EMPLOYMENT TERMINATION AGREEMENT
THIS EMPLOYMENT TERMINATION AGREEMENT (this Agreement ) dated
September 4, 1997 between XXXX X. XXXXXX, currently residing at 000
Xxxxxxxxx Xxxxx, Xx. Xxxxx, Xxxxxxxx 00000 ( Employee ), and EDISON
BROTHERS STORES, INC., a Delaware corporation (the Company ).
RECITALS
WHEREAS, in November 1995, the Company, along with 65 of its
affiliates (collectively the Debtors ), filed a petition under Chapter 11
of the United States Bankruptcy Code (the Bankruptcy Code ) in the United
States Bankruptcy Court in Delaware (Case No. 95-1354 (PJW)) (the Chapter
11 Case ) and has since been operating its business as a debtor-in-
possession; and
WHEREAS, Employee has been serving as Chairman of the Board, President
and Chief Executive Officer of the Company since April, 1995 and is
currently serving in such capacity; and
WHEREAS, during his tenure with the Company, Employee's service and
leadership have been critical in significantly increasing the value of the
Company and successfully guiding the Company through the Chapter 11 Case
and its reorganization; and
WHEREAS, on June 30, 1997, the Debtors filed with the Bankruptcy Court
their Amended Joint Plan of Reorganization (as said Plan may be amended or
modified, the Plan of Reorganization ) and expect to emerge from Chapter
11 in September, 1997; and
WHEREAS, the statutory creditors committee appointed in the Chapter 11
Case has expressed its desire that the Company recruit a new Chief
Executive Officer for the Company but has requested that Employee remain in
his current positions with the Company through the Company's emergence from
Chapter 11 and until the commencement of employment of a new Chief
Executive Officer in order to ensure an orderly management transition, and
Employee has agreed to so remain, all on the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto do hereby agree as follows:
AGREEMENT
1. Resignation. Employee shall resign as Chairman of the Board, a
member of the Board of Directors, President and Chief Executive Officer of
the Company effective upon the commencement of employment of the successor
Chief Executive Officer of the Company (the Termination Date ).
2. Payments and Benefits. Employee shall be entitled to receive the
following payments and benefits:
(a) On the Termination Date the Company shall pay or
cause to be paid to Employee (i) the full base salary earned by Employee
through the Termination Date and unpaid at the Termination Date, plus (ii)
credit for any vacation earned by Employee but not taken prior to the
Termination Date, plus (iii) any monies owing to Employee in reimbursement
for travel or other business expenses incurred by Employee in the
performance of his duties prior to the Termination Date, plus (iv) any
other amounts earned by or owing to Employee and unpaid as of the
Termination Date.
(b) On the Termination Date the Company shall pay or cause
to be paid to Employee a lump sum cash amount of $1,575,000,
representing Employee's current annual salary, which the parties
acknowledge and agree is Five Hundred Twenty-Five Thousand Dollars
($525,000.00), multiplied by three (3).
(c) On the Termination Date the Company shall pay or cause
to be paid to Employee a lump sum cash amount equal to Seven Hundred
Eighty-Seven Thousand Five Hundred Dollars ($787,500.00), which
represents an aggregate amount equal to Employee's target bonus
under the Company's EBITDA Bonus Plan of Two Hundred Sixty-Two
Thousand Five Hundred Dollars ($262,500.00) for each of fiscal years
1997, 1998 and 1999.
(d) On the Effective Date of the Plan of Reorganization
as that term is defined therein (the Effective Date ) the Company
shall pay or cause to be paid to Employee a lump sum cash bonus equal
to One Million Five Hundred Thousand Dollars ($1,500,000.00)
(representing a performance bonus ).
(e) On September 17, 1997 the Company shall pay or cause to
be paid to Employee a lump sum cash amount equal to Eighty-Seven
Thousand Five Hundred Dollars ($87,500.00) (representing the amount to
be paid to Employee on that date pursuant to Section 3.D of the
Amended and Restated Employment Agreement, dated June 21, 1996,
between the Company and Employee).
(f) The Company acknowledges and agrees that options for
50,000 shares of New Common Stock (as such term is defined in the Plan
of Reorganization) (the Common Stock ) were to have been granted to
Employee pursuant to the Company's 1997 Stock Option Plan. The said
stock options shall not be issued to Employee but instead shall be
reallocated by the Board of Directors of the Company, or any
authorized compensation committee or compensation subcommittee
thereof, to other employees of the Company as such Board or authorized
compensation committee or compensation subcommittee shall determine in
its absolute discretion. The Company shall grant to Employee, as of
the Effective Date, 75,000 shares of Common Stock, which shares shall
be restricted as to transferability (except in the event of Employee's
death) until the latter of the Effective Date or the Termination Date.
In addition, on the Termination Date the Company shall pay or cause to
be paid to Employee a lump sum cash payment in such amount as is
necessary (after taking into account all federal, state and local
income taxes payable by Employee as a result of the receipt of such
sum) to place Employee in the same after-tax position he would have
been in if no federal, state or local income taxes were payable by
Employee in respect of the vesting of such shares. The Company has
caused the aggregate number of shares of Common Stock authorized for
issuance to Management pursuant to Section 9.8 of the Plan of
Reorganization to be increased from 200,000 shares to 225,000 shares
in order to fulfill the Company's obligations pursuant to this Section
2(f).
(g) The Company shall maintain in full force and effect for
Employee's continued benefit, for a period of three years from the
Termination Date, all life insurance, medical, dental, and disability
plans, programs or arrangements in which Employee was entitled to
participate immediately prior to the Termination Date, provided that
Employee's continued participation is possible under the terms and
provisions of such plans, programs or arrangements. In the event that
Employee's participation in any such plan, program or arrangement is
barred by the terms thereof or is otherwise prevented, the Company
shall arrange to provide Employee with benefits substantially similar
to those which Employee would otherwise be entitled to receive under
such plans, programs or arrangements. Any continuation of benefits
under this Section 2(g) shall not be counted towards the benefits
extension period mandated by the Consolidated Omnibus Budget
Reconciliation Act of 1985.
(i) On the Termination Date the Company shall pay or cause to be paid to
Employee all benefits to which Employee would be entitled under the
Company's Pension and Pension Restoration Plans as if his employment had
continued until January 1, 1998, including 100% vesting and payout of
benefits, each with contribution made on behalf of Employee for the year
1997.
3. Tax Indemnity. If any amounts or benefits payable by the Company to
Employee pursuant to this Agreement are determined to be subject to any
excise or similar tax pursuant to Sections 280G and 4999 of the Internal
Revenue Code of 1986, as amended (the IRC ), or any successor or other
comparable federal, state or local tax laws, the Company shall pay to
Employee, at the time such excise or similar tax payments are payable by
Employee, without extension of any returns, such additional sum as is
necessary (after taking into account all federal, state and local income
taxes payable by Employee as a result of the receipt of such additional
sum) to place Employee in the same after-tax position he would have been in
had no such excise or similar purpose tax been paid or incurred. Employee
hereby agrees to explore with the Company a tax efficient solution to any
potential excise or similar tax payment pursuant to this Section 3. In the
event of a subsequent controversy (including audit, administrative appeal
or litigation) with the Internal Revenue Service (the IRS ), or any state
or local authority with respect to any excise or similar tax pursuant to
Sections 280G and 4999 of the IRC, the Company shall reimburse Employee for
any attorneys' and accounting fees incurred by Employee with respect to
such controversy, and shall make an additional tax gross up payment as
described above if additional excise or similar taxes pursuant to Section
280G and 4999 of the IRC are subsequently determined to be due and payable,
which additional payment shall include reimbursement for any interest
expense and penalties payable to any taxing authority which is attributable
to any increased excise or similar taxes pursuant to Sections 280G and 4999
of the IRC and related attorney's or accountant's fees. If Employee is
subject to an audit by the IRS or any state or local authority, Employee
shall give prompt notice thereof to the Company. In such an event, the
Company shall provide legal representation at audit, administrative appeal
and in litigation on Employee's behalf with respect to any such action with
an attorney reasonably acceptable to Employee; provided, however,
Employee's counsel shall be kept advised of all proceedings and shall be
permitted to participate therein and Employee shall be entitled to
reimbursement as provided above. Notwithstanding the foregoing, no
settlement shall be agreed to with respect to any such audit without the
prior written consent of Employee.
4. Private Letter Ruling.
(a) Without affecting the Company's obligations under
Section 3 hereof, the Company, or such other appropriate party, at the
Company's sole expense, shall submit to the IRS a request for a
private letter ruling (hereinafter the request for private letter
ruling shall be referred to as the PLR Request and the private
letter ruling issued or to be issued in response to the PLR Request
shall be referred to as the PLR ) in a form reasonably acceptable to
Employee substantially to the effect that the payments received under
this Agreement will not constitute amounts that would be subject to
any excise or similar tax pursuant to Sections 280G and 4999 of the
IRC, or any successor or other comparable federal tax laws.
(b) From and after the Termination Date, the Company at its
expense shall obtain and keep in effect (until drawn upon or
terminated as set out below) an irrevocable stand-by letter of credit
(the Letter of Credit ) in a form and amount acceptable to Employee
(including a provision that permits Employee to immediately draw down
on the Letter of Credit if any notice of non-renewal is sent out by
the issuer) which will ensure that amounts will be available to make
any payments to Employee contemplated by Section 3 hereof including
interest and penalties and any other gross up payments contemplated
by this Agreement. Said Letter of Credit shall remain in force and
effect for the period determined as follows:
(i) Upon the receipt of a favorable PLR from the
IRS, with conclusions reasonably acceptable to Employee, the
Letter of Credit shall be terminated.
(ii) Upon the receipt from the IRS of a PLR which
in the Employee's reasonable opinion is adverse or if, prior
to the issuance by the IRS of a PLR, the Company withdraws
the PLR Request, Employee shall either timely file his
individual federal, state and local income tax returns for
the appropriate year (the Employee Returns ) reflecting the
excise tax of Sections 280G and 4999 of the IRC (or
comparable state or local statutes or ordinances, as
appropriate) as payable, or, if Employee Returns have been
filed reflecting no such excise tax payable, said Employee
Returns shall be amended to reflect the amount as payable,
and Employee shall pay the appropriate excise taxes,
interest and penalties, and Employee immediately shall draw
down on the Letter of Credit in an amount sufficient to pay
the amount Employee is entitled to receive pursuant to
Section 3 hereof.
(iii) If the IRS informs the Company that it will
not issue a PLR with respect to all of the matters presented
in the PLR Request, Employee agrees that he will file, or
shall have filed, his Employee Returns reflecting the
amounts in issue as not being subject to the excise or
similar tax pursuant to Sections 280G and 4999 of the IRC
(or comparable state or local statutes or ordinances, as
appropriate) and the said Letter of Credit shall remain in
effect. If, at the expiration of time (including
extensions) during which said excise tax can be assessed by
the IRS against Employee, the IRS has not begun, or sent to
Employee a notice that it intends to begin, an audit of
Employee's individual federal income tax return for the year
during which said excise tax would be payable, the Letter of
Credit shall be terminated. If, however, prior to the
expiration of time (including extensions) during which said
excise tax can be assessed by the IRS against Employee, an
audit by the IRS has begun, or Employee has received a
notice from the IRS that it intends to begin an audit, for
the applicable year, the Letter of Credit shall remain in
effect (a) until the closing of the audit by the IRS with no
adjustment with respect to the excise tax in issue at which
time the Letter of Credit shall be terminated by the Company
or (b) after the closing of the audit by the IRS at any
administrative level with an adjustment with respect to the
applicable excise which is (i) agreed to by the Company and
Employee or (ii) unagreed to by Company and Employee and the
IRS issues a statutory notice of deficiency pursuant to
Section 6212 of the IRC. Upon the occurrence of clause (i)
or (ii) above, Employee shall pay the amount of the
adjustment and shall draw down on the Letter of Credit in an
amount sufficient to pay the amount Employee is entitled to
receive pursuant to Section 3 hereof.
(iv) If Employee pays the excise tax in issue
pursuant to Section 4(b)(ii) or 4(b)(iii)(b), and if the
Company requests in writing, Employee, at Company's expense,
promptly shall file a claim for refund for the full amount
of the applicable excise taxes and the Company may pursue
said claim for refund at the Company's sole expense on
Employee's behalf. Employee agrees to cooperate with the
Company in any such effort. If a refund is received by
Employee, Employee shall promptly forward said refund to
Company.
5. Employee's Outplacement Expenses. The Company shall reimburse
Employee for any out-of-pocket costs and expenses actually incurred by
Employee for outplacement services in an aggregate amount not to exceed
Twenty Five Thousand Dollars ($25,000.00). For purposes of this Section 5,
outplacement services shall be broadly defined and liberally construed.
6. Employee's Attorney's Fees. The Company shall reimburse Employee
for any reasonable attorney's fees and expenses actually incurred by
Employee in connection with the implementation of this Agreement and the
terms and conditions hereof; provided, however, that the amount to be
reimbursed by the Company under this Section 6 shall in no event exceed
Fifteen Thousand Dollars ($15,000.00).
7. The Company's Release and Indemnification.
(a) The Company, on its own behalf and on behalf of its
subsidiaries, hereby releases, acquits, and forever discharges
Employee from any and all claims, demands, actions, causes of action
and liabilities, whether known or unknown, absolute or contingent,
presently existing or hereafter discovered, that the Company may now
have or that might subsequently accrue to the Company against Employee
arising out of or related to Employee's service as an employee,
officer or director of the Company. Except for the Avoidance Claims
as referenced in Section 7.2(ii) of the Plan of Reorganization, which
are not released hereunder, to the extent this release and the release
set out in section 7.2 of the Plan of Reorganization are not
consistent, the language which grants the broadest release to Employee
shall control.
(b) The Company shall provide Employee with coverage under
a directors and officers liability insurance policy, with tail
coverage, with respect to actions of Employee as an officer or
director of the Company occurring prior to the Termination Date, in an
amount equal to or greater than that regularly carried on behalf of
other officers and directors of the Company and reasonably acceptable
to Employee.
(c) The Company shall indemnify, defend and hold harmless
Employee against all losses, expenses, damages, and liabilities
incurred in connection with any claims by anyone against Employee with
respect to his duties or actions as an employee, officer or director
of the Company prior to the Termination Date.
8. Employee's Release. Employee hereby releases, acquits, and
forever discharges the Company and the past, present and future directors,
shareholders, officers, employees, agents, attorneys, representatives and
affiliates of the Company, from any and all claims, demands, actions,
causes of action and liabilities, whether known or unknown, absolute or
contingent, presently existing or hereafter discovered, other than claims
or other actions or proceedings under or related to this Agreement, that
Employee may now have or that might subsequently accrue to Employee against
such parties arising out of or related to Employee's service as an
employee, officer or director of the Company.
9. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be
held to be invalid or unenforceable, the remainder of this Agreement and
the application of such provision to persons or circumstances other than
those to which it is held invalid or unenforceable shall not be affected
thereby, and each provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
10. Headings. The headings in this Agreement are inserted for
convenience of reference only and shall not in any way affect the meaning
or interpretation of this Agreement.
11. Counterparts. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
12. Entire Agreement. This instrument constitutes the entire
agreement of the parties with respect to the subject matter hereof and
shall supersede any other agreement between the parties, oral or written,
concerning the same subject matter, except as otherwise expressly provided
herein.
13. Amendment. This Agreement may be amended only by a writing
which makes express reference to this Agreement as the subject of such
amendment and which is signed by Employee and by a duly authorized officer
of the Company.
14. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Missouri, without reference to the conflict of laws rules of such State.
The parties (a) agree that any action, suit or other proceeding initiated
by either party pursuant to or in connection with this Agreement shall be
brought in a State or Federal court situated in the City or County of St.
Louis, Missouri, and (b) irrevocably submit to the jurisdiction of any such
court in any such action, suit or proceeding.
15. Binding Effect and Assignment. The rights and obligations under
this Agreement shall inure to and be binding on the Company and its
respective successors and assigns and the rights and obligations under this
Agreement shall inure to and be binding upon Employee and his legal
representatives, legatees and heirs. This Agreement may not be assigned by
either party hereto without the prior written consent of the other party.
16. Further Assurances. The parties hereto agree to execute and
deliver such further instruments and documents as may be reasonably
necessary in order to fully effectuate the purpose and intent of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Xxxx X. Xxxxxx, Employee
EDISON BROTHERS STORES, INC.,
on its own behalf and on
behalf of its subsidiaries
By:
Title:
By:
Title:
