of a confidentiality obligation, or (z) which has otherwise entered the public domain through lawful means and through no fault of Grantee. Confidential Information will be interpreted as broadly as possible to include all information of any sort (whether merely remembered or embodied in a tangible or intangible form) that is (1) related to any Company Party’s current or potential business or operations, and (2) is not generally or publicly known. Notwithstanding the foregoing obligations, pursuant to 18 U.S.C. § 1833(b), Grantee understands and acknowledges that he shall not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of a trade secret that is made: (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (2) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and protected from public disclosure. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).
v.“ Person” means any individual, association (incorporated or unincorporated), corporation, partnership (of any designation - limited partnership, general partnership, limited liability partnership, or otherwise), limited liability company, trust, or any other entity or organization, public or private, including a governmental entity.
vi.“ Prohibited Term” means the period commencing on the Effective Date and ending two (2) years after Grantee’s termination or resignation of employment for any reason.
vii.“ Purchase Agreement” means the agreement between BAMKO, LLC, Original BAMKO, Grantee and all the other shareholders of Original BAMKO by which BAMKO, LLC acquired substantially all of the assets owned or used by BAMKO, Inc., a California corporation, which is now named PEKMA, Inc. (“Original BAMKO”).
viii.“ Territory” means such geographic area in which Employee is working, worked, and/or over which Employee has or had managerial responsibility during Employee’s employment with the Company, including, but not limited to, the United States of America and Canada.
(c) Confidentiality.
i. Grantee warrants and agrees that he will not at any time reproduce, use, distribute, disclose, publish, misappropriate, or otherwise disseminate any Confidential Information and will not take any action causing, or fail to take any action to prevent, any Confidential Information to lose its character as Confidential Information until and unless such Confidential Information loses its status as Confidential Information through no fault, either directly or indirectly, of Grantee, either during the term of Grantee’s employment or engagement by the Company or thereafter, except when such disclosure or use is directly related to and required by Grantee’s performance of duties assigned by the Company.
ii. Grantee will safeguard all Confidential Information and will not take any action causing, or fail to take any action to prevent, any Confidential Information to lose its character as Confidential Information until and unless such Confidential Information loses its status as Confidential Information through no fault, either directly or indirectly, of Grantee. Grantee will safeguard all documents and things that contain or embody Confidential Information, including but not limited to Confidential Information stored in an electronic format on any Company computer or personal computer owned or used by Grantee.
iii. Grantee will not, in any communication, including but not limited to with the media, social media, prospective or actual employers, current and former employees of Company Parties, and current and prospective suppliers, vendors, business partners or customers, make any derogatory, disparaging, or critical statement, orally, written, or otherwise, against any Company Party.
(d) Return of Documents. Upon termination of Grantee’s employment with the Company for any reason, Grantee will return to or leave with the Company all documents, records, notebooks, and other repositories of or containing Confidential Information, including all copies thereof, as well as all originals and copies of work made for hire, including all electronic copies of Confidential Information, or other tangible property of any Company Party, whether prepared by Grantee or others, then in Grantee’s possession or under Grantee’s control.
(e) Non-Solicitation.
i. Employees. During the Prohibited Term, unless Grantee receives express written consent from the Company, Grantee shall not, directly or indirectly, solicit, recruit, induce or attempt to solicit, recruit, or induce any then current or former employee, of a Company Party to leave the employ of, any Company Party; provided however, that the restrictions set forth in this Section 6(e) shall apply only to employees with whom Grantee had business contact during the last twenty-four (24) months as of the date of Grantee’s employment termination.
ii. Contractors. During the Prohibited Term, unless Grantee receives express written consent from the Company, Grantee shall not, directly or indirectly, solicit, recruit, or induce any independent contractor of the Company to cease performing services for the Company or reduce the amount or quality of the services performed for the Company, other than in response to general solicitations not targeted to such independent contractors.
iii. Customers. During the Prohibited Term, unless Grantee receives express written consent from the Company, Grantee shall not, directly or indirectly, on behalf of any person or business other than the Company, solicit business from any customer or customer prospect of the Company Parties, or any representative of the same, with a view toward the sale or providing of any service or product competitive with the Business; provided, however, the restrictions set forth in this Section 6(e)(iii) shall apply only to customers or prospects of the Company, or representatives of the same, with which Grantee had Material Contact during the last twenty-four (24) months immediately prior to the date of Grantee's employment termination. “Material Contact” means contact between Grantee and each customer or customer prospect: (i) with whom or which Grantee dealt on behalf of the Company; (ii) whose dealings with the Company were directly or indirectly coordinated or supervised by Grantee; (iii) about whom Grantee obtained Confidential Information in the course of Grantee's employment for the Company; and/or (iv) who receives products or services authorized by the Company, the sale or provision of which results or resulted in revenue to the Company or compensation, commissions, or earnings for Grantee within two years prior to the date of Grantee's termination.
(f) RESTRICTIONS ON COMPETITION. During the Prohibited Term, unless performed for or provided on behalf of a Company Party, and unless Employee receives express written consent from the Chief Executive Officer of Superior Group of Companies, Inc., Employee shall not (a) directly or indirectly, in the Territory, provide the same or similar duties that Employee performed on behalf of a Company Party within the two years prior to the cessation of Employee’s employment for any person or business which competes with a Company Party in the Business, (b) directly or indirectly provide the same or similar duties that Employee performed on behalf of a Company Party related to any customer or customer prospect of a Company Party on whose account Employee worked and/or over which Employee had managerial responsibility within the two years prior to the cessation of Employee’s employment for any person or business which competes with a Company Party in the Business, and/or (c) directly or indirectly, own, control, manage, or participate in the ownership, control, or management of any business (whether as principal, agent, shareholder, participant, partner, promoter, director, officer, manager, member, equity lender, employee, consultant, sales representative, or otherwise) which competes with a Company Party in the Business within the Territory, however, notwithstanding the foregoing, Employee shall not be prohibited from owning, as a passive investment, not more than 1.0% of the capital stock of any corporation that competes with a Company Party in the Business that is traded on a national securities exchange so long as neither Employee nor any family member of Employee has active participation in the business of such corporation.
(g) Duty Of Loyalty. While employed by the Company, Grantee agrees that he will not engage in or deal with any activities, products, or services that are competitive with the Company Parties’ activities, products, business, or services, and that Grantee will not usurp any Company Parties business opportunity, without the express prior written consent of the Company. Grantee further agrees to faithfully render Grantee’s services to the Company and to devote Grantee’s best efforts, ability, skill, and attention, in good faith, to the Company’s business while employed by the Company.
(h) Notice to Future Employers. Grantee agrees to provide to any subsequent, anticipated, and/or contemplated employer an executed copy of this Agreement and to provide written notice to the Company of such event occurring and a copy of the correspondence between Grantee and such employer (or a written summary, if the contact was oral) within two (2) business days after such event. These requirements shall cease only after the expiration of the Prohibited Term and/or required by law expire. During the Prohibited Term, Grantee authorizes the Company to provide an executed copy of this Agreement to third parties, including but not limited to, Grantee’s subsequent, anticipated, and/or contemplated future employers.
(i) Assignability. All of Grantee’s obligations under this Section 6 of the Agreement shall be binding upon Grantee’s heirs, assigns, and legal representatives. The terms and provisions of this Agreement shall inure to the benefit of and be binding upon the Company, its Affiliates and each of their respective successors and assigns. The Company shall have the right to assign this Agreement to any Company Party or to any successor or assignee of all or substantially all of the business or assets of the Company. This Agreement is personal to Grantee, and he shall not have the right to assign this Agreement without the express written consent of the Company, and any attempted assignment in violation thereof shall be invalid and ineffective against the Company.
(j) Obligations Survive Termination Of Employment. Any termination of Grantee’s employment with the Company shall not impair or relieve Grantee of his obligations hereunder that otherwise survive the termination of this Agreement pursuant to their respective terms or by their nature.
(k) Severability. The Parties believe that the restrictions and covenants in this Agreement are, under the circumstances, reasonable and enforceable. However, if any one or more of the restrictions, covenants, or provisions contained in this Agreement shall, for any reason under the law as it shall then be construed, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other restriction, covenant, or provision of this Agreement. In such an instance, this Agreement shall be construed as if such invalid, illegal, or unenforceable restriction, covenant, or provision had never been contained herein. Additionally, if any one or more of the restrictions, covenants, or provisions contained in this Agreement shall for any reason be held to be excessively broad as to time, duration, geographical scope, activity, or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.
(l) Compliance with Restrictive Covenants. In the event of a breach or threatened breach by Grantee of any of the Restrictive Covenants, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, require the Grantee (a) to return all Shares previously issued to the Grantee in settlement of any vested Performance Shares; and (b) to pay to the Company the full value of any consideration received for any Shares issued in settlement of Performance Shares that were previously sold by the Grantee or otherwise disposed of to a third party (or if no such consideration was received, the then fair market value of such Shares). The Company also shall be entitled to an injunction restraining Grantee from such breach or threatened breach in Court or arbitration. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from Grantee. In the event that the Company should seek an injunction, Grantee waives any requirements that the Company post a bond or any other security (if permitted by applicable law).
(m) Independent Covenants. The Restrictive Covenants are intended by each Party hereto to be, and shall be construed as, agreements independent of each other and of any other agreement between the Parties, and the existence of any claim or cause of action of Grantee or any of his affiliates (including Original BAMKO) against the Company or any Company Party, whether predicated on this Agreement, the Purchase Agreement or any other agreement between Grantee and a Company Party, shall not constitute a defense to the enforcement by the Company of such covenants. Further, Grantee acknowledges that he is also bound by restrictive covenants in the Purchase Agreement, which were agreed to by Grantee as a material inducement to BAMKO to enter into Purchase Agreement and consummate the transactions contemplated by the Purchase Agreement. The Parties agree that the restrictive covenants in the Purchase Agreement are separate, independent of, and in addition to the restrictive covenants in this Agreement, and nothing in this Agreement shall be interpreted as modifying, replacing, terminating, or otherwise affecting the enforceability of the restrictive covenants in the Purchase Agreement, which remain in full force and effect in accordance with their terms.
(n) Blue-Pencil; Modification; Enforcement. If a court holds that the duration, scope or area restrictions in any of the Restrictive Covenants are unenforceable, the maximum duration, scope or area enforceable shall be substituted. Because Grantee’s services are unique and Grantee has access to Confidential Information, in the event of a breach or a threatened breach by Grantee of any of the Restrictive Covenants, the Parties acknowledge and agree that the Company and other Company Parties would suffer irreparable and continuing harm for which money damages would be an inadequate remedy. Accordingly, in addition and supplementary to all other rights and remedies that may be available, the Company Parties shall be entitled to specific performance and/or injunctive or other equitable relief in order to enforce or prevent any violations of this Agreement (without posting a bond or security, if permitted by applicable law, and without proof of monetary damages or an inadequate remedy at law). In addition, (i) the Prohibited Term shall be tolled until the activity causing a breach of any of the Restrictive Covenants has been stopped, and (ii) the Company Parties shall be entitled to recover from Grantee all profit Grantee gains from such breach or violation in addition to any damages that the Company Parties suffer. Grantee acknowledges and agrees that the Company Parties may exercise any of the foregoing remedies concurrently, independently or successively.
7. TAX WITHHOLDING
The Grantee shall make appropriate arrangements with the Company, in accordance with the Plan and in a manner deemed satisfactory to the Committee, to provide for the withholding or payment of the amount that the Company considers necessary to satisfy its withholding obligations upon the grant, vesting, lapse or settlement of the Performance Shares. The Grantee may satisfy any tax withholding obligation of the Company arising from settlement of this Award, in whole or in part, by paying such tax obligation in cash or by check made payable to the Company, or by electing to have the Company withhold shares of Common Stock having a Fair Market Value on the date of settlement equal to the amount required to be withheld, subject to such rules as the Committee may adopt. In any event, the Company reserves the right to withhold from any compensation otherwise payable to the Grantee such amount as the Company determines is necessary to satisfy the Company’s tax withholding obligations arising from this Award.
8. AMENDMENT OR MODIFICATION
Except as provided otherwise herein, no term or provision of this Agreement may be amended, modified or supplemented orally, but only by an instrument in writing signed by the party against which or whom the enforcement of the amendment, modification or supplement is sought; provided, however, that this Agreement may be amended, modified, supplemented or cancelled without the Grantee’s consent in accordance with the terms of the Plan.
9. LIMITED INTEREST
(a) No Right to Employment. The grant of this Award shall not confer on the Grantee any right to continue as an employee, nor interfere in any way with the right of the Company or any subsidiary to terminate the Grantee at any time.
(b) Capital Structure. The grant of this Award shall not affect in any way the right or power of the Company or any of its subsidiaries to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s or any subsidiary’s capital structure or its business, or any merger, consolidation or business combination of the Company or any subsidiary, or any issuance or modification of any term, condition, or covenant of any bond, debenture, debt, preferred stock or other instrument ahead of or affecting the Common Stock or the rights of the holders of Common Stock, or the dissolution or liquidation of the Company or any subsidiary, or any sale or transfer of all or any part of its assets or business or any other Company or subsidiary act or proceeding, whether of a similar character or otherwise.
10. GOVERNING LAW; PLAN
This Agreement shall be governed by the internal laws of the state of Florida as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. Any legal action or proceeding with respect to the Plan or the Performance Shares may only be brought and determined in a court sitting in the County of Hillsborough, or the Federal District Court for the Middle District of Florida sitting in the County of Hillsborough, in the State of Florida. The Company may require that the action or proceeding be determined in a bench trial.
ALL PARTIES ACKNOWLEDGE THAT THIS PERFORMANCE SHARES AWARD IS GRANTED UNDER AND PURSUANT TO THE PLAN, WHICH SHALL GOVERN ALL RIGHTS, INTERESTS, OBLIGATIONS, AND UNDERTAKINGS OF BOTH THE COMPANY AND THE GRANTEE. ALL CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THIS PERFORMANCE SHARES AGREEMENT SHALL HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE PLAN.
11. SEVERABILITY
If any provision of this agreement is or becomes or is deemed to be invalid, illegal or unenforceable, or would disqualify this Award under any law the Committee deems applicable, then such provision will be construed or deemed amended to conform to the applicable law, or if the Committee determines that the provision cannot be construed or deemed amended without materially altering the intent of this agreement, then the provision will be stricken and the remainder of this agreement will remain in full force and effect.
12. SECTION 409A
The Performance Shares are intended to be exempt from or compliant with Section 409A of the Code and the Treasury Regulations and other interpretive guidance promulgated thereunder (collectively, “Section 409A”). If the Grantee is deemed to be a “specified employee” within the meaning of Section 409A, as determined by the Committee, at a time when the Grantee becomes eligible for settlement of any Performance Shares upon the Grantee’s “separation from service” within the meaning of Section 409A, then to the extent necessary to prevent any accelerated or additional tax under Section 409A, such settlement will be delayed until the earlier to occur of (a) the date that is six (6) months following Employee’s separation from service and (b) Employee’s death.
13. COUNTERPARTS
This agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Grantee has executed this Agreement all as of the day and date first above written.
SUPERIOR GROUP OF COMPANIES, INC.
/s/ Michael Benstock___________________
By: Michael Benstock
Chief Executive Officer
/s/ Philip Koosed
Philip Koosed
(Grantee)
Exhibit 10.7
CONFIDENTIAL
SUPERIOR GROUP OF COMPANIES, INC.
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AWARD, dated July 1, 2021 (the “Date of Grant”), is granted by Superior Group of Companies, Inc., a Florida corporation (the “Company”) to Philip Koosed (the “Grantee”) pursuant to the Company’s 2013 Incentive Stock and Awards Plan (the “Plan”). Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings given to them in the Plan.
WHEREAS, the Company believes it to be in the best interests of the Company, its subsidiaries and its shareholders for its officers and other key employees to obtain or increase their stock ownership interest in the Company so that they will have a greater incentive to work for and manage the Company’s affairs in such a way that its shares may become more valuable; and
WHEREAS, the Grantee is employed by the Company or one of its subsidiaries as an officer or other key employee and has been selected by the Board of Directors of the Company, directly or acting through its Compensation Committee, to receive a restricted stock award;
NOW, THEREFORE, in consideration of the premises and of the services to be performed by the Grantee, the Company and the Grantee hereby agree as follows:
1. GRANT
Subject to the terms and conditions of this Agreement and the Plan, the Company grants to the Grantee an Award of 51,419 Shares (the “Restricted Stock”).
2. RESTRICTIONS AND RESTRICTED PERIOD
(a) Restrictions. Except by will or the laws of descent and distribution, the shares of Restricted Stock granted hereunder may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of and shall be subject to a risk of forfeiture under Section 3(a), in each case from and after the Date of Grant until, and to the extent that, such restrictions lapse and the Restricted Stock vests under Section 2(b) (such period, the “Restricted Period”). In addition, the Grantee acknowledges that any shares of Restricted Stock, even after expiration of the Restricted Period, may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed without (i) an effective registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to such shares, or (ii) an opinion of counsel presented to the Company and satisfactory to the Company to the effect that the proposed disposition of such shares by the Grantee may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement. Any prohibited transfer will be null and avoid ab initio and will be invalid and ineffective as to the Company, and the Company shall not be required (i) to transfer on its books any shares of Restricted Stock which shall have been sold, assigned, transferred, pledged, hypothecated or otherwise disposed of in violation of any of the provisions set forth in this Agreement, or (ii) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so sold, assigned, transferred, pledged, or hypothecated.
(b) Lapse of Restrictions.
(i) Subject to Section 2(b)(ii), the restrictions set forth above shall lapse and the Restricted Stock shall vest and become transferable (provided that such transfer is otherwise in accordance with federal and state securities laws) and non-forfeitable in accordance with the following schedule, unless the Grantee’s employment has been terminated by the Company with Cause or the Grantee has resigned without Good Reason(such event, a “Termination Event”) during the period beginning on the Date of Grant and ending on the applicable vesting date:
As to 30,851 Shares of the Restricted Stock:
On the third (3rd) anniversary of the Date of Grant.
As to 10,283 Shares of the Restricted Stock:
On the fourth (4th) anniversary of the Date of Grant.
As to 10,285 Shares of the Restricted Stock:
On the fifth (5th) anniversary of the Date of Grant.
(ii) All unvested shares of Restricted Stock shall become immediately and fully vested upon the occurrence of any of the following events (each an “Accelerated Vesting Event”), but if, and only if, no Termination Event occurs with respect to the Grantee at any time during the period beginning on the Date of Grant and ending on the date the Accelerated Vesting Event occurs. The Accelerated Vesting Events are as follows: a Change of Control of the Company.
(c) Rights of a Shareholder. From and after the Date of Grant and for so long as the Restricted Stock is held by or for the benefit of the Grantee, Grantee shall have all the rights of a shareholder of the Company with respect to the Restricted Stock, including the right to vote such shares and receive dividends with respect thereto, subject to the provisions of this Agreement.
3. TERMINATION OF EMPLOYMENT
(a) Forfeiture of Unvested Restricted Stock. If a Termination Event with respect to the Grantee occurs prior to the end of the Restricted Period for any reason (other than an Accelerated Vesting Event described in Section 2(b)(ii)), then the Restricted Stock that is unvested at that time shall be forfeited to the Company under Section 3(c). Restricted Stock that is vested at such time shall not be forfeited upon such Termination Event, but shall remain subject to this Agreement.
(b) Leave of Absence. In addition, if the Grantee takes a military, sick leave or other bona fide leave of absence from the Company and its subsidiaries, and the period of such leave exceeds 3 months, the Grantee will be considered to have terminated employment from the Company and its subsidiaries for purposes hereof on the later of (i) the first day immediately following such 3-month period, or (ii) the last day that the Grantee’s right to reemployment following the end of such leave is guaranteed by law or contract with the Company or a subsidiary.
(c) Effect of Forfeiture. If Restricted Stock is forfeited, then, effective as of the time of forfeiture, such Restricted Stock shall be automatically and immediately cancelled and forfeited to the Company and shall no longer be outstanding, without payment of any consideration by the Company and without the need for notice from or any further action by the Company, and neither the Grantee nor any of Grantee’s successors, heirs, assigns or personal representatives shall thereafter have any further right, title or interest in or to such forfeited Restricted Stock or the benefits of ownership thereof.
4. TAX WITHHOLDING
When the Restricted Period ends with respect to any Restricted Stock, or upon Grantee’s filing an effective election with the Internal Revenue Service (“IRS”) pursuant to Section 83(b) of the Code, Grantee shall make appropriate arrangements with the Company, in accordance with the Plan and in a manner deemed satisfactory to the Committee, to provide for the withholding or payment of the amount that the Company considers necessary to satisfy its withholding obligations. GRANTEE ACKNOWLEDGES THAT IT IS HIS OR HER SOLE RESPONSIBILITY, AND NOT THE COMPANY’S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF THE GRANTEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
5. DEFINITIONS
(a) “Cause” means termination of employment as a result of (i) the failure of the Grantee to perform or observe any of the terms or provisions of any written employment agreement between the Grantee and the Company or its subsidiaries or, if no written agreement exists, the gross dereliction of the Grantee’s duties with respect to the Company; (ii) the failure of the Grantee to comply fully with the lawful directives of the Board of Directors of the Company or its subsidiaries, as applicable, or the officers or supervisory employees to whom the Grantee is reporting; (iii) the Grantee’s dishonesty, misconduct, misappropriation of funds, or disloyalty or disparagement of the Company, any of its subsidiaries, or its management or employees; or (iv) other proper cause determined in good faith by the Committee. Notwithstanding the foregoing, if the Grantee is subject to a written agreement with the Company or its subsidiaries that contains a definition of “Cause” that is different than the definition provided herein, such as in Grantee’s Employment Agreement with Superior Group of Companies, Inc., effective July 1, 2021 (the “Employment Agreement”), the definition of “Cause” in such other agreement shall apply in lieu of the definition provided herein.
(b) “Disability” means permanently and totally disabled within the meaning of section 22(e)(3) of the Internal Revenue Code of 1986, as amended.
(c) “Good Reason” shall have the meaning ascribed to it in Grantee’s Employment Agreement.
6. CERTIFICATES; POWER OF ATTORNEY
Certificates for the Restricted Stock shall be registered in Grantee’s name and constitute issued and outstanding shares of Common Stock for all corporate purposes as of the Date of Grant; provided that, in the discretion of the Company, the Company may retain custody of such certificates. On or before the date of execution of this Agreement, Grantee shall deliver to the Company one or more stock powers endorsed in blank relating to the Restricted Stock in the form attached hereto as “Exhibit A,” which will permit transfer to the Company of all or any portion of the Restricted Stock that shall be forfeited or cancelled in accordance with this Agreement. The certificates for the Restricted Stock shall bear the following legend, in addition to any other legend deemed necessary or desirable by the Committee:
The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Superior Group of Companies, Inc. 2013 Incentive Stock and Awards Plan and a Restricted Stock Agreement entered into between the registered owner and Superior Group of Companies, Inc. A copy of such plan and agreement is on file in the offices of, and will be made available for a proper purpose by, Superior Group of Companies, Inc.
The Grantee and any other holder of the Restricted Stock hereby irrevocably constitute and appoint the Company, with full power of substitution in the premises, as their due and lawful attorney in fact (i) to transfer any Restricted Stock that is forfeited pursuant to this Agreement on the books of the Company, and (ii) take such other actions and execute such assignments, conveyances, transfers and other documents in such holder’s name and on such holder’s behalf as may be necessary or appropriate to effect such transfer. This power of attorney is coupled with an interest, and is irrevocable.
7. AMENDMENT OR MODIFICATION
Except as provided otherwise herein, no term or provision of this Agreement may be amended, modified or supplemented orally, but only by an instrument in writing signed by the party against which or whom the enforcement of the amendment, modification or supplement is sought; provided, however, that this Agreement may be amended, modified, supplemented or cancelled without the Grantee’s consent in accordance with the terms of the Plan.
8. LIMITED INTEREST
(a) No Right to Employment. The grant of this Award shall not confer on the Grantee any right to continue as an employee, nor interfere in any way with the right of the Company to terminate the Grantee at any time.
(b) Capital Structure. The grant of this Award shall not affect in any way the right or power of the Company or any of its subsidiaries to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s or any subsidiary’s capital structure or its business, or any merger, consolidation or business combination of the Company or any subsidiary, or any issuance or modification of any term, condition, or covenant of any bond, debenture, debt, preferred stock or other instrument ahead of or affecting the Common Stock or the rights of the holders of Common Stock, or the dissolution or liquidation of the Company or any subsidiary, or any sale or transfer of all or any part of its assets or business or any other Company or subsidiary act or proceeding, whether of a similar character or otherwise.
9. GOVERNING LAW; PLAN
This Agreement shall be governed by the internal laws of the state of Florida as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. Any legal action or proceeding with respect to the Plan or the Restricted Stock may only be brought and determined in a court sitting in the County of Hillsborough, or the Federal District Court for the Middle District of Florida sitting in the County of Hillsborough, in the State of Florida. The Company may require that the action or proceeding be determined in a bench trial.
ALL PARTIES ACKNOWLEDGE THAT THIS RESTRICTED STOCK AWARD IS GRANTED UNDER AND PURSUANT TO THE PLAN, WHICH SHALL GOVERN ALL RIGHTS, INTERESTS, OBLIGATIONS, AND UNDERTAKINGS OF BOTH THE COMPANY AND THE GRANTEE. ALL CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THIS RESTRICTED STOCK AGREEMENT SHALL HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE PLAN.
10. SEVERABILITY
If any provision of this agreement is or becomes or is deemed to be invalid, illegal or unenforceable, or would disqualify this Award under any law the Committee deems applicable, then such provision will be construed or deemed amended to conform to the applicable law, or if the Committee determines that the provision cannot be construed or deemed amended without materially altering the intent of this agreement, then the provision will be stricken and the remainder of this agreement will remain in full force and effect.
11. COUNTERPARTS
This agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Grantee has executed this Agreement all as of the day and date first above written.
SUPERIOR GROUP OF COMPANIES, INC.
/s/ Michael Benstock___________________
By: Michael Benstock
Chief Executive Officer
/s/ Philip Koosed
Philip Koosed
(Grantee)
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and transfer unto _______________________________________(__________) shares of Common Stock of Superior Group of Companies, Inc. in the books of said corporation represented by Certificate No. ________ and do hereby irrevocably constitute and appoint _____________________________ to transfer the said stock on the books of the said corporation with full power of substitution in the premises.
This Assignment Separate from Certificate may be used only in accordance with the Restricted Stock Agreement between Superior Group of Companies, Inc. and the undersigned dated ________________, 20___.
Dated: ________________, 20___
/s/ Philip Koosed
Print name: Philip Koosed
INSTRUCTIONS:
Please sign, but do not fill in any other information (including the date).
Exhibit 10.8
CONFIDENTIAL
SUPERIOR GROUP OF COMPANIES, INC.
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AWARD, dated July 8, 2021 (the “Date of Grant”), is granted by Superior Group of Companies, Inc., a Florida corporation (the “Company”) to Jordan Alpert (the “Grantee”) pursuant to the Company’s 2013 Incentive Stock and Awards Plan (the “Plan”). Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings given to them in the Plan.
WHEREAS, the Company believes it to be in the best interests of the Company, its subsidiaries and its shareholders for its officers and other key employees to obtain or increase their stock ownership interest in the Company so that they will have a greater incentive to work for and manage the Company’s affairs in such a way that its shares may become more valuable; and
WHEREAS, the Grantee is employed by the Company or one of its subsidiaries as an officer or other key employee and has been selected by the Board of Directors of the Company, directly or acting through its Compensation Committee, to receive a restricted stock award;
NOW, THEREFORE, in consideration of the premises and of the services to be performed by the Grantee, the Company and the Grantee hereby agree as follows:
1. GRANT
Subject to the terms and conditions of this Agreement and the Plan, the Company grants to the Grantee an Award of 22,007 Shares (the “Restricted Stock”).
2. RESTRICTIONS AND RESTRICTED PERIOD
(a) Restrictions. Except by will or the laws of descent and distribution, the shares of Restricted Stock granted hereunder may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of and shall be subject to a risk of forfeiture under Section 3(a), in each case from and after the Date of Grant until, and to the extent that, such restrictions lapse and the Restricted Stock vests under Section 2(b) (such period, the “Restricted Period”). In addition, the Grantee acknowledges that any shares of Restricted Stock, even after expiration of the Restricted Period, may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed without (i) an effective registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to such shares, or (ii) an opinion of counsel presented to the Company and satisfactory to the Company to the effect that the proposed disposition of such shares by the Grantee may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement. Any prohibited transfer will be null and avoid ab initio and will be invalid and ineffective as to the Company, and the Company shall not be required (i) to transfer on its books any shares of Restricted Stock which shall have been sold, assigned, transferred, pledged, hypothecated or otherwise disposed of in violation of any of the provisions set forth in this Agreement, or (ii) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so sold, assigned, transferred, pledged, or hypothecated.
(b) Lapse of Restrictions.
(i) Subject to Section 2(b)(ii), the restrictions set forth above shall lapse and the Restricted Stock shall vest and become transferable (provided that such transfer is otherwise in accordance with federal and state securities laws) and non-forfeitable in accordance with the following schedule, unless the Grantee’s employment has been terminated by the Company with Cause or the Grantee has resigned without Good Reason (such event, a “Termination Event”) during the period beginning on the Date of Grant and ending on the applicable vesting date:
As to 13,204 Shares of the Restricted Stock:
On the third (3rd) anniversary of the Date of Grant.
As to 4,401 Shares of the Restricted Stock:
On the fourth (4th) anniversary of the Date of Grant.
As to 4,402 Shares of the Restricted Stock:
On the fifth (5th) anniversary of the Date of Grant.
(ii) All unvested shares of Restricted Stock shall become immediately and fully vested upon the occurrence of any of the following events (each an “Accelerated Vesting Event”), but if, and only if, no Termination Event occurs with respect to the Grantee at any time during the period beginning on the Date of Grant and ending on the date the Accelerated Vesting Event occurs. The Accelerated Vesting Events are as follows: a Change of Control of the Company.
(c) Rights of a Shareholder. From and after the Date of Grant and for so long as the Restricted Stock is held by or for the benefit of the Grantee, Grantee shall have all the rights of a shareholder of the Company with respect to the Restricted Stock, including the right to vote such shares and receive dividends with respect thereto, subject to the provisions of this Agreement.
3. TERMINATION OF EMPLOYMENT
(a) Forfeiture of Unvested Restricted Stock. If a Termination Event with respect to the Grantee occurs prior to the end of the Restricted Period for any reason (other than an Accelerated Vesting Event described in Section 2(b)(ii)), then the Restricted Stock that is unvested at that time shall be forfeited to the Company under Section 3(c). Restricted Stock that is vested at such time shall not be forfeited upon such Termination Event, but shall remain subject to this Agreement.
(b) Leave of Absence. In addition, if the Grantee takes a military, sick leave or other bona fide leave of absence from the Company and its subsidiaries, and the period of such leave exceeds 3 months, the Grantee will be considered to have terminated employment from the Company and its subsidiaries for purposes hereof on the later of (i) the first day immediately following such 3-month period, or (ii) the last day that the Grantee’s right to reemployment following the end of such leave is guaranteed by law or contract with the Company or a subsidiary.
(c) Effect of Forfeiture. If Restricted Stock is forfeited, then, effective as of the time of forfeiture, such Restricted Stock shall be automatically and immediately cancelled and forfeited to the Company and shall no longer be outstanding, without payment of any consideration by the Company and without the need for notice from or any further action by the Company, and neither the Grantee nor any of Grantee’s successors, heirs, assigns or personal representatives shall thereafter have any further right, title or interest in or to such forfeited Restricted Stock or the benefits of ownership thereof.
4. TAX WITHHOLDING
When the Restricted Period ends with respect to any Restricted Stock, or upon Grantee’s filing an effective election with the Internal Revenue Service (“IRS”) pursuant to Section 83(b) of the Code, Grantee shall make appropriate arrangements with the Company, in accordance with the Plan and in a manner deemed satisfactory to the Committee, to provide for the withholding or payment of the amount that the Company considers necessary to satisfy its withholding obligations. GRANTEE ACKNOWLEDGES THAT IT IS HIS OR HER SOLE RESPONSIBILITY, AND NOT THE COMPANY’S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF THE GRANTEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
5. DEFINITIONS
(a) “Cause” shall have the meaning ascribed to it in Grantee’s Change In Control Agreement, dated July 8, 2021 (“Change In Control Agreement”).
(b) “Disability” means permanently and totally disabled within the meaning of section 22(e)(3) of the Internal Revenue Code of 1986, as amended.
(c) “Good Reason” shall have the meaning ascribed to it in Grantee’s Change in Control Agreement.
6. CERTIFICATES; POWER OF ATTORNEY
Certificates for the Restricted Stock shall be registered in Grantee’s name and constitute issued and outstanding shares of Common Stock for all corporate purposes as of the Date of Grant; provided that, in the discretion of the Company, the Company may retain custody of such certificates. On or before the date of execution of this Agreement, Grantee shall deliver to the Company one or more stock powers endorsed in blank relating to the Restricted Stock in the form attached hereto as “Exhibit A,” which will permit transfer to the Company of all or any portion of the Restricted Stock that shall be forfeited or cancelled in accordance with this Agreement. The certificates for the Restricted Stock shall bear the following legend, in addition to any other legend deemed necessary or desirable by the Committee:
The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Superior Group of Companies, Inc. 2013 Incentive Stock and Awards Plan and a Restricted Stock Agreement entered into between the registered owner and Superior Group of Companies, Inc. A copy of such plan and agreement is on file in the offices of, and will be made available for a proper purpose by, Superior Group of Companies, Inc.
The Grantee and any other holder of the Restricted Stock hereby irrevocably constitute and appoint the Company, with full power of substitution in the premises, as their due and lawful attorney in fact (i) to transfer any Restricted Stock that is forfeited pursuant to this Agreement on the books of the Company, and (ii) take such other actions and execute such assignments, conveyances, transfers and other documents in such holder’s name and on such holder’s behalf as may be necessary or appropriate to effect such transfer. This power of attorney is coupled with an interest, and is irrevocable.
7. AMENDMENT OR MODIFICATION
Except as provided otherwise herein, no term or provision of this Agreement may be amended, modified or supplemented orally, but only by an instrument in writing signed by the party against which or whom the enforcement of the amendment, modification or supplement is sought; provided, however, that this Agreement may be amended, modified, supplemented or cancelled without the Grantee’s consent in accordance with the terms of the Plan.
8. LIMITED INTEREST
(a) No Right to Employment. The grant of this Award shall not confer on the Grantee any right to continue as an employee, nor interfere in any way with the right of the Company to terminate the Grantee at any time.
(b) Capital Structure. The grant of this Award shall not affect in any way the right or power of the Company or any of its subsidiaries to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s or any subsidiary’s capital structure or its business, or any merger, consolidation or business combination of the Company or any subsidiary, or any issuance or modification of any term, condition, or covenant of any bond, debenture, debt, preferred stock or other instrument ahead of or affecting the Common Stock or the rights of the holders of Common Stock, or the dissolution or liquidation of the Company or any subsidiary, or any sale or transfer of all or any part of its assets or business or any other Company or subsidiary act or proceeding, whether of a similar character or otherwise.
9. GOVERNING LAW; PLAN
This Agreement shall be governed by the internal laws of the state of Florida as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. Any legal action or proceeding with respect to the Plan or the Restricted Stock may only be brought and determined in a court sitting in the County of Hillsborough, or the Federal District Court for the Middle District of Florida sitting in the County of Hillsborough, in the State of Florida. The Company may require that the action or proceeding be determined in a bench trial.
ALL PARTIES ACKNOWLEDGE THAT THIS RESTRICTED STOCK AWARD IS GRANTED UNDER AND PURSUANT TO THE PLAN, WHICH SHALL GOVERN ALL RIGHTS, INTERESTS, OBLIGATIONS, AND UNDERTAKINGS OF BOTH THE COMPANY AND THE GRANTEE. ALL CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THIS RESTRICTED STOCK AGREEMENT SHALL HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE PLAN.
10. SEVERABILITY
If any provision of this agreement is or becomes or is deemed to be invalid, illegal or unenforceable, or would disqualify this Award under any law the Committee deems applicable, then such provision will be construed or deemed amended to conform to the applicable law, or if the Committee determines that the provision cannot be construed or deemed amended without materially altering the intent of this agreement, then the provision will be stricken and the remainder of this agreement will remain in full force and effect.
11. COUNTERPARTS
This agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Grantee has executed this Agreement all as of the day and date first above written.
SUPERIOR GROUP OF COMPANIES, INC.
/s/ Michael Benstock__________________
By: Michael Benstock
Chief Executive Officer
/s/ Jordan Alpert
Jordan Alpert
(Grantee)
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and transfer unto _______________________________________(__________) shares of Common Stock of Superior Group of Companies, Inc. in the books of said corporation represented by Certificate No. ________ and do hereby irrevocably constitute and appoint _____________________________ to transfer the said stock on the books of the said corporation with full power of substitution in the premises.
This Assignment Separate from Certificate may be used only in accordance with the Restricted Stock Agreement between Superior Group of Companies, Inc. and the undersigned dated ________________, 20___.
Dated: ________________, 20___
/s/ Jordan Alpert
Print name: Jordan Alpert
INSTRUCTIONS:
Please sign, but do not fill in any other information (including the date).
Exhibit 31.1
CERTIFICATIONS
I, Michael Benstock, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Superior Group of Companies, Inc.;
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: July 28, 2021
/s/ Michael Benstock
Michael Benstock
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATIONS
I, Andrew D. Demott, Jr., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Superior Group of Companies, Inc.;
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: July 28, 2021 |
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/s/ Andrew D. Demott, Jr. |
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Andrew D. Demott, Jr. Chief Operating Officer, Chief Financial Officer and Treasurer (Principal Financial Officer) |
Exhibit 32
Written Statement of the Chief Executive Officer and the Chief Financial Officer
Pursuant to 18 U.S.C. §1350
Solely for the purposes of complying with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Superior Group of Companies, Inc. (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Michael Benstock
Michael Benstock
Chief Executive Officer
(Principal Executive Officer)
Date: July 28, 2021
/s/ Andrew D. Demott, Jr.
Andrew D. Demott, Jr.
Chief Operating Officer, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: July 28, 2021