Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this 29th
day of March, 1999, and having an "Effective Date" of
March 29, 1999, is by and among SCHOOL SPECIALTY, INC.,
a Delaware corporation (the "Company") and XXXXX XXXXXX
("Employee").
RECITALS
The Company desires to employ the Employee on the
terms set forth in this Employment Agreement.
NOW, THEREFORE, in consideration of the mutual
promises, terms, covenants and conditions set forth
herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as
follows:
AGREEMENTS
1. Employment and Duties.
The Company hereby agrees to employ the Employee and the Employee
hereby accepts employment as the General Manager of the
SmartStuff division of the Company and agrees to devote
his full business time and efforts to the diligent and
faithful performance of his duties as the General
Manager hereunder under the direction of the Chief
Executive Officer and/or the President of the Company.
Such duties shall be performed from headquarters of the
Company in the Portland, Oregon area.
2. Term of Employment.
Unless sooner terminated as hereinafter provided, the term of the
Employee's employment hereunder shall commence with and
only with the Effective Date of this agreement and
shall continue for a period of two (2) years. This
Agreement may be terminated prior to the end of the
Term in the manner provided herein. For the purpose of
this Agreement, the term "Contract Year" shall mean the
annual period commencing on the Effective Date.
3. Compensation.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary.
Effective on the date hereof, the base salary payable
to Employee shall be One Hundred Fifty Thousand Dollars
($150,000.00) per year or such greater amount as
determined from time to time by the Chief Executive
Officer and/or the President of the Company (but not
reviewed less frequently than on an annual basis),
payable on a regular basis in accordance with the
Company's standard payroll procedures, but not less
than monthly. It is understood that the base salary is
a minimum amount, and shall not be reduced during the
term of this Agreement.
(b) Incentive Bonus.
During the initial term and any extensions thereof, Employee
shall be eligible to receive an incentive bonus based upon
his participation in the Company's senior management
bonus program as specified in Exhibit A as attached
hereto. The first and last years of employment will be
prorated. Said bonus program shall provide the
Employee the opportunity for incentive compensation up
to one hundred percent (100%) of his base salary.
(c) Perquisites, Benefits, and Other Compensation.
During the initial term and any extensions thereof, Employee
shall be entitled to receive all perquisites and benefits as are
customarily and generally provided by or at the
direction of The Company, to its executive employees
and executive employees of its subsidiaries, subject to
such changes, additions, or deletions as the Company
may make generally from time to time, as well as such
other perquisites or benefits as may be specified from
time to time by the Board of Directors, President or
the Chief Executive Officer of the Company.
Notwithstanding the foregoing the Employee shall be
permitted six (6) weeks of vacation during the calendar
year of 1999. Beyond 1999 the standard vacation policy
of the Company shall apply to the Employee. For the
purpose of calculating the amount of vacation due the
employee for years 2000 and forward the Employee shall
be given credit for his time of employment with the
Company prior to its acquisition by School Specialty,
Inc.
(d) Stock Options.
The Employee shall be granted a combination of options
granted under the School Specialty, Inc, 1998 Stock
Incentive Plan Incentive Stock Option Agreement ("ISO")
(as defined and qualified under 422 of the Internal
Revenue Code of 1986, as amended (the "Code")) and
School Specialty, Inc, 1998 Stock Incentive Plan
Nonqualified Stock Option Agreement ("NSO") in a total
amount not to exceed Seventy Five Thousand (75,000)
shares of common stock of the Company (the "Option
Shares"). The Employee shall have the right for sixty
(60) days following the execution and delivery of this
Employment Agreement to allocate among other employees
of the Corporation and himself the Option Shares. At
or before the end of that sixty (60) day period the
Employee shall provide a list to the Company of the
allocation of the Option Shares. The exercise price of
these options shall be established as of the date of
grant pursuant to the terms of the ISO and NSO. The
Option Shares shall be composed of the maximum amount
of shares permitted to be issued under the terms of the
ISO with the balance to be issued under the terms of
the NSO. The ability to purchase the Option Shares
shall have the following characteristics: (i) an
exercise price equal to the fair market price of the
common stock of the Company on at date of grant; (ii)
expiration date of ten (10) years from the Effective
Date; (iii) vested over a four (4) year period, at 25%
per year, with such vesting to occur at the end of
Contract Year (unless the Compensation
Committee of the Board of Directors of the Company provides for
earlier vesting before such date); and (iv) subject to forfeiture
on conditions as provided in the ISO and/or NSO documents.
4. Covenants and Conditions.
(a) The Employee will acquire information and knowledge respecting
the intimate and confidential affairs of the Company in the
various phases of its business. Accordingly, the
Employee agrees that he shall not for the term of his
employment and for a period of two (2) years
thereafter, use for himself or disclose to any person
not employed by the Company (other than disclosures
reasonably required to be made in the ordinary course
of the Company's business) any such knowledge or
information heretofore acquired or acquired during the
term of this employment hereunder. Nothing in this
agreement shall be construed to limit or supersede the
common law of torts or statutory or other protection of
trade secrets where such law provides the Company with
greater protections or protections for a longer
duration than that provided in this Section 4 of this
Agreement.
(b) The Employee agrees that all memoranda, notes, records, papers,
or other documents and all copies thereof relating to the
Company's operations or business and containing
confidential or proprietary information subject to
protection under the Oregon Trade Secrets Act, some of
which may be prepared by him, and all objects
associated therewith (such as models and samples) in
any way obtained by him shall be the Company's
property. This shall include, but is not limited to,
documents and objects concerning any process,
apparatus, or product manufactured, used, developed,
investigated, or considered by the Company. The
Employee shall not, except for Company use, copy or
duplicate any of the aforementioned documents or
objects, nor remove them from the Company's facilities,
nor use any information concerning them except for the
Company's benefit, either during his employment or
thereafter. The Employee agrees that he will deliver
all of the aforementioned documents and objects that
may be in his possession to the Company on termination
of his employment, or at any other time on the
Company's request, together with his written
certification of compliance, except for those documents
and objects received as a director of the Company.
5. Death or Disability of the Employee.
The Employee's employment shall terminate immediately upon
his death. In the event the Employee becomes
physically or mentally disabled under the terms of the
then currently effective disability coverage for full
time employees of the Company (which shall not be
materially different from such coverage afforded to
executive employees of The Company), he shall cease
receiving compensation under the terms of this
agreement. In the event that the Employee returns to
active full time employment
with the Company during the
term of this agreement, or any extension or renewal
thereof, he shall then be compensated for his
employment under the terms of this agreement.
6. Termination.
The Company reserves the right to terminate the Employee's
employment under this agreement should any of the following occur:
(a) The Employee's commission of a felony that is an act which, in
the opinion of the Board of Directors, is either abhorrent
to the community or is an intentional act, which the
Board of Directors considers materially damaging to the
reputation of the Company or its successors or assigns.
(b) The Employee's material breach of or failure to perform his
obligations in accordance with the terms and conditions
of this agreement following notice thereof and a thirty
(30) day period to cure same.
(c) The death or disability of the Employee.
7. Covenant Not to Compete.
In consideration of the employment hereunder, the Employee hereby
agrees that during the term of his employment by the Company
and for the term of his employment with the Company and
for a period of two (2) years thereafter, the Employee
will not either directly or indirectly own, have
proprietary interest (except for less then 5% of any
listed company or company traded in the over-the-
counter market) of any kind in, be employed by, or
serve as a consultant to or in any other capacity for
any firm, other than the Company and its subsidiaries,
engaged in the manufacture and/or distribution of
school supplies, software, Internet services,
equipment, furniture or other products, if such
products or directly competitive products were made
and/or distributed by the Company or any of the
Company's present or future subsidiary corporations
(acquired during the term of this Agreement) during the
period of the Employee's employment, by the Company or
any such subsidiary, in the area where they are engaged
in business without the express written consent of the
Company. The Employee agrees that a breach of the
covenant contained herein may result in irreparable and
continuing damage to the Company for which there may be
no adequate remedy at law and in the event of any
breach of such agreement, the Company shall be entitled
to injunctive and such other and further relief
including damages as may be proper.
8. Notice.
All notices, demands and other
communications hereunder shall be deemed to have been
duly given, if delivered by hand, telefaxed or mailed,
certified or registered mail with postage prepaid:
To the Company: School Specialty, Inc.
0000 Xxxxx Xxxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxx, XX 00000-0000
Attention: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxxx XX, Esq.
Xxxxxxx & Xxxxxxx, S.C.
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
To Employee: Xxxxx X. Xxxxxx
SmartStuff Development Corporation
0000 XX 00xx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
or to such other address as the person to
whom notice is to be given may have specified
in a notice duly given to the sender as
provided herein. Such notice, request, claim,
demand, waiver, consent, approval or other
communication shall be deemed to have been
given as of the date so delivered, telefaxed,
mailed or dispatched and, if given by any
other means, shall be deemed given only when
actually received by the addressees.
9. Entire Agreement; Amendment; Waiver.
This Agreement (including any documents referred
to herein) sets forth the entire
understanding of the parties hereto with
respect to the subject matter contemplated
hereby. Any and all previous agreements and
understandings between or among the parties
regarding the subject matter hereof, whether
written or oral, are superseded by this
Agreement. This Agreement shall not be
amended or modified except by a written
instrument duly executed by each of the
parties hereto. Any extension or waiver by
any party of any provision hereto shall be
valid only if set forth in an instrument in
writing signed on behalf of such party.
10. Expenses.
The Company will pay all fees,
expenses and disbursements of their agents,
representatives, accountants and counsel
incurred in connection with the subject
matter of this Agreement, and its
enforcement.
11. Governing Law.
This Agreement shall in all respects be construed according to the
laws of the State of Delaware, without regard
to its conflict of laws principles.
IN WITNESS WHEREOF, the parties hereto have cause
this Agreement to be duly executed as of the date first
written above.
THE COMPANY:
SCHOOL SPECIALTY, INC.
/s/ Xxxxx Xxxxxx Zanden
----------------------------------
Xxxxx Xxxxxx Zanden, President
EMPLOYEE:
/s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx, Individually
EXHIBIT A
EXECUTIVE PLAN
The Executive Incentive Plan will be based on the
operating profit budget. The incentive of company
presidents will be based 25% on the consolidated
operating budget and 75% on their company's operating
profit budget. Corporate executives' incentive will be
based 100% on the consolidated operating profit budget.
If the budget is met, participants will be eligible to
receive a bonus of 50% of base salary. If the budget
is exceeded, participants will be eligible for
additional bonus of up to 50% of base salary which will
be calculated as a percentage of salary based upon the
amount exceeding budget and the maximum payout level.
If the budget is not met, the bonus amount will be
zero. New acquisitions will not be included in these
calculations.
Consolidated operating profit must be at least 7% of
sales in order for any incentives to be paid. Payment
will be made annually after the audit and approval by
the Board of Directors' Compensation Committee.
Target
Operating Profit 1
Maximum
Budget Payout Level
Consolidated $31,000,000 $40,000,000
Childcraft $3,900,000 $5,000,000
Re-Print $5,500,000 $7,100,000
Sax $5,700,000 $7,400,000
Traditional $18,000,000 $23,200,000
Gresswell $750,000 $1,500,000
Education Access $900,000 $1,800,000
1 These figures are based on the most recent version of
the budget. When the budget is finalized, they will
be revised to reflect our final operating budget.
Calculations for Executive Incentive Plan
Example 1
Act. Consolidated Act. Childcraft
Salary Operating Profit Operating Profit
President of Specialty Division $100,000 $35,000,000 $4,900,000
-------------------------------------------------------
Percentage for exceeding budget
Consolidated Portion
Maximum payout level $40,000,000
Budget - 31,000,000
------------
$9,000,000
(50% of salary) $50,000/ $9,000,000 = .56% x 25% = .139%
Division Portion
Maximum payout level $5,000,000
Budget $3,900,000
-----------
$1,100,000
(50% of salary) $50,000/ $1,100,000 = 4.55% x 75% = 3.41%
-------------------------------------------------------
Bonus earned for meeting budget
Consolidated Operating Profit: 50% x 100,000 x .25 = $12,500
Division Operating Profit 50% x 100,000 x .75 = $37,500
--------
$50,000
Bonus earned for exceeding budget
35,000,000 - 31,000,000 = 4,000,000 x .139% = $ 5,560
4,900,000 - 3,900,000 = 1,000,000 x 3.41% = $34,100
-------
$39,660
TOTAL BONUS EARNED $89,660
=======
89.7%
Example 2
Act. Consolidated Act. Division
Salary Operating Profit Operating Profit
President of Specialty Division $100,000 $30,000,000 $4,900,000
Bonus earned for meeting budget
Consolidated Operating Profit: 0% x 100,000 x .25 = $0
Division Operating Profit 50% x 100,000 x .75 = $37,500
--------
$37,500
Bonus earned for exceeding budget
30,000,000 - 31,000,000 = (1,000,000) $0
4,900,000 - 3,900,000 = 1,000,000 x 3.41% = $34,100
--------
$34,100
--------
TOTAL BONUS EARNED $71,600
========
71.6%
