EXHIBIT 10.1
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING (this "Memorandum") dated as of
December 22, 1998, sets forth the mutual and binding understanding of Xxxxx X.
Major (the "Executive") regarding the material terms of employment of Executive
by Nebraska Book Company, Inc. (the "Company"). For good and fair value and
consideration, the parties agree as follows:
o POSITION:
Executive shall be employed as Chief Operating Officer of the Company.
o TERM:
The term of Executive's employment hereunder (the "Term") shall be from
the date hereof to March 31, 2001, unless extended or earlier terminated
in accordance with this Memorandum or otherwise by agreement of the
parties. The Term shall be automatically extended for additional periods
of one year each unless either party gives at least 120 day prior
written notice to the other of the intention to terminate the
Executive's employment hereunder at the end of the then current Term.
o BASE SALARY:
Executive will be paid a base salary at the rate of $200,000 per annum.
Increases in base salary for Executive shall be determined by the Board
of Directors of the Company (the "Board") after due consideration of the
recommendation of the Chief Executive Officer of the Company (the
"CEO"). Increases in base salary thereafter shall be determined annually
in the same manner.
o SIGNING BONUS:
Executive shall receive a Signing Bonus of $60,000 within ten days of
the mutual execution of this Memorandum.
o INCENTIVE BONUSES:
Executive shall be afforded the opportunity to earn an Incentive Bonus
with respect to each of fiscal years 2000 and 2001 based upon the
attainment of financial objectives established by the Board (or a
committee thereof), following consideration of the recommendation of the
CEO.
o STOCK OWNERSHIP:
Executive shall purchase 4,765 shares of the Common Stock (the
"Purchased Shares") of NBC Acquisition Corp. ("NBC Acquisition") for
$250,000. The Executive shall pay for the Purchased Shares by delivery
of $25,000 to NBC Acquisition and a Note in the principal amount of
$225,000 in the form attached hereto as Appendix A.
o STOCK OPTIONS:
Executive shall be granted options (the "Original Options") to purchase
9,530 shares of the Common Stock of NBC Acquisition. The Original
Options shall have an exercise price of $52.46722 per share. The
Original Options shall be exercisable as to 25% of the shares covered
thereby on March 31, 1999, and shall be exercisable as to an additional
25% of the shares covered thereby on each of March 31, 2000, 2001 and
2002, subject to Executive's continued employment with the Company on
such anniversary dates. Customary terms and conditions shall apply to
the Original Options.
For each of fiscal years 2000 and 2001, Executive shall be granted
additional options to acquire a number of shares of Common Stock of NBC
Acquisition to be determined by the Board, subject to the achievement by
the Company of annual performance targets to be established by the
Board. The additional options shall have an exercise price equal to the
fair market value per share as of the date of grant. Each additional
option shall be exercisable as to 25% of the shares covered thereby on
the date of grant and shall become exercisable as to an additional 25%
of the shares covered thereby on each of the first three anniversaries
of the date of grant of such option, subject to Executive's continued
employment with the Company on such anniversary dates. Customary terms
and conditions shall apply to such additional options.
o TAG-ALONG AND DRAG-ALONG RIGHTS:
In the event of a sale of the majority of the common stock of NBC
Acquisition, all shares of Common Stock of NBC Acquisition owned by
Executive (including shares hereafter acquired) shall be subject to
tag-along and drag-along rights, entitling and obligating Executive to
sell his shares ratably with, and on the same terms and conditions as,
other selling shareholders.
o NON-TRANSFERABILITY OF STOCK:
Other than the sale described above, Executive shall not sell, transfer,
pledge or convey any Common Stock or options of NBC Acquisition other
than (i) for estate planning purposes, to a family trust or family
partnership for the benefit of immediate members of the Executive's
family, (ii) upon Executive's death, to his estate, (iii) upon
Executive's disability or (iv) after an initial public offering of
Common Stock of NBC Acquisition, subject in each case (except iv) to the
tag-along and drag-along provisions of the immediately preceding
paragraph.
o TERMINATION OF EMPLOYMENT PRIOR TO THE EXPIRATION OF TERM:
-Termination by the Company without "cause": Executive entitled to (i)
continued payment of base salary for 12 months, (ii) payment of
Incentive Bonus when otherwise due in respect of year of termination,
prorated through date of termination, and (iii) continuation for 12
months of any health, life insurance and disability insurance benefits
provided to the Executive immediately before such termination.
-Death/Disability: Executive entitled to (i) payment of base salary
through the date of termination plus an additional six (6) months, and
(ii) payment of Incentive Bonus when otherwise due in respect of year of
termination, prorated through date of termination.
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-Executive voluntary resignation or termination by Company for "cause":
Executive entitled to payment of base salary through date of termination.
-Cause Defined: "Cause" shall mean the Executive willfully neglects his
duties hereunder, is convicted of any felony or misdemeanor involving
moral turpitude, is guilty of gross misconduct in connection with the
performance of his duties hereunder, or materially breaches affirmative
or negative covenants or undertakings hereunder (including under
Appendix A).
o NON-COMPETITION AND CONFIDENTIALITY AGREEMENTS:
Executive agrees to be bound by the terms of the Non-Competition and
Confidentiality Agreement attached as Appendix B, which is hereby
incorporated by reference.
o FRINGE BENEFITS AND EMPLOYEE BENEFITS:
Customary fringe benefit plans and entitlements as currently provided by
the Company to its senior executives.
o COUNTERPARTS AND ADDITIONAL DOCUMENTATION:
This Memorandum may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument, and the signature of any party
to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
NEBRASKA BOOK COMPANY, INC.
By______________________________
Its: Chairman
EXECUTIVE
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Xxxxx X. Major
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Appendix A
SECURED PROMISSORY NOTE
$225,000 January ____, 1999
FOR VALUE RECEIVED, the undersigned, Xxxxx X. Major, (the "Borrower"),
hereby promises to pay to NBC Acquisition Corp., a Delaware corporation (the
"Payee"), the principal sum of Two Hundred Twenty-Five Thousand Dollars
($225,000), together with interest on the unpaid balance of such principal
amount from the date hereof at a rate of interest equal to 5.25% per annum
payable on or before January ___, 2009. Payment of interest shall commence on
December 31, 1999 and shall be payable thereafter annually on December 31 of
each year.
Payments of principal and interest on this Note shall be paid to the
Payee at its principal office in Lincoln, Nebraska (or where otherwise specified
by the Payee), by certified or official bank check or personal check (subject to
collection) payable to the Payee . If the date set for any payment of principal
or interest on this Note is a Saturday, Sunday or legal holiday, such payment
shall be due on the next succeeding business day.
As of the date hereof, the Borrower has purchased from Payee 4,765
shares of its common stock, $0.01 par value per share, $225,000 of which was
paid in the form of this Note. This Note shall be secured by a pledge of the
Collateral (as defined in the Pledge and Security Agreement (as defined below) )
by the Borrower to Payee as provided in that certain Pledge and Security
Agreement (the "Security Agreement"), dated as of the date hereof, between the
Payee and the Borrower.
In the event that the Borrower fails to make complete payment of accrued
principal or interest when due under this Note, the Payee may accelerate this
Note and may, by written notice to the Borrower, declare the entire unpaid
principal amount and all such accrued and unpaid interest therein to be
immediately due and payable and, thereupon, the unpaid principal amount and all
such accrued and unpaid interest shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by the Borrower; provided, however, the Payee shall only
have recourse against the Borrower for payment of One Hundred Thousand Dollars
($100,000) of the principal owing under this Note.
In case this Note shall become mutilated, defaced or apparently
destroyed, lost or stolen, upon the written request of the Payee, the Borrower
shall issue and execute a new Note in exchange and substitution for the
mutilated or defaced Note or in lieu of and substitution for the Note so
apparently destroyed, lost or stolen. Thereafter, no amount shall be due and
payable or owing under the mutilated, defaced or apparently destroyed, lost or
stolen Note.
This Note may be prepaid in whole or in part (principal amount to be
prepaid, plus accrued interest thereon through date of prepayment) at any time
without penalty.
This Note may be assigned by the Payee to any of his affiliates, members
of his immediate family or trusts, partnerships or limited liability companies
established for their benefit.
The provisions of this Note shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to the
conflicts of law rules thereof.
IN WITNESS WHEREOF, this Note has been duly executed and delivered by
Borrower on the date first above written.
BORROWER
---------------------------------
Xxxxx X. Major
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PLEDGE AND SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement"), dated as of January ____, 1999,
among NBC Acquisition Corp., a Delaware corporation (the "Pledgee"), and Xxxxx
X. Major (the "Pledgor").
WHEREAS, the Pledgee and the Pledgor are parties to a Memorandum of
Understanding (the "Memorandum") dated as of December ___, 1998, pursuant to
which the Pledgor is purchasing from the Pledgee 4,765 shares of its common
stock, $.01 par value per share (the "Stock"), for aggregate consideration of
$250,000, of which $225,000 was paid in the form of a Secured Promissory Note
(the "Note") of even date herewith;
NOW, THERFORE, in consideration of the foregoing and of mutual
undertakings set forth in this Agreement, the Pledgee and the Pledgor agree as
follows:
1. As collateral security for the full and timely payment, performance
and observance of all indebtedness (the "Indebtedness") of the
Pledgor to the Pledgee or any transferee under the Note, the Pledgor
shall grant and hereby grants to the Pledgee a perfected first
security interest in all of the Pledgor's right, title and interest
in the Stock (the "Collateral").
2. The Pledgee shall have no duty as to the collection or protection of
the Collateral or any income thereon or as to the preservation of any
rights pertaining thereto, including with respect to any maturities,
calls, conversations, exchanges, redemptions, offers, tenders or
similar matters relating to any of the Collateral.
3. This security interest shall continue until the Note has been paid in
full. Upon payment in full of the Note, the Pledgee shall promptly
return to the Pledgor all of the Collateral.
4. The Pledgor agrees to do such further acts and things, and to execute
and deliver such additional conveyances, assignments and instruments,
as the Pledgee may at any time reasonably request in connection with
the administration and enforcement of this Agreement or with respect
to the Collateral or any part thereof or in order better to assure
and confirm unto the Pledgee its rights and remedies hereunder,
including, without limitation, the execution of UCC-1 Financing
Statements to perfect the Pledgee's security interest in the
Collateral.
5. Any notice or demand upon the Pledgor shall be deemed to have been
sufficiently given for all purposes thereof if mailed, postage
prepaid, by registered or certified mail, return receipt requested,
or delivered, to the Pledgor at 00000 Xxxxx Xxxxxx, Xxxxx, Xxxxxxxx
00000 or such other address as the Pledgor may therefore have
designated in writing and given in like manner to the Pledgee.
6. This Agreement and the rights and obligations of the Pledgee and the
Pledgor hereunder shall be construed in accordance with and governed
by the laws of the State of New York, cannot be changed orally and
shall bind and inure into the benefit of the Pledgor and the Pledgee
and their respective successors and assigns, and all subsequent
holders of the Indebtedness.
7. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which taken together
shall constitute but one and the same instrument.
IN WITNESSES WHEREOF, the Pledgor and the Pledgee have duly executed
this Agreement as of the day and year first above written.
Pledgee: NBC ACQUISITION CORP.
By: _________________________________________
Its: Chairman
Pledgor:
---------------------------------------------
Xxxxx X. Major
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Appendix B
Non-Competition and Confidentiality Agreement
Capitalized terms used herein without definition shall have the respective
meanings specified in the Memorandum of Understanding dated as of December ____,
1998 between Nebraska Book Company, Inc., and Xxxxx X. Major (the "Memorandum of
Understanding").
I. Executive acknowledges that (i) the principal business of the Company
is the wholesale distribution of used college textbooks and the ownership (or
management) of college bookstores (the "Company Business"); (ii) he is one of
the limited number of persons who will develop such business; (iii) the business
of the Company is national and international in scope; and (iv) his work for the
Company will bring him into close contact with confidential information not
readily available to the public. Executive covenants and agrees that:
A. Non-Competition. During the term of Executive's employment by
the Company or any of its affiliates and for a period of three years following
the termination (whether for cause or otherwise) of Executive's employment with
the Company and all of its affiliates (the "Restricted Period"), Executive shall
not in the United States of America or in any foreign country, directly or
indirectly, (i) engage in the Company Business for his own account; (ii) enter
the employ of, or render any services to, any person engaged in such activities;
or (iii) become interested in any person engaged in the Company Business,
directly or indirectly, as an individual, partner, shareholder, officer,
director, principal, agent, employee, trustee, consultant or in any other
relationship or capacity; provided, however, that Executive may work for or own
a college bookstore, if the annual sales of the company that owns such bookstore
do not exceed $10,000,000, and Executive may own, directly or indirectly, solely
as an investment, securities of any person which are traded on any national
securities exchange if Executive (a) is not a controlling person of, or a member
of a group which controls, such person and (b) does not, directly or indirectly,
own 1% or more of any class of securities of such person.
B. Confidential Information. During the term of Executive's
employment by the Company or any of its affiliates and during the Restricted
Period, Executive shall keep secret and retain in strictest confidence, and
shall not use for the benefit of himself or others except in connection with the
business and affairs of the Company, all confidential matters of the Company and
its affiliates, including, without limitation, trade "know-how," secrets,
consultant contracts, customer lists, subscription lists, details of consultant
contracts, pricing policies, operational methods, marketing plans or strategies,
product development techniques or plans, business acquisition plans, new
personnel acquisition plans, methods of manufacture, technical processes,
designs and design projects, inventions and research projects and other business
affairs of the Company and its affiliates learned by Executive heretofore or
hereafter, and shall not disclose them to anyone outside of the Company and its
affiliates, either during or after employment by the Company or any of its
affiliates, except (i) as required in the course of performing duties hereunder,
(ii) with the Company's express written consent, (iii) if such information is or
becomes generally known by the public other than as a result of a breach hereof
or of a similar Non-Competition and Confidentiality Agreement, or (iv) as
required by law or judicial or administrative process.
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C. Property of the Company. All memoranda, notes, lists, records
and other documents (and all copies thereof) made or compiled by Executive or
made available to Executive concerning the business of the Company or any of its
affiliates shall be the Company's property and shall be delivered to the Company
promptly upon the termination of Executive's employment with the Company or any
of its affiliates or at any other time on request.
D. Employees of the Company. During the Restricted Period,
Executive shall not, directly or indirectly, hire, solicit or encourage to leave
the employment of the Company or any of its affiliates, any employee of the
Company or its affiliates or hire any such employee who has left the employment
of the Company or any of its affiliates within one year of the termination of
such employee's employment with the Company and all of its affiliates.
E. Consultants of the Company. During the Restricted Period,
Executive shall not, directly or indirectly, hire, solicit or encourage to cease
to work with the Company or any of its affiliates any consultant who provides
consulting services material to the operation of the Company Business, then
under contract with the Company or any of its affiliates.
II. Rights and Remedies Upon Breach. If Executive breaches, or threatens
to commit a breach of, any of the provisions of Paragraph I (the "Restrictive
Covenants"), the Company shall have the following rights and remedies, each of
which rights and remedies shall be independent of the other and severally
enforceable, and all of which rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
A. Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
B. Accounting. The right and remedy to require Executive to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits (collectively, "Benefits") derived or
received by Executive as the result of any transactions constituting a breach of
any of the Restrictive Covenants, and Executive shall account for and pay over
such Benefits to the Company.
C. Discontinuance of Payment. The right and remedy to discontinue
the payment of any amounts owing under the Memorandum of Understanding.
III. Severability of Covenants. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
IV. Blue-Pencilling. If any court construes any of the Restrictive
Covenants, or any part thereof, to be unenforceable because of the duration of
such provision or the area covered thereby, such court shall have the power to
reduce the duration or area of such provision and, in its reduced form, such
provision shall then be enforceable and shall be enforced.
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