EXECUTIVE EMPLOYMENT AGREEMENT
This employment agreement (the
"Agreement") is made and entered into as of
June 25th, 1999 by and between Gottschalks
Inc., a Delaware corporation (the "Company"),
and Xxxxx Xxxxxxxxx, (the "Employee").
Recitals
A. Prior to the date of this Agreement,
Employee has held the position of
President and Chief Operating Officer of
the Company.
B. The Company desires to employ the
Employee from the date set forth in
Article 2.2 (the "Effective Date") until
expiration of the term of this Agreement,
and Employee is willing to be employed by
Company during that period, on the terms
and subject to the conditions set forth
in this Agreement.
In consideration of the mutual covenants
and promises of the parties, the Company and
Employee covenant and agree as follows:
1. Duties
During the term of this Agreement,
Employee will be employed by the Company to
serve as President and Chief Executive Officer
of the Company. The Employee will devote such
amount of business time to the conduct of the
business of the Company as may be reasonably
required to effectively discharge Employee's
duties under this Agreement and, subject to
the supervision and direction of the Company's
Board of Directors (the "Board"), will perform
those duties and have such authority and
powers as are customarily associated with the
offices of a President and Chief Executive
Officer of a company engaged in a business
that is similar to the business of the
Company, including (without limitation) (a)
the authority to direct and manage the day-to-
day operations and affairs of the Company, (b)
the authority to hire and discharge employees
of the Company, and (c) all other authority
and powers exercised by the Employee prior to
the Effective Date as President and Chief
Operating Officer of the Company.
2. Term of Employment
2.1 Definitions
For the purposes of this Agreement
the following terms have the following
meanings:
(a) "Termination for Cause" means
termination by Company of Employee's
employment (i) by reason of Employee's
willful dishonesty towards, fraud upon,
or deliberate injury or attempted injury
to, the Company, (ii) by reason of
Employee's material breach of this
Agreement, (iii) by reason of Employee's
gross negligence or intentional
misconduct with respect to the
performance of Employee's duties under
this Agreement, (iv) by reason of
Employee's breached or violation of any
fiduciary duty owed to Company or (v)
Employee has been personally dishonest,
or has willfully or negligently violated
any law, rule or regulation or has been
convicted of a felony or misdemeanor
(other than minor traffic violations and
similar offenses) provided, however, that
no such termination will be deemed to be
a Termination for Cause unless the
Company has provided Employee with
written notice of what it reasonably
believes are the grounds for any
Termination for Cause.
(b) "Termination Other than For
Cause" means termination by the Company
of Employee's employment by the Company
for reasons other than those which
constitute Termination for Cause.
(c) "Voluntary Termination" means
termination by the Employee of the
Employee's employment with the Company,
excluding termination by reason of
Employee's death or disability as
described in Sections 2.5 and 2.6.
2.2 Basic Term
The term of employment of Employee
by the Company will commence on the
Effective Date of June 24, 1999 and will
extend through the period ending on July
2, 2002, (the "Termination Date").
Company and Employee may extend the term
of this Agreement by mutual written
agreement.
2.3 Termination for Cause
Termination for Cause may be
effected by Company at any time during
the term of this Agreement and may be
effected by written notification to
Employee; provided, however, that no
Termination for Cause will be effective
unless Employee has been provided with
the prior written notice. Upon
Termination for Cause, Employee is to be
immediately paid all accrued salary,
incentive compensation to the extent
earned, vested deferred compensation
(other than pension plan or profit
sharing plan benefits, which will be paid
in accordance with the applicable plan),
and accrued vacation pay, all to the date
of termination, but Employee will not be
paid any severance compensation.
2.4 Termination Other Than for Cause
Notwithstanding anything else in
this Agreement, Company may effect a
Termination Other Than for Cause at any
time upon giving notice to Employee of
such Termination Other Than for Cause.
Upon any Termination Other Than for
Cause, Employee will immediately be paid
all accrued salary, all incentive
compensation to the extent earned,
severance compensation as provided in
Section 4, vested deferred compensation
(other than pension plan or profit
sharing plan benefits, which will be paid
in accordance with the applicable plan),
and accrued vacation pay, all to the date
of termination.
2.5 Termination Due to Disability
In the event that, during the term
of this Agreement, Employee should, in
the reasonable judgment of the Board,
fail to perform Employee'' duties under
this Agreement because of illness or
physical or mental incapacity
("Disability"), and such Disability
continues for a period of more than three
(3) consecutive months, Company will have
the right to terminate Employee's
employment under this Agreement by
written notification to Employee and
payment to Employee of all accrued salary
and incentive compensation to the extent
earned, severance compensation as
provided in Section 4, vested deferred
compensation (other than pension plan or
profit sharing plan benefits, which will
be paid in accordance with the applicable
plan), and all accrued vacation pay, all
to the date of termination. Any
determination by the Board with respect
to Employee's Disability must be based on
a determination of competent medical
authority or authorities, a copy of which
determination must be delivered to the
Employee at the time it is delivered to
the Board. In the event the Employee
disagrees with the determination
described in the previous sentence,
Employee will have the right to submit to
the Board a determination by a competent
medical authority or authorities of
Employee's own choosing to the effect
that the aforesaid determination is
incorrect and that Employee is capable of
performing Employee's duties under this
Agreement. If, upon receipt of such
determination, the Board wishes to
continue to seek to terminate this
Agreement under the provisions of this
section, the parties will submit the
issue of Employee's Disability to
arbitration in accordance with the
provisions of this Agreement.
2.6 Death
In the event of Employee's death
during the term of this Agreement,
Employee's employment is to be deemed to
have terminated as of the last day of the
month during which Employee's death
occurred, and Company will pay to
Employee's estate accrued salary,
incentive compensation to the extent
earned, vested deferred compensation
(other than pension plan or profit
sharing plan benefits, which will be paid
in accordance with the applicable plan),
and accrued vacation pay, all to the date
of termination.
2.7 Voluntary Termination
In the event of a Voluntary
Termination, Company will immediately pay
to Employee all accrued salary, all
incentive compensation to the extent
earned, vested deferred compensation
(other than pension plan or profit
sharing plan benefits, which will be paid
in accordance with the applicable plan),
and accrued vacation pay, all to the date
of termination, but Employee will not be
paid any severance compensation.
2.8 Effect of Termination on Option
Agreement
Notwithstanding anything to the
contrary contained in this Agreement, any
termination of Employee's employment by
the Company will have no effect on
Employee's rights under that certain
Nonqualified Stock Option Agreement
granted to Employee pursuant to the
Company's Employee-Shareholder
Performance Stock Option Plan, which
agreement was entered into between the
Employee and the Company as of April 14,
1997 and November 23, 1998 (the "Option
Agreement"). Those Agreements contain
their own terms concerning termination.
3. Salary, Benefits and Other Compensation
3.1 Base Salary
As payment for the services to be
rendered by Employee as provided in
Section 1 and subject to the terms and
conditions of Section 2, Company agrees
to pay to Employee a "Base Salary"
payable bi-weekly. The Base Salary
payable to Employee under this Section
will initially be $420,000. Employee
will be entitled to regular salary
reviews and raises during the term of
this Agreement in the same general manner
as other officers of the Company;
provided, however, that so long as the
Board first determines that Employee has
achieved satisfactory performance,
Employee will be entitled to receive a
minimum increase in Employee's Base
Salary during the second year of this
Agreement to $460,000, and subject to
that same determination, a minimum
increase in Employee's Base Salary during
the third year of this Agreement to
$500,000. Furthermore, the Company and
Employee acknowledge that, subject to the
actual financial performance of the
Company during the term of this
Agreement, during the term of this
Agreement it is the mutual intent of the
parties that the Base Salary may increase
to a level above those minimums provided
for above, provided such increase is
commensurate with the level of
compensation received by other chief
executive officers of other similarly
situated companies in the retail
department store business, or the general
retail business.
3.2 Incentive Bonus Plans
During the term of his employment
under this Agreement, the Employee will
be eligible to participate in all bonus
and incentive plans established by the
Board including, without limitation, the
Company's 1999 Management Bonus Plan
(which will be first paid during the year
2000). Said plan as it relates to
Employee shall provide the ability to
earn an annual bonus of at least 30% of
Base Salary if specific goals and
objectives adopted by the Board are
achieved.
3.3 Benefit Plans
Except as modified in this
Agreement, during the term of Employee's
employment under this Agreement, the
Employee is to be eligible to participate
in all employee benefit plans to the
extent maintained by the Company,
including (without limitation) any life,
disability, health, accident and other
insurance programs, paid vacations, and
similar plans or programs, subject in
each case to the generally applicable
terms and conditions of the plan or
program in question and to the
determinations of any committee
administering such plan or program. On
termination of the Employee for any
reason, the Employee will retain all of
Employee's rights to benefits that have
vested under such plan, but the
Employee's rights to participate in those
plans will cease on the Employee's
termination unless the termination is a
Termination Other Than for Cause, in
which case Employee's rights of
participation will continue for a period
of one (1) year following Employee's
termination.
3.4 Vacation
During the term of this Agreement,
Employee will be entitled to four weeks
paid vacation time per year.
3.5 Expenses
During the term of this Agreement,
Company will reimburse Employee for
Employee's reasonable out-of-pocket
expenses incurred in connection with
Company's business, including travel
expenses, food, and lodging while away
from home, subject to such policies as
Company may from time to time reasonably
establish for its employees. Company
shall pay Employee a car allowance of
$1,000 per month during the term of this
Agreement.
3.6 Life Insurance
During the term of Employee's
employment, the Company will pay for a
Term Life Insurance Policy, in the dollar
amount equal to Employee's then Base
Salary in the form designated by Employee
and approved by the Company's Board of
Directors, covering the life of Employee
and with proceeds payable to such
beneficiaries as Employee designates.
The foregoing is to be in addition to,
and not in place of, any rights to which
Employee's estate may be entitled under
this Agreement on Employee's death. Upon
any termination of Employee's employment,
the aforementioned insurance policy will
be assigned to the Employee and Employee
will assume responsibility for all
premium payments with respect the
insurance policy.
3.7 One-Time Grant
A one-time grant of 40,000 options
for shares upon being named Chief
Executive Officer.
3.8 Withholding of Taxes
The Employee understands that the
services to be rendered by Employee under
this Agreement will cause the Employee to
recognize taxable income, which is
considered under the Internal Revenue
Code of 1986, as amended, and applicable
regulations thereunder as compensation
income subject to the withholding of
income tax (and Social Security or other
employment taxes). The Employee hereby
consents to the withholding of such taxes
as are required by the Company.
4. Severance Compensation
4.1 Termination Other Than for Cause;
Payment in Lieu of Notice
In the event Employee's employment
is terminated in a Termination Other Than
for Cause, Employee will be paid as
severance pay Employee's Base Salary for
the period commencing on the date that
Employee's employment is terminated and
ending on the date this Agreement
terminates (but not less than 12 months
severance payments regardless of the
termination date of this Agreement), on
the dates specified in Section 3.1 for
payment of Employee's Base Salary.
4.2 Termination for Disability
In the event Employee's employment
is terminated because of Employee's
disability pursuant to Section 2.5,
Employee will be paid as severance pay
Employee's Base Salary for the period
commencing on the date that Employee's
employment is terminated and ending on
the date which is six months thereafter
(not to exceed the number of months left
in this Agreement or any extension
thereof), on the dates specified in
Section 3.1 for payment of Employee's
Base Salary.
4.3 Change in Ownership
In the event that there is a change
in ownership or control of the Company,
either by sale of all or substantially
all of the assets of the Company to
another entity, or by a sale of
controlling interest (50% or more of the
outstanding capital stock) of the
Company's common stock to another entity;
then in the event Employee is terminated
during the twenty-four (24) month period
thereafter, a severance benefit shall be
payable on a monthly basis to Employee
beginning on the notice of termination
date consisting of twenty-four (24)
months Base Salary, (or the proportional
amount of the remaining twenty-four (24)
months payments if such termination
occurs within the twenty-four (24) month
time period) determined at Employee's
annual base rate of pay in effect at the
time such notice is given (less standard
withholdings and authorized deductions).
Notwithstanding the provisions in
Article 4.3 above, in the event that the
total capitalization of the Company at
the time that a change of control or sale
occurs, is below eighty-five million
dollars, then Employee will be restricted
to twelve (12) months base salary instead
of twenty-four (24) as stated above if he
is terminated as provided.
4.4 Other Termination
In the event of a Voluntary
Termination, Termination for Cause or
Death, Employee or Employee's estate will
not be entitled to any severance pay.
5. Termination Without Compensation
Notwithstanding anything to the contrary
contained in this Agreement, Employee shall
not be entitled to continued compensation in
any form if Employee terminates his employment
from the Company, including without
limitation, (i) through retirement, or death;
(ii) Company sells all or part of its business
(or otherwise merges, divides, consolidates or
reorganizes), and Employee has the opportunity
to continue employment with the buyer (or with
one of the resulting entities in the event of
a merger, division, consolidation or
reorganization), at or above the Employee's
base compensation, provided the other terms
and conditions of Employee's employment after
such sale, division, consolidation or
reorganization are the same or substantially
the same as the terms and conditions of
Employee's employment with Company (i.e.,
Employee's duties, responsibilities, and
physical location geographically shall remain
the same, although the Company may be a
subsidiary of a larger entity); or (iii)
Employee is terminated for "cause."
6. Confidentiality
Because of Employee's employment by
Company, Employee will have access to trade
secrets and confidential information about
Company, its products, its customers, and its
methods of doing business (the "Confidential
Information"). During and after the
termination of Employee's employment by the
Company, Employee may not directly or
indirectly disclose or use any such
Confidential Information; provided, that
Employee will not incur any liability for
disclosure of information which (a) is
required in the course of Employee's
employment by the Company, (b) was permitted
in writing by the Board or (c) is within the
public domain or comes within the public
domain without any breach of this Agreement.
7. Assignment of Inventions
All processes, inventions, patents,
copyrights, trademarks and other intangible
rights (collectively the "Inventions") that
may be conceived or developed by Employee,
either along or with others, during the term
of Employee's employment, whether or not
conceived or developed during Employee's
working hours, and with respect to which the
equipment, supplies, facilities, or trade
secret information of Company was used, or
that relate at the time of conception or
reduction to practice of the Invention to the
business of the Company or to Company's actual
or demonstrably anticipated research and
development, or that result from any work
performed by Employee for Company, will be the
sole property of Company, and Employee hereby
assigns to the Company all of Employee's
right, title and interest in and to such
Inventions. Employee must disclose to Company
all inventions conceived during the term of
employment, whether or not the invention
constitutes property of Company under the
terms of the preceding sentence, but such
disclosure will be received by Company in
confidence. Employee must execute all
documents, including patent applications and
assignments, required by Company to establish
Company's rights under this Section.
8. Miscellaneous
8.1 Waiver
The waiver of any breach of any
provision of this Agreement will not
operate or be construed as a waiver of
any subsequent breach of the same or
other provision of this Agreement.
8.2 Entire Agreement; Modification
Except as otherwise provided in the
Agreement and in the Option Agreement,
this Agreement represents the entire
understanding among the parties with
respect to the subject matter of this
Agreement, and this Agreement supersedes
any and all prior understandings,
agreements, plans, and negotiations,
whether written or oral, with respect to
the subject matter hereof, including
without limitation, any understandings,
agreements, or obligations respecting any
past or future compensation, bonuses,
reimbursements, or other payments to
Employee from Company. All modifications
to the Agreement must be in writing and
signed by the party against whom
enforcement of such modification is
sought.
8.3 Notice
All notices and other communications
under this Agreement must be in writing
and must be given by personal delivery,
telecopier or telegram, or first class
mail, certified or registered with return
receipt requested, and will be deemed to
have been duly given upon receipt if
personally delivered, one (1) day after
mailing, if mailed, or twelve (12) hours
after transmission, if delivered by
facsimile or electronic transmission, to
the respective persons named below:
If to Company: Gottschalks Inc.
0 Xxxxx Xxxx Xxxxx Xxxx
Xxxxxx, Xx. 00000
Attn: Chairman of the
Board
If to Employee: Xxxxx Xxxxxxxxx
00000 X. Xxxxxxx Xxx Xx.
Xxxxxx, Xx. 00000
8.4 Headings
The Section headings of this
Agreement are intended for reference and
may not by themselves determine the
construction or interpretation of this
Agreement.
8.5 Governing Law
Except as this Agreement relates to
indemnity of Employee in Article 8.10,
this Agreement is to be governed by and
construed in accordance with the laws of
the State of California applicable to
contracts entered into and wholly to be
performed within the State of California
by California residents. Any controversy
or claim arising out of or relating to
this Agreement, or breach of this
Agreement (except any controversy or
claim with respect to Section 5 or 6), is
to be settled by arbitration in Fresno,
California in accordance with the
Commercial Arbitration Rules of the
American Arbitration Association, and
judgment on the award rendered by the
arbitrators may be entered in any court
having jurisdiction. There must be three
arbitrators, one to be chosen directly by
each party at will, and the third
arbitrator to be selected by the two
arbitrators so chosen. Each party will
pay the fees of the arbitrator he or she
selects and his or her own attorneys, and
the expenses of his or her witnesses and
all other expenses connected with
presenting his or her case. Other costs
of the arbitration, including the cost of
any record or transcripts of the
arbitration, administrative fees, the fee
of the third arbitrator, and all other
fees and costs, will be borne equally by
the parties. Notwithstanding anything in
this Agreement to the contrary, if any
controversy or claim arises between the
parties under Section 5 or 6 of this
Agreement, the Company will not be
required to arbitrate that controversy or
claim but the Company will have the right
to institute judicial proceedings in any
court of competent jurisdiction with
respect to such controversy or claim. If
such judicial proceedings are instituted,
the parties agree that such proceedings
will not be stayed or delayed pending the
outcome of any arbitration proceeding
under this Agreement.
8.6 Survival of Company's Obligations
This Agreement will be binding on,
and inure to the benefit of, the
executors, administrators, heirs,
successors, and assigns of the parties;
provided, however, that except as
expressly provided in this Agreement,
this Agreement may not be assigned either
by company or by Employee.
8.7 Counterparts
This Agreement may be executed in
one or more counterparts, all of which
taken together will constitute one and
the same Agreement.
8.8 Withholdings
All sums payable to Employee under
this Agreement will be reduced by all
federal, state, local, and other
withholdings and similar taxes and
payments required by applicable law.
8.9 Enforcement
If any portion of this Agreement is
determined to be invalid or
unenforceable, that portion of this
Agreement will be adjusted, rather than
voided, to achieve the intent of the
parties under this Agreement.
8.10 Indemnification
Subject to the laws of the State of
Delaware, and the Company's Articles and
Bylaws covering indemnity, the Company
agrees that it will indemnify and hold
the Employee harmless to the fullest
extent permitted by applicable law from
and against any loss, cost, expense or
liability resulting from or by reason of
the fact of the Employee's employment
hereunder, whether as an officer,
employee, agent, fiduciary, director or
other official of the Company.
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the day and
year first above written.
GOTTSCHALKS INC.
By: /s/ Xxx Xxxx
Xxx Xxxx
EMPLOYEE
By: /s/ Xxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx
WITNESS:
/s/ Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
