EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN
MOVIE GALLERY US, LLC
AND
XXXXXXX X. XXXXXX
DATED
AUGUST 1, 2007
TABLE OF CONTENTS
EXECUTIVE EMPLOYMENT AGREEMENT
PARAGRAPH PAGE NO.
1. Background 3
2. Definitions 3
3. Employment 6
4. Responsibilities 6
5. Stock Compensation and Benefits; Reimbursements 7
6. Term; Termination 8
7. Proprietary Information 9
8. Covenant Not To Compete 10
9. Non-Disparagement 10
10. Injunctive Relief 11
11. Severability 11
12. Arbitration 11
13. Attorneys' Fees 11
14. Headings 11
15. Notices 11
16. General Provisions 12
17. Entire Agreement 12
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into
this 1ST day of August, 2007 by and between MOVIE GALLERY US, LLC, a
Delaware limited liability company, with its principal offices at 000
Xxxx Xxxx Xxxxxx, Xxxxxx, Xxxxxxx 00000 (the "Company"), and XXXXXXX
X. XXXXXX ("Employee"), whose address is 000 Xxxxxxxxxx Xxxxx,
Xxxxxxxxxx, Xxxxx 00000 and shall be effective on the Effective Date,
as defined below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements of the parties hereto, the parties do hereby
covenant and agree as follows:
1. Background.
A. The Company is engaged in the Home Entertainment Business (as
hereinafter defined).
B. The Company desires to secure and retain the services of Employee
in the office of President of Retail Operations and such services are
considered by the Company to be valuable with regard to the Home
Entertainment Business.
C. Employee is currently employed with the Company and desires to
continue his employment with the Company, subject to and in accordance
with the terms and conditions set forth herein.
2. Definitions.
As used in this Agreement, the following terms shall have the meaning
as set forth below, and the parties hereto agree to be bound by the
provisions hereof:
A. Area means the geographic area of the United States and Canada,
and such other geographic areas in which operations are performed,
supervised, or assisted in by Employee on behalf of the Company or in
which the Company operates, both as of the date hereof and as are
anticipated to be conducted throughout the Term.
B. Board of Directors means the Board of Directors of the Company.
C. Change of Control means the occurrence of any of the following
events:
(i) Merger or consolidation where the Company is not the
consolidated, continuing or surviving company;
(ii) Transfer of all or substantially all of the assets or stock of
the Company; or
(iii) Change in control of Company of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 as in effect
on the date thereof, and any person or persons acting in concert (as
such term is used in Section 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the beneficial holder directly or indirectly of
securities of the Company representing fifty percent (50%) or more of
the combined voting power of Company's then outstanding securities.
D. Chief Executive Officer means the Chief Executive Officer of the
Company from time to time.
E. Company means Movie Gallery US, LLC, its parent corporation, Movie
Gallery, Inc., and their respective subsidiaries and successors.
F. Constructive Termination means a separation from service with the
Company during the Term due to Employee's resignation within a period
of two years after the occurrence of one of the following without
Employee's consent: (i) a material diminution in Employee's base
salary or target annual bonus, (ii) a material diminution in
Employee's authority, duties or responsibilities from those in which
Employee was engaged as President of Retail Operations of the Company
on the Effective Date, (iii) a material change in the primary
geographic location at which Employee provides services to the
Company, or (iv) any material breach by the Company of this Agreement;
provided, however, that any such event shall constitute "good reason"
only if (i) Employee provides initial notice of the "good reason"
event to the Company within 90 days after the event giving rise to
"good reason", and (ii) the Company fails to cure the event giving
rise to "good reason" within 30 days after its receipt of Employee's
initial notice of such event
G. Effective Date means April 30, 2007.
H. Home Entertainment Business means the business of renting and/or
selling movies, games and other entertainment content, whether
delivered, provided and/or displayed via a physical retail store,
kiosk or vending machine, data transmission, the Internet, direct
mail, or through any other form of display or delivery system (whether
now know or developed hereafter, whether such system involves the
delivery of a physical or tangible object and including any other
technological evolutions thereof).
I. Initial Term means the basic term of this Agreement, which shall
be twelve (12) months, beginning on the Effective Date and ending on
the date which is twelve (12) months following the Effective Date.
J. Permanent Disability means a physical or mental condition which
renders Employee incapable of performing his regular duties hereunder
for a period of one hundred twenty (120) consecutive days. In the
event of any disagreement between Employee and the Company as to
whether Employee is suffering from Permanent Disability, the
determination of Employee's Permanent Disability shall be made by one
or more board certified licensed physicians practicing the specialty
of medicine applicable to Employee's disorder in accordance with the
provisions of this Subsection J. If either the Company or Employee
desires to initiate the procedure provided in this Section, such party
(the "Initiating Party") shall deliver written notice to the other
party (the "Responding Party") in accordance with the provisions of
this Agreement specifying that the Initiating Party desires to proceed
with a medical examination and the procedures specified in this
Section. Such notice shall include the name, address and telephone
number of the physician selected by the Initiating party (the
"Disability Examination Notice"). If the Responding Party fails
within thirty (30) days after the receipt of the Disability
Examination Notice to designate a physician meeting the standards
specified herein, the physician designated by the Initiating Party in
the Disability Examination Notice shall make the determination of
Permanent Disability as provided in this Section. If the Responding
Party by written notice notifies the Initiating Party within thirty
(30) days of the receipt by the Responding Party of the Disability
Examination Notice by notice specifying the physician selected by the
Responding Party for purposes of this Section, then each of the two
physicians as so designated by the respective parties shall each
examine Employee. Examinations shall be made by each such physician
within thirty (30) days of such physician's respective designation.
Each physician shall render a written report as to whether Employee
is, in such physician's opinion, suffering Permanent Disability. If
the two physicians agree on the status of Employee for purposes of
this Section, such determination shall be conclusive and dispositive
for all purposes of this Section. If the two physicians cannot agree,
the two physicians shall jointly select a third physician meeting the
standards specified in this Section within thirty (30) days after the
later report of the two physicians is submitted. The third physician
shall render a written report on the status of Employee within thirty
(30) days of selection and such report shall be dispositive for
purposes of this Section. For purposes of this Subsection J, Employee
agrees that he shall promptly submit to such examinations and tests as
such physicians shall reasonably request for purposes of making a
determination of Permanent Disability as provided herein. Failure or
refusal of the Company to designate a licensed physician to make a
determination of Permanent Disability as required in accordance with
this Section or of Employee to submit to the examination as required
by this Section shall constitute a conclusive admission by the Company
or Employee, as appropriate, that Employee is suffering from a
Permanent Disability as provided herein.
K. Renewal Term means the period, if any, following the Initial Term
during which the Agreement is extended as set forth in Subsection 6B.
X. Xxxxxxxxx Amount shall have the meaning as set forth in Subsection
5C.
M. Term means the Initial Term and any Renewal Term.
N. Termination Date means the following: (a) with respect to
Termination With Cause, the date the Company notifies Employee of the
actions giving rise to such termination and the termination of this
Agreement based thereon; (b) with respect to the death of Employee,
the date of his death; (c) with respect to Termination Without Cause,
the date on which the Company gives Employee notice of Termination
Without Cause; (d) with respect to Voluntary Termination, the date on
which Employee unilaterally terminates his employment relationship
with the Company; (e) with respect to the Permanent Disability of
Employee, the date Employee is determined to be suffering from
Permanent Disability, as provided in Subsection 2J; and (f) with
respect to Constructive Termination, the date on which Constructive
Termination occurs as provided in Subsection 2F.
O. Termination With Cause means the termination of this Agreement and
Employee's separation from service with the Company during the Term,
only for the following:
(i) Theft or embezzlement with regard to material property of the
Company;
(ii) Criminal conviction punishable by imprisonment;
(iii) Material breach by Employee of any of his duties or obligations
under this Agreement; or
(iv) Gross insubordination.
P. Termination Without Cause means a termination by the Company of
this Agreement and Employee's separation from service with the Company
during the Term which is not a result of a Termination With Cause, a
Voluntary Termination or a Constructive Termination, including the
expiration of the Term as a result of the Company electing not to
renew this Agreement at the end of the Initial Term or any Renewal
Term.
Q. Triggering Event means (i) Employee's separation from service with
the Company during the Term due to a Termination Without Cause or (ii)
Employee's separation from service with the Company during the Term
due to a Constructive Termination of Employee's employment with the
Company.
R. Voluntary Termination means unilateral termination by Employee of
his employment with the Company prior to the end of the Term and in
the absence of a Triggering Event, or as a result of Employee electing
not to renew this Agreement at the end of the Initial Term or any
Renewal Term. Notice by Employee to the Company of a breach by the
Company of its obligations under this Agreement pursuant to Section 2F
shall not constitute a Voluntary Termination for purposes of this
Agreement.
3. Employment. The Company agrees to employ Employee in the office
of President of Retail Operations of the Company for the Term, and
Employee agrees to accept such employment and office upon the terms
and conditions set forth herein.
4. Responsibilities. Pursuant to this Agreement, Employee shall have
the responsibilities, perform the duties, and exercise the powers as
President of Retail Operations of the Company or as designated,
assigned or set forth by the Chief Executive Officer or Board of
Directors and consistent with the responsibilities, duties and powers
exercised by Employee as President of Retail Operations of the Company
as of the Effective Date and such other duties as may be assigned from
time to time by the Chief Executive Officer or Board of Directors.
The Employee agrees to devote his full time and efforts to the
performance of his duties as President of Retail Operations of the
Company. The Employee agrees that he will not engage in any other
gainful occupation during the term of this Agreement, without the
prior written consent of the Company. Nothing contained herein shall
be construed, however, to prevent the Employee from personal business,
charitable and professional activities, from trading, for his own
account and benefit, in stocks, bonds, securities, real estate,
commodities, or other forms of investments. Employee agrees to comply
with the Company's policies, rules and regulations as determined by
the Company and shall uphold his fiduciary obligations to the Company at
all times.
5. Compensation and Benefits; Reimbursements. The Company shall pay,
and Employee agrees to accept, as partial compensation for services to
be rendered hereunder during the Term, the remuneration described
below:
A. Annual Salary. The Company shall pay Employee a base annual
salary as of the Effective Date of Five Hundred Twenty-Five Thousand
and No/100 Dollars ($525,000.00) per year, subject to such increases
as the Board of Directors in its sole discretion deems appropriate in
accordance with the Company's customary procedures regarding the
salaries of its executive officers ("Base Salary"). The Base Salary
shall be payable according to the customary payroll practices of the
Company, but in no event less frequently than monthly.
B. Bonuses. During the Term, Employee shall be entitled to
participate in the Company's executive officer bonus program, as
amended from time to time by the Board of Directors. During the Term,
Employee shall be entitled to participate in other incentive and/or
bonus, cash and equity compensation plans of the Company which provide
benefits to senior officers, as determined by the Board of Directors
of the Company.
X. Xxxxxxxxx Payments.
(i) Upon the occurrence of a Triggering Event, Employee shall be
deemed to have earned a severance amount equal to two (2) times
Employee's Base Salary ("Severance Amount"), on the effective date of
the Triggering Event. The obligation of the Company under this
Subsection 5C shall take the place of any other obligations of the
Company under this Section 5 to pay to Employee for the balance of the
Term Employee's then Base Salary pursuant to Subsection 5A.
(ii) The Severance Amount payable to Employee pursuant to this
Subsection 5C shall be paid as follows: (a) if a Triggering Event
occurs as a result of a Constructive Termination in connection with a
Change of Control, the Severance Amount shall be paid within thirty
(30) days of the date of the Triggering Event; (b) if a Triggering
Event (other than a Constructive Termination in connection with a
Change of Control) occurs within one hundred eighty (180) days prior
or subsequent to the date of a Change of Control, or if it can
reasonably be shown that it is in any way related to, results from,
arises out of, or is in connection with a Change of Control, the
Severance Amount shall be paid within thirty (30) days of the date of
the Triggering Event; and (c) if a Triggering Event otherwise occurs,
the Severance Amount shall be pro-rated and payable in equal
installments in accordance with the Company's payroll practices and
procedures in effect at the time of the Triggering Event such that no
payment would be made after two and one-half (2 1/2) months following
the end of the calendar year in which Employee's employment with the
Company is terminated.
(iii) Upon the occurrence of a Triggering Event, any and all stock
options to purchase shares of the Company's Common Stock which are
held by Employee shall become one hundred percent (100%) vested and
immediately exercisable as of the date of such Triggering Event, and
shall be exercisable by the Employee over the balance of the remaining
stated term of such stock options (which term shall be the term
applicable to the Employee in the absence of termination of
employment), notwithstanding any provision contained in the stock
option agreement to the contrary.
D. Insurance and Benefits; Reimbursements.
(i) Employee shall be entitled to participate in or receive benefits
under all employee and executive benefit plans or arrangements and
perquisites of employment, including, without limitation, plans or
arrangements providing for health and disability insurance coverage,
life insurance for the benefit of Employee's beneficiaries, deferred
compensation and pension benefits, and personal financial, investment,
legal or tax advice, all at the highest level that is available
through the Company to other senior officers of the Company subject to
the same terms and conditions as apply to such other senior officers.
(ii) Employee shall be entitled to all holidays recognized by the
Company and vacation time for not less than three (3) weeks per year
plus such additional time as is available under the vacation policy of
the Company in effect for senior officers with continuing payment of
all compensation as set forth herein.
(iii) Employee shall be reimbursed by the Company for all reasonable
expenses incurred by Employee in connection with the performance of
his duties and responsibilities, subject to, or in accordance with,
the then current reimbursement policies of the Company.
(iv) Nothing paid to Employee under any plan, arrangement or
perquisite presently in effect or made available in the future shall
be deemed to be in lieu of the salary and other compensation or
payments paid or payable to Employee under this Agreement.
(v) In the event of a termination of Employee's employment with the
Company as a result of or in connection with a Triggering Event, and
Employee elects under COBRA to continue his group health coverage,
then for a twelve (12) month period following the Termination Date,
the Company shall pay Employee (on a monthly basis) an amount equal to
the actual premium cost to Employee for the portion of such
continuation coverage (if any) that was being paid by the Company at
the time of such termination.
6. Term; Termination.
A. This Agreement will commence on the Effective Date and shall
continue during the Initial Term.
B. In addition to the Initial Term, this Agreement shall be renewed
for additional one (1) year periods (the "Renewal"), ad infinitum,
unless either party gives notice of non-renewal at least thirty (30)
days prior to the expiration of the Initial Term or the then current
Renewal Term.
C. During the Term, the Company or Employee may terminate this
Agreement, subject to the terms, conditions and obligations hereof, by
any of the following events:
(i) Mutual written agreement expressed in a single document signed by
both the Company and Employee;
(ii) Voluntary Termination by Employee;
(iii) Death of Employee;
(iv) Termination Without Cause;
(v) Termination With Cause;
(vi) Constructive Termination; or
(vii) Permanent Disability.
D. The obligations of Employee under Sections 7, 8 and 9 shall
survive termination or expiration of this Agreement. The obligations
of the Company under Section 5 that by their terms are to be paid or
to continue after termination of this Agreement shall also survive
such termination.
7. Proprietary Information.
A. Employee acknowledges and agrees that during his employment with
the Company, prior to and subsequent to the date of this Agreement,
Employee has had and will continue to have access to certain
confidential and proprietary information of the Company, including:
(i) information which derives economic value, actual or potential,
from not being generally known to, and not being readily ascertainable
by proper means by, other persons who can obtain economic value from
its disclosure or use, and is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy
(hereinafter "Trade Secrets" or "Trade Secret"); or
(ii) information which does not rise to the level of a Trade Secret,
but is valuable to the Company and provided in confidence to Employee
(hereinafter "Confidential Information").
B. Employee acknowledges and agrees with respect to Trade Secrets and
Confidential Information provided to or obtained by Employee, prior to
or subsequent to the date of this Agreement (hereinafter collectively
the "Proprietary Information"):
(i) that the Proprietary Information is and shall remain the
exclusive property of the Company;
(ii) to use the Proprietary Information exclusively for the purpose
of fulfilling the obligations under this Agreement;
(iii) to return the Proprietary Information, and any copies thereof,
in his possession or under his control, to the Company upon request of
the Company, or expiration or termination of this Agreement for any
reason; and
(iv) to hold the Proprietary Information in confidence and not to
copy, publish, or disclose to others or allow any other party to copy,
publish, or disclose to in any form, any Proprietary Information
without the prior written approval of an authorized representative of
the Company.
C. The obligations and restrictions set forth in this Section 7 shall
survive expiration or termination of this Agreement, for any reason,
and shall remain in full force and effect as follows:
(i) as to Trade Secrets, for so long as such information remains
subject to protection under applicable law;
(ii) as to Confidential Information, for a period of five (5) years
after expiration or termination of this Agreement for any reason.
8. Covenant Not To Compete. Employee hereby agrees that during the
term hereof, and for a period of one (1) year from the date of
expiration or termination of this Agreement for any reason, and within
the Area, Employee will not:
A. compete with the Company in the Home Entertainment Business, or
engage in or carry on the Home Entertainment Business, directly or
indirectly, through any person or entity, or in any capacity,
including, without limitation, agent, lender, trustee, consultant,
shareholder, director, officer, employee, or partner;
B. be employed by, or perform any services as employee, consultant,
or otherwise for, any person, firm, partnership, joint venture,
corporation or other entity that competes with the Company in the Home
Entertainment Business, or that is engaged in the Home Entertainment
Business within the Area;
C. employ, solicit for employment, or advise or recommend to any
other person or entity that such person or entity employ, or solicit
for employment, any employee of the Company; or
D. deal with, invest in (other than as a stockholder of less than one
percent (1%) of the issued and outstanding stock of a publicly traded
corporation having assets in excess of $100,000,000.00), lend money
to, guarantee loans of, make gifts to, advise, or by any other means
assist any other person or entity that competes with the Company, or
that is engaged in the Home Entertainment Business within the Area.
9. Non-Disparagement. During the Term and for a period of one (1)
year from the date of expiration or termination of this Agreement for
any reason, Employee shall maintain a professional manner, and shall
avoid and refrain from: (i) making any disparaging or derogatory remarks
or comments about the Company, or any of its employees, officers,
directors, stockholders, members, representatives or agents; or (ii)
engaging in any other conduct which is likely to disparage the Company,
or any of its employees, officers, directors, stockholders, members,
representatives or agents, or otherwise damage, jeopardize or be
prejudicial to any business, professional or personal relationship,
interests or reputation of the Company, or any of its employees,
officers, directors, stockholders, members, representatives or agents.
10. Injunctive Relief. Employee acknowledges and agrees that any
breach by Employee of his obligations under Section 7, Section 8 or
Section 9 of this Agreement will cause irreparable harm to the Company
and agrees to the entry of a temporary restraining order and permanent
injunction by any court of competent jurisdiction to prevent breach or
further breach thereof, in addition to any other remedy available to
the Company at law or in equity.
11. Severability. If any provision of this Agreement is held to be
invalid or unenforceable by any court of competent jurisdiction, such
holdings shall not affect the enforceability of any other provision of
this Agreement, and all other provisions shall continue in full force
and effect.
12. Arbitration. Except as set forth in section 10 above, all disputes
between the parties hereto arising out of, or relating to, this
Agreement shall be settled and determined to final resolution by
arbitration. Any such arbitration shall be held in Dothan, Alabama, and
shall be conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. There shall be one arbitrator,
as shall be agreed upon by the parties. In the absence of such
agreement, each party in the dispute shall select one arbitrator and the
arbitrators so selected shall select a third arbitrator. In the event
the arbitrators cannot agree upon the selection of a third arbitrator,
such third arbitrator shall be appointed by the American Arbitration
Association at the request of the parties in dispute. All of the
arbitrators shall be individuals skilled in the legal and business
aspects of the subject matter of this Agreement and of the dispute. The
arbitrator(s) shall be instructed to manage the arbitration to a prompt
resolution. Judgment upon any award obtained in such proceedings may be
entered in any court having jurisdiction over the subject matter of the
proceedings. All arbitration costs shall be paid by the non-prevailing
party. The parties agree to be bound by the decision and award of the
arbitrator or arbitrators.
13. Attorneys' Fees. If any arbitration, legal action or other
proceeding is commenced to enforce or interpret any provision of, or
otherwise relating to, this Agreement, the prevailing party as
determined through arbitration or final judgment of a court of
competent jurisdiction (which arbitration or judgment is not subject
to further appeal due to the passage of time or otherwise) shall be
entitled to reimbursement from the other party for reasonable
attorneys' fees and expenses incurred by the prevailing party in
connection with the resolution of the dispute.
14. Headings. The headings of the several paragraphs in this
Agreement are inserted for convenience of reference only and are not
intended to affect the meaning or interpretation of this Agreement.
15. Notices. All notices, consents, requests, demands and other
communications hereunder shall be in writing and shall be deemed to
have been duly given or delivered if (i) delivered personally; (ii)
mailed by certified mail, return receipt requested, with proper
postage prepaid; or (iii) delivered by recognized courier contracting
for same day or next day delivery with signed receipt acknowledgment
to the Company at its principal offices, or to Employee at the address
last shown on the records of the Company, or at such other address as
the parties hereto may have last designated by notice to the other
party. Any item delivered personally or by recognized courier
contracting for same day or next day delivery shall be deemed
delivered on the date of delivery. Any item mailed shall be deemed to
have been delivered on the date evidenced on the return receipt.
16. General Provisions. This Agreement shall be governed by and
construed under the laws of the State of Alabama, without giving
effect to its conflict of law principles. The terms of this Agreement
shall be binding upon and inure to the benefit of the Company and its
successors and assigns. Neither party may assign his or its rights
and obligations under this Agreement to any other party.
17. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto, and except as otherwise provided in this
Agreement, supersedes and cancels all previous and contemporaneous
written and oral agreements, including all prior employment agreements
between the Company and Employee and amendments thereto. No amendment
or modification of this Agreement shall be valid or binding unless in
writing and signed by the party to be bound.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
COMPANY:
ATTEST: MOVIE GALLERY US, LLC
/s/ Xxxxxx X. Xxxxxx By: /s/ S. Page Xxxx
-------------------- --------------------
Assistant Secretary S. Page Xxxx
Its Executive Vice
President, Chief
Compliance Officer,
Secretary & General
Counsel
Date: 8/1/2007
EMPLOYEE:
/s/ Xxxxxx Xxxxxxx /s/ Xxxxxxx Xxxxxx
------------------ ------------------
Witness Xxxxxxx X. Xxxxxx
Date: 8/1/2007
