EXHIBIT 10.64
EXECUTIVE EMPLOYMENT AGREEMENT
ENTERED INTO on May 10, 2005 by and between Xxxxx X. Xxxxxxx ("EXECUTIVE"),
an individual presently domiciled in Hinsdale, Illinois, and SOURCE INTERLINK
COMPANIES, INC. (the "COMPANY"), a Delaware corporation having its principal
executive offices at 00000 Xxxxxxxxx Xxxxxx Xxxx., Xxxxx 000, Xxxxxx Xxxxxxx,
Xxxxxxx 00000.
WHEREAS, the Company desires to assure itself of the benefit of Executive's
services and experience, and
WHEREAS, Executive desires to enter into the employ of the Company under
the terms and provisions set forth in this Agreement,
NOW, THEREFORE, with the intent to be legally bound, the Company and
Executive do hereby covenant and agree as follows.
Section 1. Employment of Executive.
1.1. The Company hereby agrees to employ Executive in the positions
described in Section 1.2 below, and Executive hereby accepts such employment,
under the terms and provisions set forth in this Agreement.
1.2. During the Period of Employment (defined in Section 2. below),
Executive shall serve in the position of Executive Vice President of the Company
reporting directly to the Company's Chief Operating Officer ("Executive's
Supervisor") and based at such of the Company's offices as Executive's
Supervisor may designate; provided, however, that during the period beginning on
the date hereof and ending on the fifth anniversary of the date of this
Agreement. Executive shall be permitted to discharge her duties and exercise her
responsibilities in at the Company's offices in Chicago, Illinois up to one-half
of her working time. Executive shall have supervisory authority over sales and
marketing of the Company's magazine products and shall have the usual and
customary duties, responsibilities and authority of executive vice president,
and shall perform such other and additional duties and responsibilities as are
consistent with that position and as the Board of Directors of Source Interlink
Companies, Inc. (the "BOARD") or the Executive's Supervisor may reasonably
require.
1.3. Executive shall devote all of her working time, attention and energy
using her best efforts to the performance of her duties and responsibilities,
and shall apply the level of skill, diligence, energy, and cooperation to
protecting and advancing the interests of the Company and its subsidiaries as
can be reasonably expected from a faithful, dedicated, experienced and prudent
corporate executive (as applicable under this Section 1) under similar
circumstances. Nothing in this Agreement shall be construed or be deemed to
prohibit Executive from (a) maintaining her ownership interest in Xxxx. Levy
Company, LLC ("CLC") or exercising her rights with respect thereto, (b) acting
as a member of the board of directors of CLC (or its affiliates) or as an
advisor to CLC or Xxxxxxx Xxxxxx (or their respective affiliates), with or
without compensation, (c) serving as a member of the governing body of any for
profit or not for profit enterprise, with or without compensation, in each case
provided that (i) Executive first notify Executive's Supervisor of any such
intended activities and, solely in the case of the activities described in
clause (c) above, Executive's Supervisor shall have approved thereof, which
approval shall not be unreasonably withheld, and (ii) the aggregate of all
activities described in clauses (a), (b) and (c) do not materially interfere
with the performance by Executive of her duties and responsibilities to the
Company.
Section 2. Term of Employment.
The term of employment of Executive under this Agreement shall be a
five-year period commencing on the date hereof and expiring on the fifth
anniversary of the date of this Agreement (the "PERIOD OF EMPLOYMENT"). Not
later than One Hundred Eighty (180) days prior to the expiration of the Period
of Employment, the Company and the Executive will meet to discuss their
respective intentions concerning the continued employment of Executive following
the expiration of the Period of Employment.
Section 3. Early Termination.
3.1. Notwithstanding the provisions of Section 2 hereof, the Period of
Employment shall be subject to early termination at any time:
(a) at the Company's election, by dismissal of Executive from employment
with or without Proper Cause (defined in Section 3.2 below) pursuant to
resolution of the Board, or
(b) at the Company's election, upon determination of Disability of
Executive pursuant to Section 3.3 below, or
(c) upon death of Executive, or
(d) at Executive's election, by voluntary resignation upon 30 days' advance
written notice, with or without Good Reason (defined in Section 3.5 below).
In the event of early termination pursuant to the foregoing paragraphs (a), (b),
(c) or (d), the Company's obligations to Executive shall be as set forth in
Sections 3.2, 3.3, 3.4 or 3.5, respectively; and Executive shall have no other
rights or claims under this Agreement except for (i) the right to be indemnified
as an officer of the Company on the terms and conditions set forth in the
Company's Certificate of Incorporation and Amended and Restated Bylaws, as the
same may be amended from time to time, or in any indemnification agreement
between Executive and the Company, (ii) the right to coverage as an insured
person under the directors' and officers' liability insurance policy maintained
by the Company in accordance with Section 5.2(b) for a period of three years
after the expiration or earlier termination of the Period of Employment, (iii)
the right to receive such benefits and exercise such rights under (and as
provided in) such of those plans and programs described in Section 4.3 and 4.4
as Executive may participate to the extent Executive is fully vested therein on
the date of such early termination, (iv) reimbursement of previously incurred
expenses pursuant to Section 5.1 below and (v) indemnification pursuant to
Section 5.2 below (clauses (i) through (v) inclusive, the "CONTINUING RIGHTS").
3.2. (a) In the event of early termination pursuant to Section 3.1(a)
without Proper Cause, the Company shall be and remain obligated to pay and
provide to Executive (or her estate) during the remainder of the Period of
Employment provided for under Section 2.:
(i) The Base Compensation provided for under Section 4.1 below at the
annual salary rates stated therein without further adjustment.
(ii) The Annual Bonus in an amount equal to (A) $178,125 in the case
no Annual Bonus has been awarded to Executive prior to the date of such early
termination, or (B) 75% of the average of the Annual Bonuses previously awarded
to Executive in the case that one or more Annual Bonus has been awarded to
Executive prior to the date of such early termination.
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(iii) The right to continued participation in the Company's healthcare
plan (referred to in Section 4.4 below) under and subject to the same terms and
provisions (including without limitation contribution to premiums, deductibles,
co-payments and caps) as are applicable during such period to the Company's
executive officers generally.
(iv) the Continuing Rights.
(b) In the event of early termination pursuant to Section 3.1(a) with
Proper Cause, the Company shall thereupon be relieved of its obligations to pay
or provide any and all compensation and benefits under Section 4 hereof (except
the Continuing Rights).
(c) The occurrence of any of the following events or circumstances
shall constitute "PROPER CAUSE" for dismissal of Executive from employment under
this Agreement:
(i) Disclosure to third parties of material trade secrets or other
material Confidential Information (defined in Section 6 below), or any other
misuse or misappropriation thereof, by Executive in violation of the obligations
imposed by Section 6 hereof;
(ii) Violation by Executive of the restrictions imposed by Section 7
of this Agreement on competitive activities by Executive;
(iii) Abandonment by Executive of her employment with the Company or
any subsidiary or repeated and deliberate failure or refusal by Executive to
fulfill her duties and responsibilities under this Agreement in any material
respect and Executive's failure or refusal to initiate corrective action within
10 days after written notice by the Company setting forth in reasonable detail
the conditions alleged to be encompassed by the foregoing clause;
(iv) Breach by Executive of her fiduciary duties to the Company or any
act of financial dishonesty or theft affecting the Company or any of its
subsidiaries;
(v) Willful, reckless or grossly negligent conduct by Executive
entailing a material violation of the laws or governmental regulations or orders
applicable to the Company or its subsidiaries, or imposition by any court or
governmental agency of any material restriction upon Executive's ability to
perform her duties and responsibilities hereunder;
(vi) Repeated and deliberate failure or refusal by Executive to comply
with lawful policies of the Company or lawful directives of the Board;
(vii) Conviction of Executive of a crime (excluding any infractions
such as traffic violations) in any federal, state or foreign court, or entry of
any governmental decree or order against Executive based upon violation of any
federal, state or foreign law, which is not based exclusively on the legal
violations of Executive's subordinates and which, in the circumstances, the
continued association of Executive with the Company will, more likely than not,
have a material adverse effect upon the Company, its business or its reputation.
3.3. The term of employment of Executive under this Agreement may be
terminated at the election of the Company upon a determination by the Board,
made in its reasonable discretion, that Executive is unable, by reason of
physical or mental incapacity ("DISABILITY") whether caused by accident,
illness, disease or otherwise, to substantially perform the material duties and
responsibilities assigned to her pursuant to this Agreement for a period longer
than 90 consecutive days or more than 180 days in any consecutive 12-month
period. In the exercise of its discretion, the Board shall give due
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consideration to, among such other factors as it deems appropriate to the best
interests of the Company, the opinion of Executive's personal physician or
physicians and the opinion of any physician or physicians selected by the Board
for these purposes. Executive shall submit to examination by any physician or
physicians so selected by the Board, and shall otherwise cooperate with the
Board in making the determination contemplated hereunder (such cooperation to
include without limitation consenting to the release of information by any such
physician(s) to the Board). In the event of early termination for Disability
pursuant to Section 3.1(b), the Company shall thereupon be relieved of its
obligations to pay or provide any and all compensation and benefits under
Section 4 hereof, but shall be obligated to provide to Executive:
(a) For the period commencing on the date of early termination and
ending on the expiration of 24 full calendar months next following the date of
early termination, a disability income benefit, payable in monthly installments,
in an amount equal to 50% of the annual rate of Base Compensation provided for
under Sections 4.1 below, at the annual salary rate in effect on the date of
determination of Disability without further adjustment;
(b) For the period commencing on the date which is 24 full calendar
months following the date of early termination, a supplemental disability income
benefit equal to $12,000 per month for the period commencing on the date of
early termination and ending on August 18, 2013 or Executive's earlier death;
(c) For the period during which Executive is receiving benefits under
Sections 3.3(a) or 3.3(b), the right to continued participation in the Company's
healthcare plan (referred to in Section 4.4 below) under and subject to the same
terms and provisions (including without limitation contribution to premiums,
deductibles, co-payments and caps) as are applicable during such period to the
Company's executive officers generally; and
(d) the Continuing Rights.
The Company shall be entitled to credit, against its obligation to pay the
foregoing benefits, the amounts received from time to time by Executive pursuant
to any disability income insurance policy maintained by the Company or under the
Source Interlink Companies, Inc. Supplemental Executive Retirement Plan dated as
of March 1, 2005, if Executive shall be a participant therein.
3.4. In the event of early termination pursuant to Section 3.1(c), the
Company shall thereupon be relieved of its obligations to pay or provide any and
all compensation and benefits under Section 4 hereof (except for the Continuing
Rights).
3.5 (a) In the event of early termination pursuant to Section 3.1(d) with
Good Reason, the provisions of Section 3.2(a) shall apply; provided however that
in the case of early termination pursuant to Section 3.1(d) as the result of a
Change in Control all amounts payable by the Company under Sections 3.2(a)(i)
and (ii) shall be payable in a single lump sum not later than sixty (60) days
after the date of such early termination. It being understood and agreed by
Executive and the Company that in the event of an early termination occurs
within thirty (30) days after a Change of Control pursuant to Section 3.1(a)
such early termination shall nevertheless be deemed to have occurred pursuant to
Section 3.1(d) for Good Reason in accordance with Section 3.5(c)(iv).
(b) In the event of early termination pursuant to Section 3.1(d)
without Good Reason, the provisions of Section 3.2(b) shall apply.
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(c) The occurrence of any of the following events or circumstances
shall constitute "GOOD REASON" under this Agreement.
(i) failure by the Company to substantially comply with its
obligations to pay or provide the compensation, benefits and other amounts due
and payable to Executive under Sections 4 and 5 below;
(ii) a material reduction in Executive's duties, responsibilities and
authority during the Period of Employment; or
(iii) a material breach by the Company of its obligations under this
Agreement; and
in the case of clause (i), (ii) or (iii), the failure or refusal by the Company
(and/or any successor in interest to the Company) to initiate corrective action
within 30 days after written notice by Executive to the Secretary of the Company
setting forth in reasonable detail the conditions alleged to be encompassed by
the foregoing clause (i), (ii) or (iii);
(iv) a Change of Control within thirty (30) days after such event
(defined in Section 3.5(d)).
(d) The occurrence of any of the following events or circumstances
shall constitute a "CHANGE OF CONTROL" under this Agreement.
(i) A change in the composition of the Board, as a result of which
fewer than one-half (1/2) of the incumbent directors are directors who either:
(A) had been directors of the Company on the first day of the Period of
Employment (the "ORIGINAL DIRECTORS"); or (B) were elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the
aggregate of the Original Directors who were still in office at the time of the
election or nomination and the directors whose election or nomination was
previously so approved (the "CONTINUING DIRECTORS"); or
(ii) Any "PERSON" (defined below) who by the acquisition or
aggregation of securities, is or becomes the "BENEFICIAL OWNER" (defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities ordinarily
(and apart from rights accruing under special circumstances) having the right to
vote at elections of directors (the "BASE CAPITAL STOCK"); except that any
change in the relative beneficial ownership of the Company's securities by any
person resulting solely from a reduction in the aggregate number of outstanding
shares of Base Capital Stock, and any decrease thereafter in such person's
ownership of securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person's beneficial ownership of any
securities of the Company; or
(iii) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization in which the
Company is not the acquiring entity for accounting purposes; or
(iv) The consummation of a sale, transfer or other disposition of all
or substantially all of the Company's assets.
For purposes of subsection (ii) above, the term "person" shall have the same
meaning as when used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended, but shall exclude (1) a trustee or other fiduciary holding
securities under an employee benefit plan maintained by the Company
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or a parent or subsidiary and (2) a corporation owned directly or indirectly by
the shareholders of the Company in substantially the same proportions as their
ownership of the common stock of the Company.
Any other provision of this Section 3.5(d) notwithstanding, no event shall
constitute a Change of Control under this Agreement if: (A) the sole purpose of
the event was to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions by the
persons who held the Company's securities immediately before such transaction;
or (B) following such event, S. Xxxxxx Xxxxxx is employed by the Company or any
successor entity with the duties and responsibilities of such entity's principal
executive officer.
Section 4. Compensation and Benefits. As consideration for Executive's
undertakings set forth in this Agreement and her services hereunder, the Company
shall pay and provide to Executive during the Period of Employment hereunder,
and Executive hereby agrees to accept, the compensation and benefits described
in Sections 4.1, 4.2, 4.3, 4.4 and 4.5 below.
4.1. The Company shall pay to Executive Base Compensation in the form of
salary at the following annual rates: (a) during the period from the first day
of the Period of Employment through and including January 31, 2006--Four Hundred
Seventy-Five Thousand Dollars ($475,000); (b) during the period from February 1,
2006 through and including January 31, 2007--Five Hundred Thousand Dollars
($500,000); (c) during the period from February 1, 2007 through and including
January 31, 2008--Five Hundred Twenty Thousand Dollars ($520,000); (d) during
the period from February 1, 2008 through and including January 31, 2009--Five
Hundred Forty Thousand Eight Hundred Dollars ($540,800); and (e) during the
period from February 1, 2009 through and including the last day of the Period of
Employment--Five Hundred Sixty-Two Thousand Four Hundred Thirty-Two Dollars
($562,432). Base Compensation shall be payable in such installments and at
intervals prescribed from time to time under the Company's payroll policies and
practices, and shall be subject to such withholdings as are required thereunder
or by applicable law.
4.2 Executive also may be awarded a bonus (the "Annual Bonus") each year
during the Period of Employment in an amount, not to exceed 75% of Executive's
Base Compensation as in effect for such year, in such amount as the Executive's
Supervisor may recommend, and the Compensation Committee of the Board may
approve, based on such criteria, as they shall have established in their sole
and absolute discretion.
4.3. The Company shall permit Executive to participate in all stock option,
stock purchase, stock bonus and other equity-based incentive plans and programs
(if any) as may be approved by the Board or its Compensation Committee and as
the Company chooses to maintain from time to time with respect to its executive
officers generally. Executive's level of participation and entitlements (if any)
thereunder shall be subject to the eligibility requirements and all other terms
and provisions of such plans and programs (including without limitation
amendment and termination), and the determinations of their duly appointed
administrators.
4.4 The Company shall permit Executive to participate in all healthcare,
retirement, life insurance and disability income plans and programs as may be
duly adopted and as the Company chooses to maintain from time to time with
respect to its executive officers and/or employees generally. Executive's level
of participation and benefits thereunder shall be subject to the eligibility
requirements and all other terms and provisions of such plans and programs
(including without limitation amendment and termination), and the determinations
of their duly appointed administrators.
4.5. Executive shall be entitled to 20 business days vacation on an annual
basis and all holidays provided under Company policy. For any calendar year
during which Executive is employed for
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only a portion of the year, Executive shall be entitled to the appropriate
proportion of the vacation days. Vacation days will not be cumulative, will
accrue only for the current year, and must be taken by Executive during the
calendar year in which the vacation time accrues. Vacation days will not be
converted into cash. Executive shall arrange her vacation so as not to conflict
with the needs of the Company.
Section 5. Expenses and Indemnification.
5.1. The Company shall pay directly, or shall reimburse Executive for, such
items of reasonable and necessary expense as are incurred by Executive in the
interest of the business of the Company. All such expenses paid by Executive
shall be reimbursed by the Company upon the presentation by Executive of an
itemized account of such expenditures, sufficient to support their deductibility
by the Company for federal income tax purposes (without regard to whether or not
the Company's deduction for such expenses is limited for federal income tax
purposes), such submissions to be made within thirty (30) days after the date
such expenses are incurred.
5.2.
(a) In addition to such rights of indemnification as are provided to
Executive by the Certificate of Incorporation and/or Bylaws of the Company and
its subsidiaries, the Company agrees that, absent a written opinion of
independent legal counsel that it would be unlawful to do so, the Company shall
promptly pay or advance all costs and expenses (including without limitation
attorneys fees) reasonably incurred by Executive in defense of any and all
claims, causes of action and charges which may be threatened, asserted or filed
against her in any judicial, governmental or arbitration proceedings, inquiry or
investigation (whether of a civil or criminal nature), arising out of her
employment under this Agreement or the performance in good faith of her duties
hereunder, other than such claims, causes of action or charges that may be
initiated against Executive upon approval by the Board or the Chief Executive
Officer.
(b) Until the third anniversary of the expiration or earlier
termination of the Period of Employment, the Company shall provide and maintain
officers' and directors' liability insurance policy in respect of acts or
omissions (including employment practices) occurring prior to the date of such
termination or expiration covering Executive, in an amount, on terms, and with
scope of coverage comparable to those applicable to the Company's officers' and
directors' generally.
(c) Executive hereby agrees to promptly reimburse to the Company all
such costs and expenses as have been paid or advanced by the Company if it is
finally determined as a matter of law that Executive was not entitled to be
indemnified for them by the Company. In addition, Executive shall remit to the
Company the proceeds of any insurance received by her to defray such costs and
expenses as have been paid or advanced by the Company.
Section 6. Protection of Confidential Information and Property.
6.1. Executive acknowledges that the Company has or may have a legitimate
need for and/or interest in protecting the confidentiality of all information
and data pertaining to the business and affairs of the Company and its
subsidiaries, including without limitation information and data relating to (i)
manufacturing operations and costs, (ii) distribution and servicing methods and
costs, (iii) merchandising techniques, (iv) sales and promotional methods, (v)
customer, vendor and personnel relationships and arrangements, (vi) research and
development projects, (vii) information and data processing technologies, and
(viii) strategic and tactical plans and initiatives ("CONFIDENTIAL
INFORMATION"). "Confidential Information" shall not include (a) information that
from time to time has
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been disclosed by the Company in public filings, press announcements or
commercial dealings, (b) is or becomes publicly known or within the public
domain without the breach of this Confidentiality Agreement by Executive, or (c)
was known to Executive prior to her receipt of the information from the Company.
6.2. Executive acknowledges that, in the course of her employment, (i) she
has participated and/or will participate in the development of Confidential
Information, (ii) she has been and/or will be involved in the use and
application of Confidential Information for corporate purposes, and (iii) she
otherwise has been and/or will be given access to and entrusted with
Confidential Information for corporate purposes.
6.3. Executive agrees that, during the term of her employment under this
Agreement, she shall possess and use the Confidential Information solely and
exclusively to protect and advance the interests of the Company and its
subsidiaries; and that at all times thereafter, she (i) shall continue to treat
the Confidential Information as proprietary to the Company, and (ii) shall not
make use of, or divulge to any third party, all or any part of the Confidential
Information unless and except to the extent disclosed in the good faith
discharge of her duties and responsibilities under this Agreement, otherwise so
authorized in writing by the Company or required by judicial, legislative or
regulatory process.
6.4. Executive acknowledges that, in the course of her employment, she will
create and/or be furnished with (i) materials that embody or contain
Confidential Information (in written and electronic form) and (ii) other
tangible items that are the property of the Company and its subsidiaries.
Executive agrees that, upon expiration or other termination of her term of
employment under this Agreement, or sooner if the Company so requests, she shall
promptly deliver to the Company all such materials and other tangible items so
created and/or furnished, including without limitation drawings, blueprints,
sketches, manuals, letters, notes, notebooks, reports, lists of customers and
vendors, personnel lists, computer disks and printouts, computer hardware and
printers, and that she shall not retain any originals or copies of such
materials, or any of such tangible items, unless and except to the extent so
authorized in writing by the Company.
6.5. Executive agrees to inform all prospective employers of the content of
this Section 6 and of Section 7 of this Agreement prior to her acceptance of
future employment.
Section 7. Restrictions against Competition and Solicitation.
7.1. Executive agrees that, during the term of her employment hereunder and
during the Restricted Period (defined in Section 7.2 below), she shall not in
any way, directly or indirectly, manage, operate, control, accept employment or
a consulting position with or otherwise advise or assist or be connected with,
or own or have any financial interest in, any Competitive Enterprise (defined in
Section 7.2 below).
7.2. For purposes of this Section 7:
(a) "RESTRICTED PERIOD" means:
(i) in the case of early termination of the Period of Employment by
the Company with Proper Cause, by the Executive without Good Reason or in the
case of the expiration of the Period of Employment, the greater of (A) the
remaining Period of Employment plus the period of twelve months next following
expiration of the Period of Employment, and (B) the period of twenty-four (24)
months next following the such date of early termination; or
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(ii) in the case of early termination of the Period of Employment
pursuant to Section 3.1(a) without Proper Cause, Section 3.1(b), or Section
3.1(d) with Good Reason, the period during which Executive is receiving payments
or benefits from the Company.
(b) "COMPETITIVE ENTERPRISE" means any person or business organization
engaged, directly or indirectly, in the business of (i) designing, manufacturing
and marketing front-end fixtures, shelving and other display equipment and
accessories for use by retail stores; (ii) designing, manufacturing and
marketing custom wood fixtures, furnishings and millwork for use by commercial
enterprises, (iii) distribution and fulfillment of magazines, pre-recorded
music, and video and video games, (iv) rendering third party billing and
collection services with respect to claims for manufacturer rebates and
incentive payments payable to retailers respecting the sale of magazines,
periodicals, confections and general merchandise, and/or (v) providing sales and
marketing data and analyses to retailers and vendors of products distributed by
the Company. As used herein, neither Xxxx. Xxxx Company, LLC. nor Levy Home
Entertainment, LLC shall not be deemed to be a "Competitive Enterprise."
Furthermore, nothing in this Agreement shall be construed or be deemed to
prohibit Executive from (a) maintaining her ownership interest in CLC (or its
affiliates) or exercising her rights with respect thereto, (b) acting as a
member of the board of directors of CLC (or its affiliates) or as an advisor to
CLC or Xxxxxxx Xxxxxx (or their respective affiliates), with or without
compensation, (c) serving as a member of the governing body of any for profit or
not for profit enterprise, with or without compensation, in each case provided
that (i) Executive first notify Executive's Supervisor of any such intended
activities and, solely in the case of the activities described in clause (c)
above, Executive's Supervisor shall have approved thereof, which approval shall
not be unreasonably withheld, and (ii) the aggregate of all activities described
in clauses (a), (b) and (c) do not materially interfere with the performance by
Executive of her duties and responsibilities to the Company.
7.3. Without limitation of the Company's rights and remedies under this
Agreement or as otherwise provided by law or in equity, it is understood and
agreed between the parties that the right of Executive to receive and retain any
payments otherwise due under this Agreement shall be suspended and canceled if
Executive is in violation of the foregoing covenant not to compete and fails or
refuses to take to initiate corrective action within 30 days after written
notice by the Company setting forth in reasonable detail the conditions alleged
to constitute a violation of the foregoing covenant not to compete.
7.4. If the Period of Employment hereunder shall have been terminated
without Proper Cause pursuant to Section 3.1(a) or 3.1(d) for Good Reason, and
if Executive shall have duly complied with and observed the covenants of Section
6 and this Section 7, Executive may, at her election, be discharged from the
covenants of Section 7.1 at any time on or before the thirtieth (30th) day
following such termination by filing with the Company a duly executed statement
(in form and content reasonably satisfactory to the Board of Directors of the
Company) releasing the Company and its subsidiaries (and, if applicable, its
insurance carriers) from any and all obligations it (or they) may have by reason
of such termination (except for accrued and unpaid items).
7.5. Executive agrees further that, during the Restricted Period, she will
not, directly or indirectly, either for himself or on behalf of any other person
or entity, employ or attempt to employ or solicit the employment or services of
any person who is at that time, or has been within six months immediately prior
thereto, employed by the Company or any subsidiary of the Company.
Section 8. Injunctive Relief and Costs.
8.1. Executive acknowledges that any violation of or failure to comply with
the provisions of Sections 6, 7.1 and 7.5 of this Agreement may cause
substantial and irreparable harm to the Company and
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its subsidiaries (and their constituencies), and that the nature and magnitude
of the harm may be difficult or impossible to measure precisely or to compensate
adequately with monetary damages.
8.2. Executive agrees that the Company shall have the right to enforce her
performance of and compliance with any and all provisions of Sections 6, 7.1 and
7.5 by seeking a restraining order and/or an order of specific performance
and/or other injunctive relief against Executive from a court of competent
jurisdiction, at any time or from time to time, if it appears that Executive has
violated or is about to violate any such provision.
8.3. In any proceeding or arbitration arising out of any violation (or
alleged violation of) or failure to comply with the provisions of Sections 6,
7.1 and 7.5, the substantially non-prevailing party in such matter (whether
determined based on a final adjudication of the issue at court, arbitration or
from the terms of a settlement) shall pay to the substantially prevailing party
all costs, attorneys' fees and paralegals' fees (whether incurred before trial,
at trial or on appeal) incurred by such prevailing party in connection with such
controversy, interpretation or implementation.
8.4. The provisions of this Section 8 are in addition to, and not in lieu
of, any other rights and remedies that may be available to the Company for
breach of any portion of this Agreement.
Section 9. Compliance with Law and Company Policies.
9.1. Executive warrants and represents to the Company that she is not now
under any legal or contractual duty or obligation which could prevent, limit or
impair in any way her full and faithful performance of this Agreement. Executive
shall indemnify and hold the Company harmless from and against any claim, loss,
damage, liability, cost or expense (including without limitation reasonable
attorneys' fees) incurred by or asserted against the Company arising out of or
in connection with any breach of this representation and warranty.
9.2. Executive acknowledges that she has received and read and understands
the intent and purposes of the Company's Code of Business Code and Ethics.
Executive shall comply with all lawful rules and policies of the Company, as in
effect from time to time.
9.3. Nothing contained in this Agreement shall be interpreted, construed or
applied to require the commission of any act contrary to law and whenever there
is any conflict between any provision of this Agreement and any statute, law
ordinance, order or regulation, the latter shall prevail; but in such event any
such provision of this Agreement shall be curtailed and limited only to the
extent necessary to bring it within applicable legal requirements.
9.4. Executive acknowledges and agrees that, notwithstanding anything to
the contrary in this Agreement, she shall not be entitled to, and this Agreement
does not confer on Executive, any benefits that constitute (or which, in the
Company's good faith determination based on the advice of counsel, would likely
constitute) a personal loan in violation of Section 402 of the Xxxxxxxx-Xxxxx
Act of 2002, including any implementing regulations thereunder, or any similar
provision of applicable law (collectively, "Section 402"). In the event that the
Company, in good faith and upon the advice of counsel, determines that any
provision of this Agreement would, absent this Section, give rise to a potential
violation of Section 402, Executive and the Company shall promptly negotiate, in
good faith, towards an appropriate amendment to this Agreement that would
eliminate such potential violation, but which would, as closely as reasonably
possible, afford both the Company and Executive, the same relative economic
benefits of their bargain hereunder prior to such amendment.
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Section 10. Effect of Business Combination Transactions. In the event of the
merger or consolidation of the Company with any unrelated corporation or
corporations, or of the sale by the Company of a major portion of its assets or
of its business and good will to an unrelated third party, this Agreement shall
remain in effect and be assigned and transferred to the Company's successor in
interest as an asset of the Company, and the Company shall cause such assignee
to assume the Company's obligations hereunder. Notwithstanding such assumption,
the Company shall not be discharged from its liabilities under this Agreement
unless and until released therefrom by Executive, which release shall not be
unreasonably withheld or delayed.
Section 11. Successors and Assigns.
11.1. This Agreement shall be binding upon, and shall inure to the benefit
of, Executive and the Company and their respective permitted successors,
assigns, heirs, legal representatives and beneficiaries.
11.2 Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect; provided, however, that nothing in this Section 10 shall
preclude the assumption of such rights by executors, administrators or other
legal representatives of Executive or her estate and their assigning any rights
hereunder to the person or persons entitled thereto.
Section 12. Notices. Any and all notices required or permitted to be given under
this Agreement shall be sufficient if furnished in writing and personally
delivered, or if sent by registered or certified mail to the last known
residence address of Executive or to the Company, Attention: Chief Executive
Officer, 00000 Xxxxxxxxx Xxxxxx Xxxx., Xxxxx 000, Xxxxxx Xxxxxxx, Xxxxxxx 00000,
or such other place as Executive or the Company may designate in writing to the
other for these purposes.
Section 13. Miscellaneous.
13.1. The waiver by either party of a breach or violation of any provision
of this Agreement shall not operate as or be construed to be a waiver of any
subsequent breach hereof.
13.2. The headings to the Sections hereof are for convenience of reference
only, and in case of any conflict, the text of this Agreement, rather than the
headings, shall control.
13.3. This Agreement sets forth the entire understanding of the parties in
respect of the subject matter contained herein and supersedes all prior
agreements, arrangements and understandings relating to the subject matter and
may only be amended by a written agreement signed by both parties hereto or
their duly authorized representatives. Except as expressly stated herein,
however, nothing in this Agreement shall be deemed to affect the Company's
duties and obligations, or Executive's rights and benefits, under the Company's
existing Source Interlink Companies 401(k).
13.4. Should a court or arbitrator declare any provision hereof to be
invalid, such declaration shall not affect the validity of the Agreement as a
whole or any part thereof, other than the specific portion declared to be
invalid.
13.5. This Agreement shall be interpreted, construed and governed according
to the laws of the State of Florida.
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13.6. Any claim, controversy or dispute arising with respect to this
Agreement between the parties hereto or anyone claiming under or on behalf of
either of the parties (a " Dispute"), other than a Dispute to which Section 8
hereof applies, shall be submitted to final and binding arbitration in
accordance with the following:
(a) Any party to an unresolved Dispute may file a written Demand for
Arbitration pursuant to this Section 13.5 with the Regional Office of the
American Arbitration Association nearest to Xxxxxx Springs, and shall
simultaneously send a copy of such Demand to the other party or parties to such
Dispute;
(b) Arbitration proceedings under this Section 13.6 shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, except that all decisions and awards rendered shall be accompanied
by a written opinion setting forth the rationale for such decisions and awards;
(c) Venue for all evidentiary hearings conducted in such proceedings shall
be in Xxx or Xxxxxxx County, Florida, as determined by the Arbitrator.
(d) Unless otherwise agreed by the parties thereto, arbitration proceedings
under this Section 13.6 shall be conducted before one impartial arbitrator
selected through the procedures of the American Arbitration Association. On all
matters, the decisions and awards of the arbitrator shall be determinative.
(e) To the extent practicable, the arbitration proceedings under this
Section 13.6 shall be conducted in such manner as will enable completion within
sixty (60) days after the filing of the Demand for Arbitration hereunder.
(f) The arbitrator shall award attorney's fees and costs of arbitration to
the substantially prevailing party. Unless and except to the extent so awarded,
the costs of arbitration shall be shared equally by the parties, and each party
shall bear the fees and expenses of its own attorney. Punitive damages shall not
be allowed by the arbitrator. The award may be enforced in such manner as
allowed by law.
(g) If any sums payable by the Company hereunder are not paid on or before
the sixtieth (60th) day following the date on which such sums become finally due
and payable, the Company shall pay, in addition to sum past due amounts,
interest on the unpaid portion thereof (accruing from the date on which such
sums become finally due and payable through and including the date on which
payment is made) at an annual rate equal to the rate of interest announced from
time to time within Xxxxx Fargo Bank at its principal office in San Francisco,
California as its "prime rate."
(h) During the first two years following the date of this Agreement, if any
payment, coverage or benefit provided under this Agreement would, in the opinion
of counsel for the Company, not be deemed to be deductible in whole or in part
in the calculation of the Federal income tax of the Company, or any other person
making such payment or providing such coverage or benefit, by reason of Section
280G of the Code, the aggregate payments, coverages or benefits provided
hereunder shall be reduced to the "safe harbor" level under Section 280G so that
no portion of such amount which is paid to Executive is not deductible by reason
of Section 280G of the Code. Furthermore, the Company shall hold such portions
not paid to Executive (the "ESCROWED FUNDS") in escrow pending a final
determination of whether such amounts would be deductible if paid to Executive.
The Company shall use its best efforts to seek and obtain a ruling from the
Internal Revenue Service that the Escrowed Funds would be deductible if paid to
Executive.
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If the IRS favorably rules on the matter, the Company shall promptly pay to
Executive the Escrowed Funds.
If the IRS has not favorably ruled on such matter within six (6) months
after the date on which any payment, coverage or benefit provided under this
Agreement is required to be paid or provided, the Company shall pay to Executive
the Escrowed Funds and an additional amount (the "280G PAYMENT") such that the
net amount retained by Executive, after giving effect to any excise tax on the
payment, coverages or benefits and any Federal, state or local income taxes and
excise tax on the 280G Payment, shall be equal to the value of such payments,
coverages and benefits prior to giving effect to the excise tax. For purpose of
determining the 280G Payment, Executive shall be deemed to pay Federal, state
and local income tax at the highest marginal rate of taxation in the calendar
year in which the payments, coverages or benefits are paid or provided. State
and local income taxes shall be determined based on the state and locality of
Executive's domicile on the date of termination of the Period of Employment.
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[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT WITH XXXXX X. XXXXXXX]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
SOURCE INTERLINK COMPANIES, INC.
By: /s/ S. Xxxxxx Xxxxxx
-----------------------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chairman & Chief Executive Officer
/s/ Xxxxx X. Xxxxxxx
---------------------------------------------
Xxxxx X. Xxxxxxx
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