Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this 3rd day of
September, 1999, and having an "Effective Date" of September 3,
1999, is by and between SCHOOL SPECIALTY, INC., a Delaware
corporation (the "Company") and XXXXXX X. XXXXXXXXX ("Employee").
RECITALS
The Company desires to continue to employ Employee and to
have the benefit of his skills and services, and Employee desires
to accept employment with the Company, on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises,
terms, covenants and conditions set forth herein, and the
performance of each, the parties hereto, intending legally to be
bound, hereby agree as follows:
AGREEMENTS
1. Employment and Duties. The Company hereby agrees to
employ the Employee and the Employee hereby accepts
employment as a Vice President Finance and Business
Development of the Company and agrees to devote his
full business time and efforts to the diligent and
faithful performance of his duties as a Vice President
Finance and Business Development of the Company
hereunder under the direction of the Chief Financial
Officer of the Company. Such duties shall be performed
from headquarters in the Appleton, Wisconsin, area.
2. Term of Employment. Unless sooner terminated as
hereinafter provided, the term of the Employee's employment
hereunder shall commence with and only with the Effective Date
and shall continue for a period of eighteen (18) months (the
"Term"). This Agreement may be terminated prior to the end of the
Term in the manner provided herein. In the event that this
agreement is not terminated pursuant to the terms of this
Agreement, following the first eighteen (18) months of the Term
of or any renewal terms thereof, said agreement shall extend for
a successive renewal term of eighteen (18) months measured from
the date of the expiration of the Term or the expiration of any
subsequent renewal term, unless either party shall notify the
other party of their desire to not renew the term of this
agreement, with said notice to be made no later than ninety (90)
days prior to the expiration of the Term of this agreement or
any then effective renewal term thereof.
3. Compensation. For all services rendered by Employee,
the Company shall compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the
annual base salary payable to Employee shall be One
Hundred Forty Thousand Dollars ($140,000.00) per
year or such greater amount as determined from time
to time by the Board of Directors of the Company
(but not reviewed less frequently than on an annual
basis), payable on a regular basis in accordance
with the Company's standard payroll procedures, but
not less than monthly. It is understood that the
base salary is a minimum amount, and shall not be
reduced during the term of this Agreement.
(b) Incentive Bonus. During the initial term and any
extensions thereof, Employee shall be eligible to
receive an incentive bonus based upon his
participation in the Company's executive incentive
bonus program as specified in Exhibit A as attached
hereto, or successor executive incentive bonus
programs. Bonuses will be prorated and paid based
upon the number of days employed in the fiscal year
of termination.
(c) Perquisites, Benefits, and Other Compensation.
During the initial term and any extensions thereof,
Employee shall be entitled to receive all
perquisites and benefits as are customarily
provided by the Company to its executive employees,
subject to such changes, additions, or deletions as
the Company may make generally from time to time,
as well as such other perquisites or benefits as
may be specified from time to time by the Board of
Directors or the Chief Executive Officer of the
Company.
4. Covenants and Conditions.
(a) The Employee will acquire information and knowledge
respecting the intimate and confidential affairs of
the Company in the various phases of its business.
Accordingly, the Employee agrees that he shall not
for a period of two (2) years following the
termination of his employment with the Company, use
for himself or disclose to any person not employed
by the Company any such knowledge or information
heretofore acquired or acquired during the term of
this employment hereunder including but not limited
to the prescribed requirements of S.134.90 of the
Wisconsin Statutes, as hereinafter amended from
time to time. Nothing in this agreement shall be
construed to limit or supersede the common law of
torts or statutory or other protection of trade
secrets where such law provides the Company with
greater protections or protections for a longer
duration than that provided in this section 4 of
this Agreement.
(b) The Employee agrees that all memoranda,
notes, records, papers, or other documents and all
copies thereof relating to the Company's operations
or business, some of which may be prepared by him,
and all objects associated therewith (such as
models and samples) in any way obtained by him
shall be the Company's property. This shall
include, but is not limited to, documents and
objects concerning any process, apparatus, or
product manufactured, used, developed,
investigated, or considered by the Company. The
Employee shall not, except for Company use, copy or
duplicate any of the aforementioned documents or
objects, nor remove them from the Company's
facilities, nor use any information concerning them
except for the Company's benefit, either during his
employment or thereafter. The Employee agrees that
he will deliver all of the aforementioned documents
and objects that may be in his possession to the
Company on termination of his employment, or at any
other time on the Company's request, together with
his written certification of compliance, except for
those documents and objects received as a director
of the Company.
5. Death or Disability of the Employee. The Employee's
employment shall terminate immediately upon his death.
In the event the Employee becomes physically or mentally
disabled so as to qualify for disability payments under
the then current disability coverage for full time
employees of the Company, the Company may at its option
terminate his employment upon not less than thirty (30)
days written notice. The Company's right to terminate
the Employee's employment pursuant to the preceding
sentence shall cease in the event the notice of
termination provided for therein shall not be given
during the period of the Employee's disability. In the
event of termination, the Company shall
not be obligated to pay the Employee's salary under
paragraph 3 hereof, but rather the Employee shall
receive the gross amount of disability benefits as currently
available under the then current disability coverage
provided by the Company for its full time Employees.
6. Termination and Severance Compensation. The
Company reserves the right to immediately terminate the
Employee's employment under this agreement should any of
the following occur:
(a) The Employee's commission of a felony
that is an act which, in the opinion of the
Board of Directors, is either abhorrent to
the community or is an intentional act, which
the Board of Directors considers materially
damaging to the reputation of the Company or
its successors or assigns.
(b) The Employee's breach of or failure to
perform his obligations in accordance with
the terms and conditions of this agreement.
However the right of the Company to terminate
the employment of the Employee under the
terms of this paragraph 6(b) shall be
conditioned upon the Company promptly
providing to the Employee a written notice
which describes the Employee's breach of or
failure to perform his obligations in
accordance with the terms and conditions of
this agreement. The Employee shall have
thirty (30) days from the date of the
Company's issuance of this notice to cure the
described breach or failure. Notwithstanding
the above described language, should the
Company issue more than one (1) notice in any
twelve (12) month period under the terms of
this paragraph 6(b), the Employee shall have
no cure rights for such breach or failure to
perform.
(c) The death of the Employee.
(d) The disability of the Employee, as described
in Section 5 above.
(e) The Company provide the Employee with
notice of the termination of his employment
with the Company for conditions other than
those described above.
(f) The Company issues a notice of non-
renewal of the term of this Agreement as
described in Section 2 herein.
Should the term of the Employee's employment with the
Company be terminated pursuant to the terms of Sections
6(e), 6(f) or 9 herein, the Company shall pay to the
Employee the Base Salary described in Section 3(a) for
a period of eighteen (18) months from the date of such
termination.
7. Self-Termination The Employee shall have the right to
terminate his employment with the Company for any
reason by providing the Company with fifteen (15) days
prior written notice. The Company shall have the right
to waive any or all of such fifteen (15) day period to
accelerate the effective date of the termination of the
employment of the Employee with the Company, by written
notice to the Employee. If the Employee elects to so
terminate his employment with the Company no sooner
than ninety (90) days after the effective date but no
later than fifteen (15) calendar months after the
Effective Date, the Employee is entitled to severance
compensation for twelve (12) months following the
effective date of such termination by the payment of
Base Salary as described in Section 3(a).
8. Vesting. In the event that the Employee's employment
hereunder is terminated under the provisions of Sections 6(e),
6(f) or 7, the Employee shall at the time of termination,
completely vest in all rights available under the qualified and
non-qualified stock options, which are at the time of the
termination granted to the Employee.
9. Rights and Obligations of Successors. In the event that
any of the following events occur, a "Change in Control" shall be
deemed to occur for the purpose of this Agreement: (a) any person
or group of persons acting in concert becomes the beneficial
owner, directly or indirectly (excluding ownership by or through
employee benefit plans), of securities of the Company
representing fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities; (b) the
Company is combined (by merger, share exchange, consolidation, or
otherwise) with another corporation and as a result of such
combination less than seventy five percent (75%) of the
outstanding securities of the surviving or resulting corporation
are owned in the aggregate by the former shareholders of the
Company; or (c) any person or group of persons acting in concert
obtains direct or indirect control of the Board of Directors of
the Company, other than the current shareholders of the Company.
The Employee shall have the right to terminate his employment
under the terms of this Agreement for a period of sixty (60) days
following the Change in Control. In the event that the Employee
shall not so elect to terminate this Agreement, then this
agreement shall be assignable and transferable by the Company to
any subsidiary or affiliate or to any subsidiary or affiliate of
the Company affiliated with the Change in Control and shall inure
to the benefit of and be binding upon the Employee and his heirs
and personal representatives and the Company and its successors
and assigns. In the event the Employee elects to terminate
employment, the Employee shall be paid in accordance with
Paragraph 6.
10. Covenant Not to Compete. In consideration of the
employment hereunder, the Employee hereby agrees that during the
term of his employment by the Company and for a period of
eighteen (18) months (twelve (12) months in the case of self-
termination), following the termination of his employment with
the Company, the Employee will not either directly or indirectly
own, have proprietary interest (except for less than 5% of any
listed company or company traded in the over-the-counter market)
of any kind in, be employed by, or serve as a consultant to or in
any other capacity for any firm, other than the Company and its
subsidiaries, engaged in the distribution of school supplies,
equipment, furniture or other products made and distributed by
the Company or any of the Company's present or future subsidiary
corporations (acquired during the term of this Agreement) during
the period of the Employee's employment in the area where they
are engaged in business without the express written consent of
the Company. The Employee agrees that a breach of the covenant
contained herein will result in irreparable and continuing damage
to the Company for which there will be no adequate remedy at law
and in the event of any breach of such agreement, the Company
shall be entitled to injunctive and such other and further relief
including damages as may be proper.
11. Notice. All notices, demands and other communications
hereunder shall be deemed to have been duly given, if delivered
by hand or mailed, certified or registered mail with postage
prepaid:
To the Company: School Specialty, Inc.
000 X. Xxxxxxx Xxxxxx
P.O. Box 1579
Xxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxxx XX, Esq.
Xxxxxxx & Xxxxxxx, S.C.
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
To Employee: Xxxxxx X. Xxxxxxxxx
0000 Xxxxx Xxxxxxxxx
Xxxxx Xxx, XX 00000
or to such other address as the person to whom notice
is to be given may have specified in a notice duly
given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or
other communication shall be deemed to have been given
as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be
deemed given only when actually received by the
addressees.
12. Entire Agreement; Amendment; Waiver. This Agreement
(including any documents referred to herein) sets forth
the entire understanding of the parties hereto with
respect to the subject matter contemplated hereby. Any
and all previous agreements and understandings between
or among the parties regarding the subject matter
hereof, whether written or oral, are superseded by this
Agreement. This Agreement shall not be amended or
modified except by a written instrument duly executed
by each of the parties hereto. Any extension or waiver
by any party of any provision hereto shall be valid
only if set forth in an instrument in writing signed on
behalf of such party.
13. Expenses. Each party hereto will pay their respective
fees, expenses and disbursements of their agents,
representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement,
and its enforcement.
14. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of
Delaware, without regard to its conflict of laws
principles.
IN WITNESS WHEREOF, the parties hereto have cause this
Agreement to be duly executed as of the date first written above.
COMPANY: SCHOOL SPECIALTY, INC.
/s/ Xxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxxxx, Chairman and
Chief Executive Officer
EMPLOYEE:
/s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxxxxx, Individually
School Specialty
Fiscal 2000
Incentive Program
Executive Plan:
Corporate criteria: 100% on consolidated EBITA
Budget EBITA: $62,829,000
Payout:
Below budget: $-0-
At budget: 50% of base salary
Max at Budget + 20%, or $75,395,000 = 100% of base salary
Specialty/Traditional Companies Plan:
Corporate criteria: 25% based upon consolidated EBITA, as above.
Division criteria: 75% based upon Division performance in three areas:
1. Budget EBITA: Max payout: 37.5% of base salary
Below budget: $-0-
At budget: 18.75% of base salary
Max: budget + 20% of Division EBITA: 37.5% of base salary
2. Return on Average Operating Assets: Max payout: 18.75% of base salary
Calc: EBITA/Gross A/R + Gross Inv. + Net F/A - A/P =
Return on Average Operating Assets (RAOA)
(average calculated using month-end balance)
Payout:
0 - 20% RAOA 0
21 - 60% RAOA 0 - 18.75% of base salary
3. Return on Sales: Max payout: 18.75% of base salary
Calc: EBITA/Net Sales
Payout:
Spec. Co's
7 - 20% Return on Sales: 0 - 18.75% of base salary
Trad. Co.
6 - 12% Return on Sales: 0 - 18.75% of base salary
Example:
Corporate EBITA budget $63 million
Spec. Co. EBITA budget $10 million
Executive Base Salary $100,000
If actual performance is a follows:
EBITA Div. $11 million
Avg. Operating Assets $28 million
Net Sales $61 million
EBITA Corp. $68 million
Bonus:
25% Corp. EBITA: $68-$63 = $5 mil. = 75% X $100,000 X 25% = $18,750
37.5% Div. EBITA: $10-$11 = $1 mil. = 75% X $100,000 X 37.5% = $28,125
18.75% RAOA: 11 mil/28 mil = 40 RAOA = 75% X $100,000 X 18.75% = $14,063
18.75% Rtn on Sales:11 mil/61 mil = 18% = 85% X $100,000 X 18.75% = $15,938
Total Bonus $76,876
May 17, 1999
