EMPLOYMENT AGREEMENT
This agreement is made as of April 24, 1995, by and between Circuit
City Stores, Inc., (the "Company"), a Virginia Corporation, and Xxxxxxx X.
Xxxxx, (the "Employee").
The parties agree as follows:
ARTICLE I
Services
The Company agrees to employ the Employee as Senior Vice President
during the term of this Agreement. The Employee agrees to devote his full time
and attention to the business of the Company and to the faithful performance of
his duties as Senior Vice President and to the performance of such additional
duties as may be assigned to him from time to time by the Company's Board of
Directors (the "Board") or Chief Executive Officer.
At any time and from time to time while this agreement is in force, the
Employee may be appointed to such other executive positions and be given such
other titles and executive responsibilities as the Board may determine.
ARTICLE II
Term
The Company agrees to employ the Employee and the Employee agrees to
serve the Company for a term beginning as of April 24, 1995 and continuing
through April 23, 1997. The term of this Agreement shall be automatically
extended for additional one-year periods unless either party notifies the other
in writing at least one year before the end of the then-current term that it
does not wish to extend the term. For example, if such notice is not given by
April 24, 1996, the term of this Agreement shall extend through April 23, 1998.
However, in order for the contract to expire on that date, notice must be given
by April 24, 1997. If no such notice is given, the term shall extend through
April 23, 1999. This Agreement may be terminated prior to its expiration by
either the Company or the Employee. The consequences of such a termination are
described in other provisions of this Agreement.
ARTICLE III
Compensation
The Employee's compensation shall include:
(1) Base salary, as determined by the Board or the Compensation
and Personnel Committee of the Board (the "Committee") following an
annual review of the Employee's compensation. Until June 1, 1995, such
base salary will be $275,000.00/annually.
(2) Cash bonuses in accordance with the Company's annual bonus
program established by the Board or the Committee and on a basis no
less favorable than that applicable to other senior management
employees and such other cash bonuses as the Board or the Committee, in
their discretion, may determine from time to time.
(3) Participation in the Company's stock incentive programs to
the extent the Board or the Committee, in their discretion determines
is appropriate for senior management employees.
(4) Participation in the Company's pension and other benefit
plans and all of the Company's fringe benefit and executive
compensation programs for senior management employees not otherwise
provided for in this Agreement in accordance with the terms and
provisions of those plans and programs, as they may be in effect from
time to time.
In addition, the Company shall reimburse the Employee for all
reasonable and necessary expenses incurred by the Employee in connection with
the performance of his duties hereunder in accordance with corporate policies
and procedures covering travel and business expense reimbursement, as they may
be in effect from time to time.
The Employee may elect to defer all or any part of his salary or bonus
by filing a written election (the "Election") to that effect with the Secretary
of the Company. As to salary, the Election shall be effective only with respect
to compensation for services performed after the Employee files the Election. As
to bonuses, the Election shall be effective only with respect to bonuses
determined and awarded to the Employee after the Employee files the Election.
Any amounts deferred by the Employee will be credited to an account established
for him on the books of the Company. This account will also be credited as of
the end of each fiscal year, until such time as no balance remains in the
account, with an additional amount equal to the product of (a) the average
balance credited to the account during that fiscal year and (b) a percentage
which shall be the time weighted average of the prime rate announced by Signet
Bank from time to time during such fiscal year. The total amount credited to
this account will become payable to the Employee after his termination of
employment upon such payment schedule as he may specify in the Election. If
termination of employment occurs by reason of death, or if the Employee dies
after payments have commenced, any remaining payments will be made to one or
more beneficiaries designated by the Employee in a writing filed with the
Secretary of the Company. If the Employee fails to designate a beneficiary, or
if all the designated beneficiaries predecease him, payment of the remaining
unpaid balance in the account will be made to the Employee's estate. The Company
reserves the right to accelerate payments or to make payment of the amounts
remaining unpaid in a lump sum. All determinations made and actions taken by the
Company under this Article shall be binding upon the beneficiaries and the
Employee's estate. The Employee's rights, or the rights of any beneficiary, are
those of a general creditor of the Company.
ARTICLE IV
Confidential information
The Employee recognizes that by virtue of his present position and his
tenure with the Company in an executive capacity, he has and will continue to
have access to Company trade secrets and other confidential information in
whatever form as documents, software, C.D. Rom, firmware, brochures, data,
materials, knowledge, graphs, pictures and the like including, but not limited
to, the Company's business methods, expansion strategies, expansion plans,
merchandising and marketing techniques or policies, training techniques,
internal operations, supplier information, pricing information, internal
corporate planning methods, systems and operating procedures and other business
matters (the "Confidential Information").
The Employee recognizes and acknowledges that such Confidential
Information, as may exist from time to time, is a valuable, special and unique
asset of the Company, and that this Confidential Information and its use have
been responsible for the rapid growth and nationwide expansion of the Company,
and if known by an entity engaged in the "Business of the Company," would cause
irreparable harm to the Company. The "Business of the Company", shall be defined
as: (a) retail sales and service of consumer electronics or appliances ( with or
without after-sale service) or (b) the purchase or sale of motor vehicles (with
or without providing after-sale service) or c) any other line of business in
which the Company becomes engaged before the date the Employee's employment
terminates.
Therefore, except in performing his duties as an employee of the
Company, the Employee shall not:
(1) Make or cause to be made any reproductions of any
Confidential Information belonging to or in the possession of the Company; or
(2) Remove any Confidential Information from the premises of the
Company or fail or refuse to surrender the same to the Company immediately upon
the termination of his employment or at any prior time upon the Company's
request; or
(3) Use for his own benefit or purposes or disclose to or use for
the benefit or purposes of anyone other than the Company, both during his
employment and after the termination of his employment, any trade secrets or
other Confidential Information, whether he learned the information before or
after signing this Agreement.
ARTICLE V
Non-competition and Non-solicitation
(1) Non-competition. Except as hereinafter provided, the Employee
agrees that he will not, without the prior written consent of the Company,
engage in competition with the Company by being associated with any Competing
Business (as hereinafter defined) during the term of this Agreement and for a
period of one year following its termination or expiration. For purposes of this
Article, the Employee will be deemed to have associated with a Competing
Business if he: (1) directly or indirectly, alone or as a member of a
partnership, owns greater that a 5% interest in; or (2) manages, operates,
controls, or acts as a consultant to; or (3) serves as an officer or director or
in any managerial or executive position; with any Competing Business.
A "Competing Business" is any business entity which engages in the
Business of the Company and engages in Substantial Competition with the Company
in one or more Metropolitan Statistical Areas ("MSA"), in which the Company has
its operation, or in which, at the date the Employee's employment terminates,
the Company is engaged in real estate site selection or has taken further steps
toward the commencement of operation in the future, either alone or in
association with another entity ("Future Statistical Areas"), and in which the
Company collectively produced, or, in the case of Future Statistical Areas, is
projected to produce in the first year of operations, more than $5 million of
gross sales. A business will not be considered to be in "Substantial
Competition" with the Company if: (1) the business or the operating unit of the
business in which the Employee is employed or with which the Employee is
associated (the "Business Unit") is not engaged in the Business of the Company;
or (2) if sales of the Business Unit's products or services in the Business of
the Company constitute less than 10% of such Business Unit's sales; or (3) if
the sales of the Business Unit in the Business of the Company do not constitute
more than 10% of the sales of the Business Unit, but there is not significant
geographic overlap between such Business Unit and the Company's business
locations. For the purposes of this provision, there will not be a significant
geographic overlap if less than 10% of the sales of such Business Unit and less
than 10% of the Company's sales (i) are in the same MSA or (ii) are projected to
be in the same MSA within the first year of operations in the case of Future
Statistical Areas. The term "Business of the Company" is defined in Article IV.
In every case, the good faith judgement of the Committee shall be conclusive as
to whether the Employee is associated with a Competing Business.
(2) Non-solicitation. The Employee agrees during the term of this
Agreement and for a period of two years following its termination, he will not,
without prior written consent of the Company, directly or indirectly engage in
efforts to induce the Company's employees to terminate their employment for the
purpose of being employed by another business entity.
(3) Change of Control. In the event that the Employee's employment is
terminated within two years following a Change of Control (Change of Control
being defined in Article VII) under circumstances described in Article VI(2),
the Employee shall not be bound by the provisions of this Article.
ARTICLE VI
Termination by the Company
(1) For Cause. The Company may immediately terminate the Employee's
employment at any time prior to the expiration of this Agreement for "cause".
For purposes of this Agreement, the following shall be "cause" for termination.
(a) continued and deliberate neglect by the Employee of his
employment duties; or
(b) criminal misconduct of the Employee in connection with the
performance of any of his duties, including, by way of example
but not limitation, misappropriation of funds or property of
the Company or accepting bribes or kickbacks in connection
with any transaction entered into on behalf of the Company; or
(c) failure of the Employee to disclose to the Board a conflict of
interest, of which he knew or, with reasonable diligence,
would have known, in connection with any transaction entered
into on behalf of the Company; or
(d) conduct by the Employee that would result in material injury
to the reputation of the Company if he were retained in his
position with the Company; or
(e) the Employee's conviction of a felony; or
(f) a preliminary or permanent injunction or similar remedy is
entered against the Employee, the Company or both preventing
the Employee or the Company from performing all or part of
this Agreement; or
(g) breach by the Employee of the provisions of Articles IV or V
of this Agreement; or
(h) deliberate actions by the Employee which are contrary to the
best interests of the Company.
In every case, the good faith judgement of the Committee shall be
conclusive as to whether cause for termination exists. In the event of a
termination for cause, which shall include resignation by the Employee at the
Company's request at a time when cause for termination exists, the Employee
shall forfeit the right to any compensation (other than deferred compensation)
under this Agreement after the date of termination, except to the extent that
the terms of any plans or programs referred to in Article III (4) or any
applicable law require otherwise.
(2) Without Cause. The Company may terminate the Employee's employment
agreement at any time prior to the expiration of this Agreement without cause
("cause" being defined in Article VI(1)). In the event: (a) the Employee's
employment is terminated by the Company without cause; (b) the Employee resigns
at the Company's request at a time when no case for termination exists; or (c)
the Employee voluntarily terminates his employment as a result of a reduction in
compensation or benefits (which is not part of a prorata reduction in executive
compensation or benefits for the Company's senior executives) or as a result of
a significant reduction in the Employee's responsibilities, and the voluntary
termination occurs within 60 days after such reduction, the Employee shall
forfeit the right to any compensation (other than deferred compensation) under
this Agreement after the date of termination except:
(i) 12 months of base salary, payable in biweekly installments over the
following 12 months; and, in the event that the termination of
employment occurs within two years following a Change in Control
(Change in Control being defined in Article VII), an additional 12
months of base salary, payable in biweekly installments over the
second 12-month period immediately following such termination; and
(ii) a pro-rated bonus for the fiscal year in which the Employee's
employment is terminated, if the termination occurs on or after
September 1st of that fiscal year. The proration will be based on
the number of complete months the Employee worked in that fiscal
year, will be in accordance with the bonus program for such fiscal
year, and will be payable within two weeks of when bonuses are
distributed, and
(iii) a prorated bonus for the prior fiscal year, if the Employee worked
six or more months in the prior fiscal year, and if the Employee's
termination date is between March 1st and the date bonuses are
distributed for the prior fiscal year (if bonuses are awarded for
the prior fiscal year). In this event, the bonus will be prorated
for the number of complete months the Employee worked in the prior
fiscal year, and
(iv) Continued participation, as if still employed, in the Company's
medical and dental insurance plans through the end of the month in
which the Employee's severance payments end to the extent permitted
by the provisions of such plans; provided, however, the Company's
obligation to continue participation in these plans, ends on the
last day of the month in which the Employee becomes eligible to
participate in such benefits at his new place of employment.
However, the Company will continue to provide benefit continuation
to the extent required by federal law.
Notwithstanding the foregoing, the Employee shall have the obligation
to seek alternative employment following a termination of employment under
Article VI(2). Any remuneration the Employee receives for the performance of
personal services during the year following termination of his employment
pursuant to this Article VI(2) will be an offset to the Company's obligations to
pay the amounts referred to in subparagraph (i) above; provided, however, that
such an offset will not reduce below one-half the remaining biweekly payments
the Company is obligated to pay under subparagraph (i) above; and provided,
further, that the Employee shall not have any obligation to seek other
employment and no such offset will be allowed the Company if such a termination
of employment occurs within two years following a Change in Control (Change in
Control being defined in Article VII).
(3) Death or Disability. If the Employee dies or becomes disabled
during the term of this Agreement, the Employee's employment will terminate as
of the date of the Employee's death or the determination of the Employee's
disability. In such event, neither of Article VI (1) or (2) shall be applicable.
The determination as to whether the employee has suffered a disability and the
date on which the disability commenced shall be made by the Committee, in its
sole discretion, on the basis of competent evidence; provided, however, that the
inability of the Employee to perform each of the material duties of his
employment for 6 consecutive months because of a medically determined physical
or mental condition shall be conclusive evidence of disability unless the
Company is provided with competent medical evidence that the condition will not
continue to prevent the Employee from performing his duties for more than six
additional months. Two consecutive weeks of full ability to perform each of the
material duties of the position shall be required to interrupt the running of
the six-month period.
In the event of termination because of disability, the Employee shall
receive his base salary (pursuant to Article III (1)) for the first 12 months
after the first date on which the Employee was unable to perform, after which he
shall be entitled only to such amounts, if any, as may be available any
employment-related benefit plans or programs in which the Employee may be a
participant (except those which are totally paid for by the Employee through a
private company). Any amounts the Employee receives under such plans or programs
during the 12 months referred to above shall be an offset to amounts which he
would otherwise receive under Article VI (3).
In the event of the Employee's death, the designated beneficiary of the
Employee shall continue to receive the Employee's base salary for a period of 3
months following his death.
ARTICLE VII
Termination by Employee
(1) General Rule. The Employee may voluntarily terminate his employment
prior to the expiration of this Agreement upon 60 days written notice to the
Company. If the Employee does so for reasons other than those set forth in
provision (c) of Article VI (2) or for such reasons, but after the time period
set forth in such provision has expired, he shall forfeit the right to any
compensation (other than deferred compensation) under this Agreement after the
date of termination.
(2) Voluntary Termination Following a Change of Control. The provision
of Article VII (1) notwithstanding, in the event that a Change of Control (as
hereinafter defined) occurs and within one year thereafter the Employee
voluntarily terminates his employment (other than pursuant to provision (c) of
Article VI (2)), the Employee shall be entitled to receive, in addition to any
other amounts he may be entitled to receive under this Agreement and subject to
any applicable payroll or other taxes required to be withheld, an amount equal
to one year's base salary, in addition to the continuation of his medical and
dental benefits (as if still employed) during the pay-out period. This severance
amount shall be payable in biweekly installments over the 12 months immediately
following termination.
In such event, fiscal year-end bonuses will be handled in the following manner:
(i) If the Employee's termination date is on or after September
1st: any bonus awarded for that year will be prorated for the
number of complete months the Employee worked in the fiscal
year.
(ii) If the termination occurs prior to September 1st, no bonus will
be due.
(iii) If the Employee's termination date is between March 1 and May
15: the Employee shall also be entitled to a bonus for the
prior fiscal year, prorated for the number of complete months
the Employee worked in the prior fiscal year, provided the
number of months employed in that year was equal to or greater
than six.
(3) Change of Control Definition. In this Agreement, "Change of
Control" shall mean:
(i) a third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, becomes, or
obtains the right to become, the beneficial owner of Company
securities having 20% or more of the combined voting power of
the then outstanding securities of the Company that may be cast
for the election of directors of the Company (other than as a
result of an issuance of securities initiated by the Company in
the ordinary course of business); or
(ii) as a result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the
foregoing transactions, the persons who were directors of the
Company before such transactions shall cease to constitute a
majority of the Board of Directors of the Company or any
successor to the Company.
ARTICLE VIII
Benefits Upon Termination
Upon termination of employment, benefits are terminated as described
below:
(1) Medical and Dental Plans: The Employee's participation in the
Medical and/or Dental plans terminates as of the last day of the month in which
the Employee's employment ends, unless specifically continued during a severance
payment period as noted in Article VI or Article VII(2) above. Continuation of
coverage other than as provided in Article VI or Article VII(2) above, will be
available in accordance with federal law and each plan's provisions.
(2) Retirement Plan: The Employee's termination of employment will not
affect Retirement Plan benefits earned as of the date of termination.
(3) Other Benefit Programs: Participation in all other benefit programs
ends as of the date of termination, except as noted below. Benefit programs
include, but are not limited to, Group Life Insurance, Long Term Disability,
Employee Discount Program, car allowance or company car program, the Restricted
Stock and Stock Option Plans, the Officer Merchandise Evaluation Program, and
the tax preparation and financial counseling programs. The ability to exercise
options ends on the date of termination of employment. Participation in the
fiscal year-end bonus program ends as of the date of termination unless the
termination of employment is without cause as defined in Article VI (2) above.
If the Employee is released, without cause, under the terms of this
agreement, and the Employee has vested but unexercised stock options, or has
stock options or restricted stock which are due to vest within one month of the
date of termination, the Employee shall have the option to delay the termination
for up to one month, to allow for any restricted stock or stock options to vest,
or for the Employee to have time to exercise options. If the Employee elects
this option, the severance pay-out period would be reduced by a like period of
time (e.g., if the Employee delays his termination for one month in order for
stock to vest, the Employee would receive 11 months of severance payments and
medical and dental plan contribution, instead of 12 months). If termination is
for "cause," participation in all benefits, including stock options and
restricted stock ends either on the date of termination or the end of the month
in which the termination occurred, according to the provisions of each benefit
program. If termination of employment is due to death, the right to exercise
vested but unexercised stock options is in accordance with the terms of the
stock option plans. All of the above is subject to the laws, regulations and
plan provisions in effect at the time of the Employee's termination.
ARTICLE IX
Monies Owed
To the extent that the Employee owes the Company any monies at the time
of termination of employment, or to the extent that taxes are due on any Circuit
City benefits, the Employee authorizes the Company to withhold such amounts from
his final paycheck or severance payment(s), or from reimbursements or any other
monies due to the Employee.
ARTICLE X
Notices
Any notice or other communication ("Notice") required under this
Agreement shall be in writing and shall be deemed to have been given or made
when personally delivered, or when mailed by registered or certified mail,
postage prepaid, return receipt requested, to the other party. In the case of
the Company, any Notice shall be delivered or mailed to its principal office to
the attention of the Secretary. In the case of the Employee, any Notice shall be
delivered or mailed to his last known address as reflected in the records of the
Company.
ARTICLE XI
Assignment
This agreement is one for personal service and shall not be assignable
by Employee. However, Company may assign this agreement to an entity under
common control with Company or to an entity which succeeds to the portion of the
Company's business in which the Employee is employed.
ARTICLE XII
Survival of Covenants
Except to the extent expressly provided otherwise in this Agreement,
the covenants and agreements of the Employee and the Company, including but not
limited to those set forth in Articles IV and V, shall survive the termination
or expiration of this Agreement.
ARTICLE XIII
Entire Agreement; Amendments
This Agreement constitutes the entire agreement and supercedes all
other prior agreements and understandings, both written and oral, express or
implied, with respect to the subject matter of this Agreement. This Agreement
may be amended only by a writing executed by the parties.
ARTICLE XIV
Governing Law
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Virginia.
ARTICLE XV
Waiver
Failure to insist upon strict compliance with any term or condition of
this Agreement shall not constitute a waiver of the term or condition, nor shall
any waiver or relinquishment of any right or power under this Agreement at any
one or more times be deemed a waiver or relinquishment of such right or power at
any other time.
ARTICLE XVI
Severability
If any Article, paragraph, sentence, or clause hereof, including,
without limitation, Article IV and V ("Provision"), is deemed invalid or
unenforceable in whole or in part in any jurisdiction, all the other Provisions
in this Agreement including the affected Provision, to the extent it is not
deemed invalid or unenforceable, shall remain in full force and effect in that,
and any other, jurisdiction and shall be liberally construed in order to
effectuate the purpose and intent of the Agreement. The invalidity or
unenforceability of any Provision of this agreement in any jurisdiction shall
not affect the validity or enforceability of that Provision in any other
jurisdiction.
ARTICLE XVII
Arbitration
(1) Any disagreement or controversy between the parties concerning this
Agreement (other than disagreements or controversies concerning Articles IV and
V of this Agreement) shall be settled by arbitration in accordance with
Commercial Arbitration Rules of the American Arbitration Association ("AAA") and
this Article. In the event of any inconsistency between such Rules and this
Agreement, this Agreement shall control. The decision in writing of the sole
arbitrator or of a majority of the arbitrators, as the case may be, designated
or selected in accordance with this Article shall be final and binding on both
parties and may be enforced in a court of law or equity. The parties recognize
that they wish to use arbitration to settle disagreements or controversies
concerning this Agreement other than those excluded above and both parties waive
their right to appeal the arbitrators' decision to any court. The cost of
arbitration, including arbitrators' fees and expenses of hearings and
conferences, shall be shared equally by the parties. Each party shall pay its
own attorney's and experts' fees and related expenses.
(2) Notice of intent to arbitrate must be given within six months after
the aggrieved party knows or, with reasonable diligence, would have known of the
existence of the disagreement or controversy, unless the parties agree in
writing to extend such six months period.
(3) Disagreements and controversies submitted to arbitration hereunder
shall be decided by a sole arbitrator appointed by the AAA; provided, however,
that each party shall have the right, but not the obligation, to designate one
additional arbitrator. If a party wishes to avail himself of such right, such
party shall give written notice naming such additional arbitrator to the other
party within 30 days after the notice of intent to arbitrate is given.
(4) If the Employee breaches the provisions of Articles IV or V, he
shall not be entitled to receive any amounts due under this Agreement that have
not been previously paid to him.
(5) The Employee recognizes and acknowledges that in the event of any
default in or breach of any of the terms, conditions, and provisions of Articles
IV or V of this Agreement (either actual or threatened) by the Employee, the
Company will suffer irreparable harm and its remedies at law will be inadequate.
Accordingly, the Employee agrees that, in such event, the Company shall have the
right to specific performance and injunctive relief in addition to any and all
other remedies and rights available to the Company under this Agreement, or at
law or in equity, and all rights and remedies shall be cumulative.
(6) Disagreements or controversies concerning Articles IV or V of this
Agreement may be settled by arbitration in accordance with this Article if both
parties so agree in writing.
The offer contained herein remains open until 5 p.m. on May 10, 1995.
To confirm that this letter states our agreement, please sign the enclosed copy
on the line above your name, date it, initial each page in the space provided
for that purpose, and return the copy to Xxxxx Xxxxx, Personnel Operations
Manager, in the enclosed envelope by May 10, 1995. This agreement is not
effective until received by Xxxxx Xxxxx, who will sign it to verify receipt and
will send you a fully executed copy for your records,
In witness whereof, the parties have executed this Agreement on the day
and the year first written below.
CIRCUIT CITY STORES, INC.
By: /s:/Xxxxxxx X. Xxxxx 4/25/95
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Xxxxxxx X. Xxxxx, Date
President and Chief Executive Officer
AGREED: /s:/Xxxxxxx X. Xxxxx 5/10/95
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Xxxxxxx X. Xxxxx Date
SS# ###-##-####
RECEIVED: /s:/Xxxxx Xxxxx 5/10/95
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Xxxxx Xxxxx Date
