EXECUTIVE COMPENSATION AND BENEFITS AGREEMENT
J.
Xxxxxxx Xxxxx (“Executive”)
0000
00xx
Xx.
XX
Xxxxxx
Xxxxxx, XX 00000
Cost-U-Less,
Inc.(“Company”)
0000
00xx
Xx XX
Xxxxxxxx
Xx 00000
1. Employment.
The
Company hereby employs Executive as its President and Chief Executive Officer
and Executive hereby accepts this Executive Compensation and Benefits Agreement
(the "Agreement")
in
conjunction with his employment with the Company.
2. Effective
Date.
This
Agreement is effective as of March 1, 2007 (the "Effective
Date"),
and
shall continue through February 28, 2011, unless extended by mutual agreement
or
terminated earlier as hereinafter provided.
3. Duties
and Responsibilities.
Executive
will, during the term of this Agreement, faithfully and diligently perform
all
such acts and duties, and have such responsibilities and furnish such services,
as are generally associated with and required for the position of President
and
Chief Executive Officer and such other duties as the Board of Directors of
the
Company (the "Board")
or its
designee(s) shall reasonably direct. Executive will devote such time, energy
and
skill to the business of the Company as shall reasonably be required for the
performance of his/her duties. Executive agrees, subject to his election as
such, to serve as a director of the Board during his term of
employment.
4. Compensation.
4.1 Salary.
For the
first year of this Agreement, Executive will be paid a salary of $385,000 on
an
annualized basis, payable on regular Company paydays. For each year thereafter
that this Agreement is in full force and effect, Executive's annual salary
shall
be reviewed by the Board for adjustment and may be increased as determined
appropriate by the Board. Except as specifically stated herein, Executive
otherwise will receive the same Company benefits and be, subject to the same
policies, practices, terms and conditions of employment as are other senior
officers of the Company.
4.2 Bonus.
In
addition to Executive's base salary, Executive is eligible for a maximum annual
bonus of up to $100,000 (hereinafter referred to as the “Bonus Base”), based on
Company’s achievement of its EBITDA target, payable upon
completion
of the annual audit following the end of the Company’s fiscal year. In the first
year of this Agreement, Executive’s bonus shall be calculated by adjusting the
Bonus Base upward or downward, as appropriate, by an amount equal to 10% of
the
difference between the Company’s current and prior year EBITDA, based on net
after deducting Executive’s bonus payment. In each successive year during the
term of this Agreement, Executive’s eligibility for the Bonus Opportunity shall
depend upon achievement of the EBITDA target to be established by the Board
after consulting with Executive. In addition, through the term of this
Agreement, Executive shall receive a bonus of $50,000 for each new store opened,
payable promptly upon the store’s opening unless otherwise mutually agreed by
Executive and the Board.
4.3 Car
Allowance.
Executive shall receive a monthly car allowance of $600 for the term of the
Agreement.
4.4 Vacation.
Executive shall be eligible for five weeks paid vacation, annually during the
term of the Agreement.
5. Confidential
Information. Non solicitation and Noncompetition.
Executive
has executed the Confidentiality, Nonsolicitation and Noncompetltion Agreement
and reaffirms his agreement to comply with the terms of such
Agreement.
6. Termination
and Severance.
6.1 Either
party may terminate the employment relationship and this Agreement at any time
and for any reason, provided that the party electing to terminate the employment
relationship and this Agreement shall give at least 30 days written notice
to
the other party.
6.2 Except
as
specifically provided for in this Agreement, Executive shall not be eligible
for
severance pay or benefits under any other policy, program, plan, or practice
of
the Company.
6.3 If
Executive's employment is terminated by the Company prior to the end of the
term
of this Agreement for reasons other than for cause, as hereinafter defined,
or
pursuant to Sections 6.6 (disability) or 7 (Change of Control) below;
or if Executive resigns his employment for Good Reason (as defined in Section
6.7), Executive shall receive as severance pay an amount equal to 24 months
of
Executive's base salary at the time of termination. As an additional severance
benefit, the Company will pay up to 12 months of COBRA premiums or until
Executive becomes eligible for comparable group health coverage or Medicare,
whichever is earlier. Severance benefits shall not include payment in connection
with an award of any stock option or grant, the eligibility for which will
be
governed solely by the terms of the Stock Plan.
6.4 If
Executive's employment is terminated at the end of the term of this Agreement
or
as a result of Executive's death or for cause by the Company or if Executive
terminates his employment for any reason, Executive shall not be entitled to
severance pay or benefits under this Agreement.
6.5 For
purposes of this Agreement, "cause" for termination includes, but is not limited
to, the following types of conduct and circumstances: failure to perform
Executive's duties under this Agreement after reasonable notice and opportunity
to cure; breach of the confidentiality, nonsolicitation and noncompetition
provisions of the Confidentiality, Nonsolicitation and Noncompetition Agreement
signed by Executive; material violation of any statutory or common law duty
of
loyalty to the Company; conduct or performance that, in the reasonable judgment
of the Company, adversely affects the interests of the Company or any of its
Affiliates (as hereinafter defined) or injures or tends to injure the reputation
of the Company or any of its Affiliates; or conduct that, in the reasonable
judgment of the Company, creates a conflict of interest or the appearance of
a
conflict of interest between Executive and the Company or any of its affiliated
or related entities. If the basis for Executive's termination for cause is
capable of being cured by Executive within 30 days, the Company will give
Executive a 30 day period to cure.
6.6 The
Company, in its sole discretion, may elect to terminate this Agreement and
Executive's employment in the event Executive is unable or unwilling to perform
the essential duties and responsibilities of his position for a period of more
than a total of 180 days in any one year period due to disability without any
obligation on the part of the Company to provide severance pay or benefits
to
Executive.
6.7 For
purposes of this paragraph 6, Good Reason exists if:
6.7.1 Executive's
principal work location is moved more than 50 miles;
6.7.2 Executive's
salary is reduced by at least 15 percent of Executive's base salary and the
reduction is not the result of a general reduction in compensation for reasons
unrelated to Executive's assignment; or
6.7.3 There
is
a material reduction in the scope of Executive's responsibilities or authority;
or
6.7.4 Employer
breaches any material term of this Agreement.
6.8 Severance
pay and benefits under paragraph 6 are subject to applicable tax and
withholdings and deductions. Severance pay and benefits shall be paid pro-rata
on regular Company paydays.
6.9 In
addition to the foregoing conditions, eligibility for and, receipt of severance
pay and benefits under paragraph 6 are subject to Executive executing and
not revoking a Separation Agreement and Release of Claims in a standard form
utilized by the Company and provided to Executive by the Company at the time
of
termination.
6.10 Severance
pay and benefits under paragraph 6 shall not be included as compensation
under any retirement plan maintained by the Company or an Affiliate unless
the
retirement plan provides otherwise.
6.11 Notwithstanding
the foregoing, Executive shall not be eligible for severance pay and benefits
and shall forfeit any outstanding severance pay and benefits under this
paragraph 6 if:
6.11.1 Executive
is terminated by the Company and is transferred to or offered comparable
employment by an entity that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with
the Company (“Affiliate”) within 120 days after termination, unless Executive is
no longer in such employment on the 120th
day.
6.11.2 Executive
fails to execute any documents or satisfy conditions required by the Company
in
order to receive severance pay and benefits under this Agreement or fails to
return property of the Company or an Affiliate within the time period designated
by the Company for acceptance of severance pay and benefits.
6.11.3 Executive
accepts employment or enters into any business relationship with, or becomes,
or
acquires ownership of more than a five percent (5%) interest in, a competitor
of
the Company less than 12 months after termination with the Company. For these
purposes, the term “competitor” means another warehouse club.
6.11.4 Executive
is eligible for severance pay and benefits under paragraph 7 of this
Agreement.
7. Change
of Control.
7.1 If,
following a Change of Control (as hereinafter defined), Executive's employment
is terminated by the Company other than for cause within 12 months following
such Change of Control or if Executive resigns from employment for Good Reason
(as defined in Section 7.3 below), Executive shall receive as severance pay
an amount equal to 12 months of Executive's base compensation. As an additional
severance benefit, the Company will pay up to 12 months of COBRA premiums or
until Executive becomes eligible for comparable group health coverage or
Medicare, whichever is earlier. Severance benefits shall not include payment
in
connection with an award of any stock option or grant, the eligibility for
which
will be governed solely by the terms of the Stock Plan. In addition
to severance pay and COBRA premium payments, the parties agree
that (a) all options or other rights to acquire Common Stock or other
equity securities of Employer then held by Employee shall immediately and
automatically vest and become exercisable in full as to all such Common Stock
and other equity securities subject thereto, notwithstanding any term or
provision to the contrary in any plans, agreements or other documents evidencing
the options and other rights or pursuant to which the options and other rights
were granted, (b) all restrictions with respect to such Common Stock and
other equity securities under any plans, agreements or other documents
evidencing the options and other rights or pursuant to which the options and
other rights were granted (other than restrictions on transfer under federal
and
applicable state securities laws), including but not limited to contractual
restrictions on transfer, rights of repurchase or first refusal in favor of
Employer and restrictions on certificates for such Common Stock and other equity
securities
(other than restrictions on certificates designed to promote compliance with
federal and applicable state securities laws) shall automatically terminate,
and
(c) such options and other rights shall remain exercisable for until a
period of eighteen (18) months has elapsed following the Change of Control
or until the respective dates provided for exercise of such options and other
rights under any plans, agreements and other documents by which they are
evidenced, whichever is later, notwithstanding any term or provision to the
contrary in any plans, agreements or other documents evidencing the options
and
other rights or pursuant to which the options and other rights were
granted.
No
other
severance pay or benefits shall be payable to Executive, including but not
limited to severance pay or benefits under paragraph 6 of this Agreement.
7.2 For
the
purposes of this paragraph 7, a "Change in Control" shall occur if any of
the following applies:
7.2.1 Any
"Person," as such term is used in Sections 13(d) and (14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")
(other
than the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any company owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing more than
50
percent of the combined voting power of the Company's then outstanding
securities;
7.2.2 The
shareholders of the Company approve a merger or other consolidation of the
Company with any other company, other than (1) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50 percent of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after
such merger or consolidation or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which
no
Person acquires more than 50 percent of the combined voting power of the
Company's then outstanding securities;
7.2.3 A
tender
or exchange offer is made for the common stock of the Company (or securities
convertible into common stock of the Company) and such offer results in a
portion of those securities being purchased and the offeror, after the
consummation of the offer, is the beneficial owner (as determined pursuant
to
Section 13(d) of the Exchange Act), directly or indirectly, of securities
representing more than 50 percent of the voting power of outstanding securities
of the Company; or
7.2.4 The
Company sells all or substantially all its operating assets to a buyer that
is
not an Affiliate of the Company.
7.3 For
the
purposes of this paragraph 7, Good Reason exists if:
7.3.1 Executive's
principal work location is moved more than 50 miles;
7.3.2 Executive's
salary is reduced by at least 15 percent of Executive's base salary and the
reduction is not the result of a general reduction in compensation for reasons
unrelated to Executive's assignment; or
7.3.3 There
is
a material reduction in the scope of Executive's responsibilities or authority;
or
7.3.4 Employer
breaches any material term of this Agreement.
7.4 Severance
pay and benefits under paragraph 7 are subject to tax and other applicable
withholdings and deductions. Severance pay and benefits shall be paid pro-rata
on regular Company paydays.
7.5 In
addition to the foregoing conditions, eligibility for and receipt of severance
pay and benefits under paragraph 7 are subject to Executive executing and
not revoking a Separation Agreement and Release of Claims in a form provided
to
Executive by the Company at the time of termination.
7.6 Severance
pay and benefits under paragraph 7 shall not be included as compensation
under any retirement plan maintained by the Company or an Affiliate unless
the
retirement plan provides otherwise.
7.7 Notwithstanding
the foregoing, Executive shall not be eligible for severance pay and benefits
and shall forfeit any outstanding severance pay and benefits under this
paragraph 7 if:
7.7.1 Executive
receives an offer of severance benefits under any severance plan or program
maintained by the Company or an Affiliate or enters into any individual
severance agreement with the Company or an Affiliate that supersedes this
Agreement; or Executive is terminated pursuant to paragraph 6 of this
Agreement; or Executive voluntarily resigns from employment for any reason
that
does not constitute a material alteration in Executive's position that has
a
detrimental impact on Executive (as defined above).
7.7.2 Executive
fails to execute any documents or satisfy conditions required by the Company
in
order to receive severance pay and benefits under this Agreement or fails to
return property of the Company or an Affiliate within the time period designated
by the Company for acceptance of severance pay and benefits.
7.7.3 Executive
fails to execute or breaches any agreement required by the Company, including,
but not limited to, cessation of severance .pay and benefits in the event of
rehire or reemployment by the Company or an Affiliate, or cessation and
repayment of severance pay and benefits in the event of any material breach
of
any required confidentiality, nonsolicitation, noncompetition, nondisparagement,
assistance
to
the
Company or assistance in defense of litigation agreements or a provision of
any
Separation Agreement and Release of Claims signed by Executive.
7.7.4 Executive
becomes employed by the Company or an Affiliate within 120 days after the Change
in Control occurs, unless Executive is no longer in such employment on the
120th
day.
7.7.5 Executive
accepts employment or enters into any business relationship with, or becomes,
or
acquires ownership of more than a five percent (5%) interest in, a competitor
of
the Company less than 12 months after termination with the Company.
8. General
Provisions.
8.1 Except
as
specifically provided herein, Executive's employment with the Company shall
be
subject to the same terms and conditions as applicable to other employees of
the
Company, including but not limited to the right of either party to terminate
the
employment relationship at any time and for any reason upon prior notice as
provided in Section 6.1.
8.2 This
Agreement shall be construed in accordance with and governed by the laws of
the
State of Washington.
8.3 Executive
agrees that any dispute (1) concerning the interpretation or construction
of this Agreement, (2) relating to any compensation or benefits Executive
may claim, or (3) relating in any way to any claim by Executive for
reinstatement or reemployment by the Company after execution of this Agreement
shall first be submitted to confidential mediation before a mediator selected
by
the parties. Should any dispute not be resolved through mediation, it shall
be
submitted and settled exclusively by confidential binding arbitration before
a
single arbitrator in accordance with the Commercial Arbitration Rules of the
American Arbitration Association or such comparable rules as may be agreed
upon
by the parties. The parties shall be responsible for their own costs and legal
fees in any mediation or arbitration proceeding. Both parties agree that the
procedures outlined in this paragraph are the exclusive methods of dispute
resolution.
8.4 This
Agreement and the Confidentiality, Nonsolicitation and Noncompetition Agreement
dated the date hereof contain the entire agreement between Executive and the
Company concerning the subject matters discussed herein. Any modification of
this Agreement shall be effective only if in writing and signed by each party
or
its duly authorized representative. This Agreement supersedes all prior
employment agreements between the parties. The terms of this Agreement are
contractual and not mere recitals. If, for any reason, any provision of this
Agreement shall be held invalid in whole or in part, such invalidity shall
not
affect the remainder of this Agreement.
8.5 The
waiver of any breach of this Agreement by one party shall not constitute waiver
by the non-breaching party of any other breach of the Agreement.
8.6 This
Agreement is subject to, and conditioned on, ratification of its terms by the
Board of Directors of the Company.
|
COST-U-LESS,
INC.
|
|
|
By:
/s/ Xxx X Xxxxxxx
Its:
Director, Chair
Compensation Committee
|
Date
3-26-07
|
|
/s/
J. Xxxxxxx Xxxxx
Executive
Signature
|
Date
3-26-07
|
