EMPLOYMENT AGREEMENT
EXHIBIT
10.1
THIS
EMPLOYMENT AGREEMENT (the “Agreement”) is entered into and effective as of this
13th day of September, 2007, by and between STAGE STORES, INC., a Nevada
corporation (the “Company”), and ED RECORD, an individual (the
“Executive”).
WITNESSETH:
WHEREAS,
the Board of Directors of the Company (the “Board”) has determined that it is in
the best interests of the Company to appoint the Executive to the position
of
Executive Vice President, Chief Financial Officer of the Company (the
“Position”), subject to the terms and conditions of this Agreement;
and
WHEREAS,
the Executive desires to be appointed to the Position, subject to the terms
and
conditions set forth in this Agreement.
NOW,
THEREFORE, in consideration of the promises and mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as
follows:
1. EMPLOYMENT. Company
hereby appoints Executive to the Position, and Executive hereby accepts such
appointment to the Position, subject to the terms and conditions set forth
in
this Agreement. Subject to earlier termination in accordance with
Section 4 below, this Agreement shall continue in effect for a period of
thirty-six (36) months commencing from the effective date hereof (the “Initial
Term”). Upon the expiration of the Initial Term or any Renewal Period
(as hereafter described), the term of Executive’s employment under this
Agreement shall automatically be extended for an additional twelve (12) month
period (a “Renewal Period”), unless either the Company or Executive notifies the
other party in writing at least thirty (30) days prior to the expiration of
the
Initial Term or the then current Renewal Period that the Employment Period
shall
not be extended upon such expiration.
1.1 Failure
to Extend by Company. In
the event the Company notifies Executive that the Employment Period shall not
be
extended at the expiration of the Initial Term or the then current Renewal
Period in accordance with Section 1 hereof, such failure to extend shall
constitute
termination of this Agreement by the Company without Good Cause (as hereafter
defined), and the Company and Executive agree that Executive shall be entitled
to receive the payments described in Section 4.3 hereof.
1.2 Failure
to Extend by Executive. In the event
Executive notifies the Company that the Employment Period shall not be extended
at the expiration of the Initial term or the then current Renewal Period in
accordance with Section 1 hereof, such failure to extend shall constitute
termination of this Agreement by Executive without Good Reason (as hereafter
defined), and the Company and Executive agree that Executive shall be entitled
to receive the payments described in Section 4.5 hereof.
2. POSITION
AND DUTIES. During such time as
Executive is employed with the Company (the “Employment Period”), Executive
shall serve in the Position and shall have the normal duties, responsibilities
and authority associated with or related to such Position, subject to the power
and authority of the Board to expand or limit such duties, responsibilities
and
authority and to override actions of the Executive. Executive shall
devote his best efforts and his full business time and attention (except for
permitted vacation periods and reasonable periods of illness or other
incapacity) exclusively to the business and affairs of the Company and its
“Subsidiaries” (as hereafter defined) and any duty, task or responsibility
assigned or given to Executive by the Board, and Executive shall perform his
duties and responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner. As used in this Agreement,
“Subsidiaries” shall mean any entity of which the securities having a majority
of the voting power in electing directors or managers are, at the time of
determination, owned by the Company either directly or through one or more
Subsidiaries.
2.1 Outside
Directorships. In the event Executive
is invited, solicited or otherwise asked to become a director, advisor or
consultant for any entity or organization of any type or function whatsoever
other than the Company or its Subsidiaries, Executive shall notify the Board
in
writing of such invitation, the entity or organization extending such invitation
and the capacity to be served by Executive for such entity or
organization. The Board shall have the sole power and authority to
authorize Executive to accept such invitation based on such criteria and
standards as the Board may determine, and Executive shall not accept such
invitation without the Board’s prior written consent, which consent shall not be
unreasonably withheld.
2.2 Delegation
by Board. Whenever this Agreement calls
for action on the part of the Board, the Board may delegate responsibility
for
such action to a duly appointed committee of the Board, including but not
limited to the Compensation Committee of the Board, and Executive agrees to
treat, comply with and be bound by any action taken by such committee as if
the
Board had taken such action directly.
3. COMPENSATION
AND BENEFITS. During the Employment
Period, Executive shall be paid or receive compensation and benefits as
follows:
3.1 Base
Salary. The base salary for Executive
shall be $460,000 per year, or such other rate as the Board may designate from
time to time (the “Base Salary”). The Base Salary shall be payable in
regular installments in accordance with the Company’s general payroll practices
and shall be subject to withholdings for applicable
taxes. Executive’s performance shall be evaluated annually in March
of each year. Any future salary increases will be based on the
Executive’s individual performance and will be approved by the Board in its sole
discretion. Executive will be eligible for a salary increase on April
1, 2008 and annually thereafter. Executive has received a lump sum
payment of $50,000 in conjunction with his active employment. This
lump sum payment is subject to tax withholding and is a one time event in
consideration for Executives decision to accept employment with the
Company. Executive, however, must remain employed until May 14, 2008
in order to retain this payment. If Executive’s employment is
terminated by the Company without Good Cause or by the Executive for Good Reason
prior to May 14, 2008, the Executive shall have no obligation to return this
payment. Otherwise, if Executive’s employment is separated prior to
May 14, 2008, Executive shall return this payment to the Company within thirty
(30) days of the separation of employment.
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3.2 Performance
Bonus. Executive will be eligible for
an annual performance bonus award, payable on or about April 1, 2008 and every
year thereafter that Executive is employed, as of April 1 of the then current
year. Executive’s annual bonus target will be 65% of the Base
Salary. Executive’s maximum bonus amount will be 130% of the Base
Salary. The award of any bonus shall be based upon the financial
earning parameters which shall be determined by the Board in its sole
discretion. Executive’s earned bonus for fiscal 2007
will be paid fully and not prorated. Thereafter, in order to receive
any such performance bonuses, the Executive must be employed in the position
on
April 1 of the then current year and must have worked for the Company in the
position for the previous 12 months. Any such bonus award shall be
subject to withholdings for applicable taxes.
3.3 Medical,
Dental and Other Benefits. Executive is
eligible to enroll and participate in any and all benefits plans the Company
provides to its executive officers and employees including, but not limited
to,
medical and dental insurance coverage for Executive and family, life insurance
policy, long term disability insurance, stock options, and retirement plans
and
arrangements. The premiums, costs and expenses for any such benefit
plans under which Executive is participating shall be borne by
Company. Executive shall receive four (4) weeks of paid vacation each
year, which if not taken may not be carried forward to any subsequent
year. Executive, however, shall not receive any compensation for any
unused vacation days and upon termination of employment for any reason, any
unused vacation days shall be forfeited. Any and all benefits
provided for hereunder shall not be included in the definition of the term
“Base
Salary” as such term is used in this Agreement. All such medical and dental insurance, life insurance
and long term
disability insurance benefits shall immediately cease and terminate upon the
later of (1) the termination date of the Employment Period or (2) the
expiration date of coverage for such benefits by the Company as described in
Section 4 hereof; provided, that upon such termination, Executive shall
have the right to elect to continue any or all of such health benefits, programs
or coverage, at his sole cost and expense, in accordance with and subject to
the
terms and limitations set forth in the Consolidated Omnibus Reconciliation
Act
of 1985 (“COBRA”) and the regulations promulgated in connection
therewith.
3.4 Automobile
Allowance. Company shall provide
Executive with an automobile allowance in the amount of $1,000.00 per month
to
be allocated at Executive’s discretion, or such other amount designated by the
Board in its sole discretion, and such allowance shall be payable in regular
installments in accordance with the Company’s general payroll
practices.
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3.5 Financial
Planning Allowance. Company shall
reimburse Executive for any expenses incurred by Executive in connection with
the preparation of taxes, estate planning or financial counseling up to a
maximum amount of $7,500.00 per year, or such other annual amount designated
by
the Board in its sole discretion, which amount may not be carried forward to
any
subsequent year. Such expenses shall be reimbursed in accordance with
the standard policies and procedures of the Company in effect from time to
time
related to such reimbursable expenses.
3.6 Business
Expense. Company shall reimburse
Executive for all reasonable travel, entertainment and other business expenses
incurred by Executive in the course of performing the duties of the
Position. Such expenses shall be reimbursed in accordance with the
standard policies and procedures of the Company in effect from time to time
related to such reimbursable expenses.
4. TERMINATION;
EFFECTS OF TERMINATION. This Agreement
may be terminated upon the occurrence of any of the following
events:
4.1 Terminable
At Will. Notwithstanding any other
provision of this Agreement including, but not limited to Section 1 hereof,
this Agreement and Executive’s employment with the Company or its Subsidiaries
shall be terminable at will at any time for any reason by either party upon
written notice, and this Agreement shall expire automatically when Executive
ceases to hold the Position with the Company for any reason. Upon
such termination, the rights of Executive to receive the monies and benefits
from the Company shall be determined in accordance with the terms and provisions
contained in this Section 4, and Executives agrees that such monies and
benefits are fair and reasonable and are the sole monies and benefits which
shall be due to him from the Company in the event of termination.
4.2 By
Company For Good Cause. Upon written
notice to Executive, Company may immediately terminate this Agreement at any
time during the Employment Period for “Good Cause” (as hereafter
defined).
4.2.1
Monies and Payments to
Executive. Upon such termination,
Executive shall be entitled to receive any Base Salary earned and unpaid, and
fringe benefits described in Section 3.3 hereof accrued and unpaid, through
the date of such termination, and no other monies or benefits shall be payable
or owed to Executive under this Agreement.
4.2.2
Forfeiture of
Options. Effective as of such
termination date, any and all stock options, stock appreciation rights,
restricted stock options, warrants and other similar rights granted to or
received by Executive under any option or incentive plan of the Company to
which
Executive is participating or enrolled shall immediately be terminated and
forfeited, except for such options or rights granted to or received by Executive
which have fully and completely vested prior to such termination
date. Any and all such options and rights to which Executive has
become fully and completely vested prior to such termination date shall expire
as set forth in the respective plan document or agreement granting such options
and rights.
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4.2.3 Good
Cause Defined. For purposes of this
Agreement, “Good Cause” means (i) Executive’s conviction of, or plea of
nolo contendere or guilty to, any criminal violation involving dishonesty,
fraud
or moral turpitude; (ii) Executive’s gross negligence;
(iii) Executive’s willful and serious misconduct; (iv) Executive’s
breach of trust or fiduciary duty in the performance of his duties or
responsibilities; (v) Executive’s willful failure to comply with reasonable
directives and policies of the Board; or (vi) Executive’s breach of any material term or provision of this Agreement
and Executive’s failure to cure such breach within 30 days of his receipt of
notice of the breach by the Company.
4.3 By
Company Without Good Cause. Upon ten
(10) days prior written notice to Executive, Company may terminate this
Agreement at any time during the Employment Period without Good
Cause.
4.3.1
Monies and Benefits to
Executive. Upon such termination,
Executive shall be entitled to receive: (i) any Base Salary earned and
unpaid, and fringe benefits described in Section 3.3 hereof accrued and
unpaid, through the date of such termination; (ii) one and one-half (1½)
times the aggregate of: (x) the Base Salary plus (y) your annual bonus
target amount (65% of Base Salary or such other higher amount as approved by
the
Board); (iii) any performance bonus (65% of Base Salary or such other
higher amount as approved by the Board) for the fiscal year in which such
termination occurs pro-rated through the date of such termination; provided,
however, Executive shall not receive any portion of the performance bonus unless
the Board determines in good faith that Executive would have been entitled
to
receive any performance bonus for the fiscal year in which such termination
occurred in accordance with Section 3.2 hereof; (iv) continuation of
the fringe benefits described in Section 3.3 hereof under which Executive
is participating as of the date of such termination for a period of twelve
(12)
months from the date of such termination; (v) payment for
outplacement services for Executive for a period of twelve (12) months from
the
date of such termination, provided, however, the aggregate amount of such
payments for outplacement services shall not exceed $15,000.00.
4.3.2 Payment
of Monies and Benefits. The payments described
in
Section 4.3.1(i) and 4.3.1(ii) hereof shall be paid
to
Executive in a lump sum within thirty (30) days from
the date of such termination and shall be subject to withholdings for applicable
taxes. The payment described in Section 4.3.1(iii) hereof
shall be payable in a lump sum on or before April 1 following the end of the
fiscal year in which such termination occurred and shall be subject to
withholdings for applicable taxes. The benefits described in
Section 4.3.1(iv) shall be provided in accordance with the Company’s
standard policies and practices. The payments described in
Section 4.3.1(v) hereof shall be paid directly to the entity providing
outplacement services to Executive within thirty (30) days of receipt of an
invoice or statement from such entity.
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4.3.3 Forfeiture
of Options. Effective as of such
termination date, any and all stock options, stock appreciation rights,
restricted stock options, warrants and other similar rights granted to or
received by Executive under any option or incentive plan of the Company to
which
Executive is participating shall immediately be terminated and forfeited, except
for such options or rights granted to or received by Executive which have fully
and completely vested prior to such termination date. Any and all
such options and rights to which Executive has become fully and completely
vested prior to such termination date shall expire as set forth in the
respective plan document or agreement granting such options and
rights.
4.4 By
Executive for Good Reason. Upon thirty
(30) days prior written notice to Company, Executive may terminate this
Agreement at any time during the Employment Period for “Good Reason” (as
hereafter defined), and if requested by Company, Executive shall continue to
work exclusively for the Company during such thirty (30) day period; provided,
however, the Company shall have the right, in its sole discretion, to terminate
this Agreement at any time during such thirty (30) day period upon written
notice to Executive.
4.4.1 Monies
and Benefits to Executive. Upon such
termination, Executive shall be entitled to receive: (i) any Base Salary
earned and unpaid, and fringe benefits described in Section 3.3 hereof
accrued and unpaid, through the date of such termination; (ii) one and
one-half (1½) times the aggregate of: (x) the Base Salary plus (y) your annual
bonus target amount (65% of Base Salary or such other higher amount as approved
by the Board); (iii) any performance bonus (65% of Base Salary or such
other higher amount as approved by the Board) for the fiscal year in which
such
termination occurs pro-rated through the date of such termination; provided,
however, Executive shall not receive any portion of the performance bonus unless
the Board determines in good faith that Executive would have been entitled
to
receive any performance bonus for the fiscal year in which such termination
occurred in accordance with Section 3.2 hereof; (iv) continuation of
the fringe benefits described in Section 3.3 hereof under which Executive
is participating as of the date of such termination for a period of twelve
(12)
months from the date of such termination; and (v) payment of outplacement
services for Executive for a period of twelve (12) months from the date of
such
termination; provided, however, the aggregate amount of such payments for
outplacement services shall not exceed $15,000.00.
4.4.2 Payment
of Monies and Benefits. The payments
described in Section 4.4.1(i) and
4.4.1(ii) hereof shall be paid to Executive within thirty (30) days from the
date of such termination and shall be subject to withholdings for applicable
taxes. The payment described in Section 4..1(iii) hereof shall
be payable in a lump sum on or before April 1 following the end of the fiscal
year in which such termination occurred and shall be subject to withholdings
for
applicable taxes. The benefits described in Section 4.4.1(iv) shall be provided in accordance
with the Company’s
standard policies and practices. The payments described in
Section 4.4.1(v) hereof shall be paid directly to the entity providing
outplacement services to Executive within ten (10) days of receipt of an invoice
or statement from such entity.
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4.4.3 Forfeiture
of Options. Effective as of such
termination date, any and all stock options, stock appreciation rights,
restricted stock options, warrants and other similar rights granted to or
received by Executive under any option of incentive plan of the Company to
which
Executive is participating shall immediately be terminated and forfeited, except
for such options or rights granted to or received by Executive which have fully
and completely vested prior to such termination date. Any and all
such options and rights to which Executive has become fully and completely
vested prior to such termination date shall expire as set forth in the
respective plan document or agreement granting such options and
rights.
4.4.4 Good
Reason Defined. For purposes of this
Agreement, “Good Reason” shall exist if, without Executive’s express written
consent, the Company: (i) decreases Executive’s Base Salary from the level
in effect on the date of the decrease; (ii) willfully fails to include
Executive in any incentive compensation plans, bonus plans, or other plans
and
benefits provided by the Company to other executive level executive;
(iii) materially reduces, decreases or diminishes the nature, status or
duties and responsibilities of the Position from those in effect on the date
hereof, and such reduction, decrease or diminution is not reasonably related
to
or the result of an adverse change in Executive’s performance of assigned duties
and responsibilities; (iv) the hiring by Company of an
executive senior to Executive; (v) requires Executive to regularly perform
the duties and responsibilities of the Position at a location which is more
than
fifty (50) miles from the location of Executive’s principal place of employment;
or, (vi) requires Executive to engage in any accounting, financial reporting
or
other practice as part of the duties of the Position that Executive believes
violates: (i) the law or (ii) US GAAP Principles and has so informed any of
the
Company’s senior executives. Notwithstanding the above, Good Reason
shall not include the death, disability or voluntary retirement of Executive
or
any other voluntary action taken by or agreed to by Executive related to the
Position or its employment with the Company or its
Subsidiaries.
4.5 By
Executive Without Good Reason. Upon
thirty (30) days prior written notice to Company, Executive may terminate this
Agreement at any time during the Employment Period without Good Reason, and
if
requested by the Company, Executive shall continue to work exclusively for
the
Company during such thirty (30) day period; provided, however, the Company
shall
have the right, in its sole discretion, to terminate this Agreement at any
time
during such thirty (30) day period upon written notice to
Executive.
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4.5.1 Monies
and Benefits to Executive. Executive
shall be entitled to receive any Base Salary earned and unpaid, and fringe
benefits described in Section 3.3 hereof accrued and unpaid, through the
date of such termination or the date on which the Company terminates this
Agreement during such thirty (30) day period, and no other monies or benefits
shall be payable or owed to Executive under this Agreement.
4.5.2 Forfeiture
of Options. Effective as of such
termination date, any and all stock options, stock appreciation rights,
restricted stock options, warrants and other similar rights granted to or
received by Executive under any option or incentive plan of the Company to
which
Executive is participating or enrolled shall immediately be terminated and
forfeited, except for such options or rights granted to or received by Executive
which have fully and completely vested prior to such termination
date. Any and all such options and rights to which Executive has
become fully and completely vested prior to such termination date shall expire
as set forth in the respective plan document or agreement granting such options
and rights.
4.6 By
Company Due to Change in Control. In
the event a Change in Control (as hereafter defined) occurs and during the
period beginning three (3) months before the Change in Control and ending
twenty-four (24) months after the Change in Control:(i) this Agreement is
terminated by the Company or its successor without Good Cause; or (ii) this
Agreement is terminated by Executive with Good Reason, Executive shall be
entitled to receive, and Company or its successor shall be obligated to pay,
the
monies and benefits described in this Section 4.6, and Sections 4.3 or
4.4 hereof shall not be applicable to such Change in Control or
termination. Solely for the purposes under this Section 4.6, the
Executive shall have Good Reason to terminate this Agreement upon a Change
of
Control if the Executive is not the Chief Financial Officer for the Company’s
successor and the successor is not a publicly traded entity on a listed
exchange.
4.6.1 Monies
and Benefits to Executive. Upon such
Change in Control or termination, Executive shall be entitled to receive:
(i) any Base Salary earned and unpaid, and fringe benefits described in
Section 3.3 hereof accrued and unpaid, through the date of such Change in
Control or termination; (ii) three (3) times the aggregate of (x) the Base
Salary plus (y) your annual bonus target (65% of Base Salary or such other
higher amount as approved by the Board); (iii) any performance bonus (65%
of Base Salary or such other higher amount as approved by the Board) for the
fiscal year in which such Change in Control or termination occurs pro-rated
through the date of such Change in Control or termination; provided, however,
Executive shall not receive any portion of the performance bonus under this
Section 4.6.1(iii) unless the Board determines in good faith that Executive
would have been entitled to receive any performance bonus for the fiscal year
in
which such Change in Control or termination occurred in accordance with
Section 3.2 hereof; (iv) continuation of the fringe benefits described
in Sections 3.3 hereof under which Executive is participating as of the
date of such Change in Control or termination for a period of thirty-six (36)
months from the date of such Change in Control or termination; (v payment
of outplacement services for Executive for a period of twelve (12) months from
the date of such Change in Control or termination; provided, however, the
aggregate amount of such payments shall not exceed $15,000.00; and
(vi) continuation of the financial planning allowance described in
Section 3.5 hereof for a period of thirty-six (36) months from the date of
such Change in Control or termination.
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4.6.2 Payment
of Monies and Benefits. The payments
described in Sections 4.6.1(i) and 4.6.1(ii) hereof shall be paid to
Executive in a lump sum within thirty (30) days of the date of such Change
in
Control or termination and shall be subject to withholdings for applicable
taxes. The payment described in Section 4.6.1(iii) hereof shall
be payable in a lump sum on or before April 1 following the end of the fiscal
year in which such Change in Control or termination occurred and shall be
subject to withholdings for applicable taxes. The benefits described
in Section 4.6.1(iv) hereof shall be provided in accordance with the
Company’s or its successor’s standard policies and practices. The
payments described in Section 4.6.1(v) hereof shall be paid directly to the
entity providing outplacement services to Executive within ten (10) days of
receipt of an invoice or statement from such entity. The
reimbursement of the expenses related to Section 4.6.1(vi) shall be made to
Executive in accordance with the Company’s or its successor’s policies and
procedures.
4.6.3 Vesting
of Options. Effective as of such Change
in Control or termination date, any and all stock options, stock appreciation
rights, restricted stock options, warrants and other similar rights granted
to
or received by Executive under any option or incentive plan of the Company
or
its successors to which Executive is participating or enrolled shall immediately
become fully and completely vested and exercisable as if Executive had satisfied
any and all terms, conditions or requirements described or contained in such
plan. In the event Executive has not previously exercised, or does
not exercise, all or any portion of such options or rights within sixty (60)
days of the date of such Change in Control or termination (the
“Exercise Period”), Executive shall be entitled to receive, and Company or its
successor shall be obligated to pay, compensation for such unexercised options
or rights in an amount equal to (i) the number of shares not exercised by
Executive under such options or rights multiplied by (ii) the closing price
of the common stock of the Company or its successor as of the day immediately
prior to such Change in Control or termination minus the exercise price of
Executive described in such options or rights (the “Option
Compensation”). The Option Compensation shall be payable in a lump
sum within thirty (30) days after the expiration of the Exercise Period, and
shall be subject to withholdings for applicable taxes. Executive
shall take any and all actions, and execute and deliver to Company or its
successor any and all agreements, certificates or instruments, necessary or
required to consummate the transactions contemplated under this
Section 4.6.3 including, but not limited to, the assignment, transfer or
conveyance of any and all shares and rights to be acquired by the Company or
its
successor and the cancellation, revocation or termination of any options or
rights Executive has or may have under any such option or incentive
plan.
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Notwithstanding
anything herein to the contrary, if any payments or benefits due under this
Agreement (including but not limited to the continuation of fringe benefits
following termination of employment or the cash payment for options following
a
change in control) would subject the Executive to accelerated taxation and
additional taxes under Code Section 409A if such payments or benefits were
made
at the time described herein, then the Company shall take such actions as are
necessary (but only to the minimum extent necessary) to cause such payments
to
comply with the requirements of Code Section 409A such that the payments or
benefits provided hereunder are not taxable under or are no longer subject
to
Code Section 409A. Without limitation, if Executive is a “specified
employee” within the meaning of Code Section 409A, the payments due under this
Agreement may be delayed for a period of six months following the Executive’s
separation from service and in such case, all payments that were otherwise
scheduled to be paid within such six-month period shall be accumulated, with
interest at the annual rate of 5%, and paid in a lump sum immediately following
the end of such six-month period.
4.6.4 Change
in Control Defined. For purpose of this
Agreement, a “Change in Control” shall be deemed to have occurred as of the date
(i) any “person” or “group ” (as such terms are used in Section 13(b)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or
becomes the “beneficial owner” (as defined in Rule 13d 3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the Company’s
then outstanding securities, and within one (1) year after such “person” or
“group” becomes the beneficial owner of twenty-five percent (25%) or more of the
combined voting power of the Company (the “Trigger Date”), the members of the
Board immediately prior to the Trigger Date cease to constitute a majority
of
the Board, (ii) the consummation of a consolidation or merger of the
Company in which the Company is not the surviving or continuing corporation,
or
pursuant to which shares of the Company’s common stock would be converted into
cash, securities or other property, other than a merger of the Company in which
the holders of the Company’s common stock immediately prior to the merger have
(directly or indirectly) at least a fifty one percent (51%) ownership interest
in the outstanding common stock of the surviving corporation immediately after
the merger, or (iii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, except for any sale, lease exchange or transfer
resulting from any action taken by any creditor of the Company in enforcing
its
rights or remedies against any assets of the Company in which such creditor
holds a security interest.
4.6.5 Payments
from Tax Implications.
(a) Gross-Up
Payment. Notwithstanding anything to the contrary in this
Agreement, in the event it shall be determined that any payment or distribution
made, or benefit provided (including, but not limited to, Section 4.6.3
hereof), by the Company to or for the benefit of Executive under this Agreement
but determined without regard to any additional payments required under this
Section 4.6.5 (each, a “Payment”), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
from time to time (the “Code”), or any similar excise tax, or any interest or
penalties incurred by Executive with respect to such excise tax (such tax with
any such interest and penalties being collectively referred to as the “Excise
Tax”), Executive shall be entitled to receive an additional payment (a “Gross Up
Payment”) from the Company in an amount such that after payment by Executive of
all taxes (including any Excise Tax, income tax or payroll tax) imposed upon
the
Gross Up Payment and any interest or penalties imposed with respect to such
taxes, Executive retains from the Gross Up Payment an amount equal to the Excise
Tax imposed upon the Payments.
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(b) Determination
of Gross-Up Payment. Subject to the provisions of
Section 4.6.5(c) hereof, all determinations required to be made under this
Section 4.6.5, including a determination of the requirement for and amount
of any Gross Up Payment, shall be made by the independent public accounting
firm
which is then retained by the Company to audit its financial statements (the
“Accounting Firm”) which shall provide detailed supporting calculations both to
the Company and Executive within thirty (30) business days of the date of such
termination, if applicable, or such earlier time as is requested by the Company,
provided that any determination that an Excise Tax is payable by Executive
shall
be made on the basis of substantial authority. Any initial Gross Up
Payment shall be paid to Executive within fifteen (15) business days of the
receipt of the Accounting Firm’s determination. If the Accounting
Firm determines that no Excise Tax is payable by Executive, the Accounting
Firm
shall furnish Executive with a written opinion that he has substantial authority
not to report any Excise Tax on his federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this
Section 4.6.5(b) shall be binding upon the Company and Executive; subject
only to payments pursuant to the following sentence based on a determination
that additional Gross Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such additional
payments, including any interest and penalties, being collectively referred
to
as the “Gross Up Underpayment” ). In the event the Company exhausts
its remedies pursuant to Section 4.6.5(c) hereof and Executive thereafter
is required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Gross Up Underpayment that has occurred and any
such
Gross Up Underpayment shall be promptly paid by the Company to or for the
benefit of Executive. The fees and disbursements of the Accounting
Firm shall be paid by the Company.
(c) Remedies
to Company. Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross Up Payment. Such notification shall
be given as soon as practicable but not later than ten (10) business days after
Executive receives written notice of such claim and shall apprise the Company
of
the nature of such claim and the date on which such claim is requested to be
paid. Executive shall not pay such claim prior to the expiration of
thirty (30) days following the date on which Executive gives such notice to
the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies Executive
in writing prior to the expiration of such thirty (30) day period that the
Company desires to contest such claim at the Company’s sole cost and expense and
the Company will provide the indemnification as required by this Section
4.6.5(c), Executive shall: (1) give the Company any information reasonably
requested by the Company relating to such claim; (2) take such action in
connection with contesting such claim as the Company shall reasonably request
in
writing from time to time, including, but not limited to, accepting legal
representation with respect to such claim by an attorney reasonably selected
by
the Company and reasonably satisfactory to Executive; (3) cooperate with
the Company in good faith in order effectively to contest such claim, and
(4) permit the Company to participate in any proceedings relating to such
claim.
11
The
Company shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold Executive harmless, on an after tax basis, for any Excise
Tax, income tax or payroll tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 4.6.5(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with
the
taxing authority with respect to such claim and may, at its sole option, either
direct Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to
pay such claim and xxx for a refund, the Company shall advance the amount of
such payment to Executive, on an interest free basis and shall indemnify and
hold Executive harmless, on an after tax basis, from any Excise Tax, income
tax
or payroll tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute
of limitations relating to the payment of taxes for the taxable year of
Executive with respect to which such contested amount is claimed to be due
shall
be limited solely to such contested amount, unless Executive agrees
otherwise. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case
may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) Refund
of Excise Tax to Company. If, after the receipt by Executive of
an amount advanced by the Company pursuant to Section 4.6.5(c), Executive
becomes entitled to receive any refund with respect to such claim, Executive
shall (subject to the Company's complying with the requirements of
Section 4.6.5(c) hereof) promptly pay to the Company the amount of such
refund, together with any and all interest paid or credited thereon after taxes
applicable thereto. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4.6.5(c) hereof a determination
is made that Executive shall not be entitled to any refund with respect to
such
claim and the Company does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then any obligation of Executive to repay such advance
shall
be forgiven and the amount of such advance shall offset, to the extent thereof,
the amount of Gross Up Payment required to be paid by the
Company.
12
4.7 Execution
of Release by Executive. Company shall not be obligated
to pay any portion of the monies and benefits described above, if any, unless
and until Executive shall have executed and delivered to the Company a release
of all claims against the Company and its Subsidiaries and their respective
shareholders, partners, member, directors, managers, officers, employees, agents
and attorneys, arising out of or related to any act or omission which occurred
on or prior to the date on which this Agreement was terminated, in form and
substance reasonably satisfactory to the Company.
5. POST-EMPLOYMENT
DUTIES. For a period of three (3) years
following the termination of this Agreement, Executive shall: (i) fully and
truthfully cooperate and assist the Company and its Subsidiaries, to the fullest
extent possible, in any and all issues, matters, legal proceedings or litigation
related to or associated with the business, management or operation of or any
other matter involving the Company or its Subsidiaries in any way or of any
nature whatsoever arising from, related to or connected with any period in
which
Executive was employed by or otherwise provided services to the Company or
its
Subsidiaries or in which Executive has or may have past knowledge, information
or experience or applicable expertise; and (ii) fully cooperate, assist,
participate and work with the Company or its Subsidiaries on any and all issues
or matters for which the Company or its Subsidiaries may seek his cooperation,
assistance, participation, involvement or consultation. Such
assistance shall be provided at such times and dates which shall not
unreasonably interfere or conflict with Executive’s then current
employment. The Company shall reimburse Executive for any and all
costs and expenses reasonably incurred by Executive in providing such assistance
in accordance with the standard policies and procedures of the Company in effect
from time to time related to such reimbursable expenses.
6. CONFIDENTIAL
INFORMATION. Executive acknowledges
that Executive will have access or be privy to certain confidential business
and
proprietary information of the Company and its Subsidiaries as a result of
Executive’s employment with the Company or its Subsidiaries. Such
confidential information may include but is not limited to business decisions,
plans, procedures, strategies and policies, legal matters affecting Company
and
its Subsidiaries and their respective businesses, personnel, customer records
information, trade secrets, bid prices, evaluations of bids, contractual terms
and arrangements (prospective purchases and sales), pricing strategies,
financial and business forecasts and plans and other information affecting
the
value or sales of products, goods, services or securities of the Company or
its
Subsidiaries, and personal information regarding employees (collectively, the
“Confidential Information”). Executive acknowledges and agrees the
Confidential Information is and shall remain the sole and exclusive property
of
the Company or such Subsidiary. Executive shall not disclose to any
unauthorized person, or use for Executive’s own purposes, any Confidential
Information without the prior written consent of the Board, which consent may
be
withheld by the Board at its sole discretion, unless and to the extent that
the
aforementioned matters become generally known to and available for use by the
public other than as a result of Executive’s acts or
omissions. Executive agrees to maintain the confidentiality of the
Confidential Information after the termination of Executive’s employment;
provided, further, that if at any time Executive or any person or entity to
which Executive has disclosed any Confidential Information becomes legally
compelled (by deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process) to disclose any of the Confidential
Information, Executive shall provide the Company with prompt, prior written
notice of such requirement so the Company, in its sole discretion, may seek
a
protective order or other appropriate remedy and/or waive compliance with the
terms hereof. In the event that such protective order or other remedy
is not obtained or the Company waives compliance with the provisions hereof,
Executive shall ensure that only the portion of the Confidential Information
which Executive or such person is advised by written opinion of the Company’s
counsel that Executive is legally required to disclose is disclosed, and
Executive further covenants and agrees to exercise reasonable efforts to obtain
assurance that the recipient of such Confidential Information shall not further
disclose such Confidential Information to others, except as required by law,
following such disclosure. In addition Executive covenants and agrees
to deliver to the Company upon termination of this Agreement, and at any other
time as the Company may request, any and all property of the Company including,
but not limited to, keys, computers, credit cards, company car, memoranda,
notes, plans, records, reports, computer tapes, printouts and software,
Confidential Information in any form whatsoever, and other documents and data
(and copies thereof) and relating to the Company or any Subsidiary which he
may
then posses or have under his control or to which Executive had access to or
possession of in the course of such employment.
13
7. COVENANT
NOT TO COMPETE, SOLICIT OR
DISPARAGE. Executive hereby agrees that
for a period of two (2) years following the expiration or termination of this
Agreement (the “Non-Compete Period”), Executive shall not: (i) directly or
indirectly, either individually or for any other person or entity (whether
as an
officer, director, employee, owner, stockholder, consultant, agent, advisor,
general partner, limited partner or otherwise), or as a part of a group, own,
operate, manage, control, participate in, consult with, render services for,
or
in any manner engage in any business competing with any part of the business
presently engaged in by the Company within any geographical area in which the
Company engages or has proposed to engage in such business (or solicit any
person to engage in any of the foregoing activities); (ii) directly or
indirectly, individually or for any other person or entity induce or attempt
to
induce any employee of the Company to leave the employ of the Company, hire
any
person who is an employee of the Company as of or immediately prior to the
time
of such hiring, or induce or attempt to induce any manufacturers’
representative, customer, supplier, licensee, agent or any other person or
entity having a business relationship with the Company to cease doing business
with or reduce the volume of its business with the Company; or
(iii) initiate, participate or engage in any communication whatsoever with
any current or former customer, supplier, vendor or competitor of the Company
or
its Subsidiaries or any of their respective shareholders, partners, members,
directors, managers, officers, employees or agents, or with any current or
former shareholder, partner, member, director, manager, officer, employee or
agent of the Company or its Subsidiaries, or with any third party, which
communication could reasonably be interpreted as derogatory or disparaging
to
the Company or its Subsidiaries, including but not limited to the business,
practices, policies, shareholders, partners, members, directors, managers,
officers, employees, agents, advisors and attorneys of the Company or its
Subsidiaries. Provided, however, nothing herein shall prohibit
Executive from being a passive owner of or controlling, directly or indirectly,
of not more than five percent (5%) in the aggregate of the outstanding stock
of
any class of a corporation which is publicly traded and which competes in the
business of the Company so long as Executive has no direct or indirect
participation in the management of such corporation. Executive
acknowledges that the foregoing restriction is reasonable in all respects and
that there is no less restrictive provision in terms of duration, prohibited
activities or geographic area which would adequately protect the Company’s
assets and other legitimate business interests. For purposes of the
foregoing, a business shall be deemed to be competing with the business of
the
Company if such business (a) operates apparel stores in small markets
(populations of less than 25,000) and (b) operates a significant number of
its apparel stores (75% or more of its total apparel stores) in 10,000 to 30,000
square foot formats. Notwithstanding the foregoing, in the event any part of
this covenant set forth in this provision shall be held invalid, illegal or
unenforceable by a court of competent jurisdiction, Executive and the Company
hereby agree that such invalid, illegal or unenforceable provision or section
hereof shall be severed from this Agreement without affecting the remaining
portions hereof in any manner. In the event any portion of this
provision related to the time or geographical area restrictions hereof shall
be
declared by a court of competent jurisdiction to exceed the maximum time or
geographical area restrictions such court deems reasonable or enforceable,
said
time or geographic area restriction shall be deemed to become and thereafter
shall be such time or geographic area which such court shall deem reasonable
and
enforceable.
14
8. ARBITRATION. Should
any dispute arise relating to the meaning, interpretation, enforcement or
application of this Agreement, such dispute shall be settled in Xxxxxx County,
Texas, in accordance with the terms, conditions and requirements described
or
contained in the Company’s arbitration policy, if any, and the employment
dispute arbitration rules of the American Arbitration Association, and all
costs
of such arbitration including, but not limited to reasonable attorney’s fees and
costs, shall be borne by the losing party. The Company, however,
shall be entitled to obtain injunctive relief from any court of competent
jurisdiction to enforce the provisions of Sections 6 and 7 of this
Agreement.
15
9. NOTICES. Any
notice provided for in this Agreement shall be in writing and shall be either
personally delivered, or mailed by first class mail, return receipt requested,
to the recipient at the address indicated below:
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To
Executive:
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Ed
Record
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||
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0000
Xxxxx Xxxxx Xxx
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|||
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Xxxxxxxx
Xxxx, Xxxxx 00000
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|||
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To
Company:
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Stage
Stores, Inc.
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||
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00000
Xxxx Xxxxxx
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|||
|
Xxxxxxx,
Xxxxx 00000
|
|||
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Attention: EVP-Human
Resources
|
or
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 or mailed.
10. GOVERNING
LAW. All issues and questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Texas, without giving effect to any choice of law or conflict
of
law rules or provisions (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Texas. In furtherance of the foregoing, the
internal law of the State of Texas shall control the interpretation and
construction of this Agreement, even though under the jurisdiction’s choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
11. SEVERABILITY. Each
section, subsection and lesser section of this Agreement constitutes a separate
and distinct undertaking, covenant or provision hereof. In the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable, such provision shall be deemed limited by construction in scope
and effect to the minimum extent necessary to render the same valid and
enforceable, and, in the event such a limiting construction is impossible,
such
invalid or unenforceable provision shall be deemed severed from this Agreement,
but every other provision of this Agreement shall remain in full force and
effect.
16
12. AMENDMENTS;
MODIFICATIONS. Neither this Agreement
nor any term or provision in it may be changed, waived, discharged, rescinded
or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge,
rescission or termination is sought.
13. WAIVER. No
failure on the part of either party to this Agreement to exercise, and no delay
in exercising, any right, power or remedy created hereunder shall operate as
a
waiver thereof, nor shall any single or partial exercise of any right, power
or
remedy by any such party preclude any other or further exercise thereof or
the
exercise of any other right, power or remedy. No waiver by any party
hereto to any breach of, or default in, any term or condition of this Agreement
shall constitute a waiver of or assent to any succeeding breach of or default
in
the same or any other term or condition hereof. The terms and
provisions of this Agreement, whether individually or in their entirety, may
only be waived in writing and signed by the party against whom or which the
enforcement of such waiver is sought.
14. SUCCESSORS
AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefits of the successors, assigns, heirs,
legatees, devisees, executors, administrators, receivers, trustees and
representatives of Executive and the Company and its Subsidiaries and their
respective successors, assigns, administrators, receivers, trustees and
representatives.
15. HEADINGS. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
16. MULTIPLE
COUNTERPARTS. This Agreement may be
executed in two or more counterparts, each of which is deemed to be an original
and all of which taken together constitute one and the same
agreement.
17. CONFIDENTIAL
INFORMATION. The parties agree that
Executive shall not disclose to or consciously utilize for the benefit of the
Company any confidential, proprietary information of his prior employers that
he
learned during the course of employment.
18. INDEMNIFICATION. The
Company agrees to indemnify and hold Executive harmless for any costs, attorney
fees or damages that he may suffer if his former employer
(Kohl’s) attempts to enforce the terms of any provision of
his prior employment agreement. The Executive shall have the right to
select counsel to represent him in any such matters for which the Company will
reimburse Executive for all reasonable costs and attorney fees.
19. FURTHER
ASSURANCES. Executive and the Company
covenant and agree that each will execute any additional instruments and take
any actions as may be reasonably requested by the other party to confirm or
perfect or otherwise to carry out the intent and purpose of this
Agreement.
17
20. CONSTRUCTION. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by Executive and the Company,
and no presumption or burden of proof shall arise favoring or disfavoring either
by virtue of the authorship of any of the provisions of this
Agreement.
21. SURVIVAL. Executive
and the Company agree that the terms and conditions of Sections 4 through
15 (inclusive), 19, 20 and 21 hereof shall survive and continue in full force
and effect, notwithstanding any expiration or termination of the Employment
Period or this Agreement.
22. ENTIRE
AGREEMENT. This Agreement contains and
constitutes the entire agreement between Executive and the Company and
supersedes and cancels any prior agreements, representations, warranties, or
communications, whether oral or written, between Executive and the Company
relating to the subject matter hereof in any way.
23. GENDER
AND NUMBER PLURALITY. Unless the
context otherwise requires, whenever used in this Agreement the singular shall
include the plural, the plural shall include the singular, and the masculine
gender shall include the neuter or feminine gender and vice versa.
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
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STAGE
STORES, INC.,
|
|
|
“COMPANY”
|
a
Nevada Corporation
|
|
|
|
||
|
/s/
Xxxxx X. Xxxxxxxxxxx
|
||
|
By:
|
Xxx
Xxxxxxxxxxx
|
|
|
Title:
|
Chairman
& CEO
|
|
|
“EXECUTIVE”
|
/s/
Ed Record
|
|
|
Ed
Record, an individual
|
||
18
