EXHIBIT 10.28
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made, entered into, and is effective as
of this first day of January, 1997 (hereinafter referred to as the "Effective
Date"), by and between Smart & Final Inc. (hereinafter referred to as the
"Company"), a Delaware corporation having its principal offices at Los Angeles,
California and Xxxxx X. Xxxxxxx, III (hereinafter referred to as the
"Executive").
WHEREAS, the Executive is presently employed by the Company in the
capacity of Chief Executive Officer and as a member of the Board of Directors of
the Company;
WHEREAS, the Executive possesses considerable experience and an
intimate knowledge of the business and affairs of the Company, its policies,
methods, personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's contribution has
been substantial and meritorious and, as such, the Executive has demonstrated
unique qualifications to act in an executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued employment
of the Executive in the above stated capacity, and Executive is desirous of
having such assurance.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
SECTION 1. TERM OF EMPLOYMENT
The Company hereby agrees to employ the Executive and the Executive
hereby agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above;
subject, however, to earlier termination as expressly provided in Section 6
herein.
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The initial three (3) year period of employment automatically shall be
extended for one (1) additional year at the end of the first year, and then
again after each successive year thereafter. However, either party may elect not
to have the then term of this Agreement extended by giving the other party
written notice of its election not to extend delivered at least ninety (90)
calendar days prior to the end of any calendar year, in which event the then
term shall expire in accordance with its terms. For example, if at the end of
calendar 1997 notice of election not to extend has not been given by either
party (thus extending the term through December 31, 2000), but on September 15,
1997 the Company delivers its election not to extend, then the term of this
Agreement shall terminate December 31, 2000 (other than the provisions of
Section 8, which shall survive such termination).
However, upon the effective date of the expiration, the Company shall
provide to the Executive a continuation of his Base Salary (at the rate then in
effect, as provided in Paragraph 4.1 herein) for a period of twenty-four (24)
months, paid in equal installments in accordance with the normal payroll
practices of the Company. The Company shall also promptly pay to the Executive
an amount equal to twice the average Bonus paid to the Executive relative to the
three fiscal years ending with the date of the expiration of the term. The
Company also shall provide to the Executive all benefits to which the Executive
has a vested right to at that time including, but not limited to, the retirement
benefits described in Paragraph 4.4 herein, and the retiree medical insurance
benefits described in Paragraph 4.6 herein.
SECTION 2. POSITION AND RESPONSIBILITIES
During the term of this Agreement, the Executive agrees to serve as
Chief Executive Officer of the Company. In his capacity as Chief Executive
Officer of the Company, the Executive shall report directly to the Board of
Directors, and shall maintain the level of duties and responsibilities as in
effect as of the Effective Date, or such higher level of duties and
responsibilities as he may be assigned during the term of this Agreement. The
Executive shall have the same status, privileges, and responsibilities normally
inherent in such capacities in corporations of similar size and character. The
Executive acknowledges that such duties shall include serving as an officer
and/or director of affiliates of the Company from time to time without the
payment of additional compensation for doing so.
SECTION 3. STANDARD OF CARE
During the term of this Agreement, the Executive agrees to devote
substantially his full time, attention, and energies to the Company's business
and shall not be engaged in any other business activity, whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage.
However, subject to Section 8 herein, the Executive may serve as a director of
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other companies so long as such service is not injurious to the Company. The
Executive covenants, warrants, and represents that he shall:
(a) Devote his full and best efforts to the fulfillment of his
employment obligations; and
(b) Exercise the highest degree of loyalty and the highest standards
of conduct in the performance of his duties.
This Section 3 shall not be construed as preventing the Executive from
investing assets in such form or manner as will not require his services in
the daily operations of the affairs of the companies in which such investments
are made.
SECTION 4. COMPENSATION
As remuneration for all services to be rendered by the Executive
during the term of this Agreement, and as consideration for complying with the
covenants herein, the Company shall pay and provide to the Executive the
following:
4.1. BASE SALARY. The Company shall pay the Executive a Base Salary
in an amount which shall be established from time to time by the Board of
Directors of the Company or the Board's designee provided, however, that such
Base Salary shall not be less than $400,000 per year. Once increased, such Base
Salary shall not thereafter be decreased during the term of this Agreement. This
Base Salary shall be paid to the Executive in equal installments throughout the
year, consistent with the normal payroll practices of the Company.
The annual Base Salary shall be reviewed at least annually following
the Effective Date of this Agreement, while this Agreement is in force, to
ascertain whether, in the judgment of the Board or the Board's designee, such
Base Salary should be increased. If so increased, the Base Salary as stated
above shall, likewise, be increased for all purposes of this Agreement.
4.2. ANNUAL BONUS. The Company shall provide the Executive with the
opportunity to earn an annual cash bonus, at a level which is commensurate with
the opportunity typically offered to executives having the same or similar
duties and responsibilities as the Executive at companies similar in size and
character to the Company. The Company shall, however, provide the Executive with
a minimum target annual bonus opportunity equal to one hundred percent (100%) of
the Executive's annual Base Salary.
Nothing in this paragraph shall be construed as obligating the Company
to pay the Executive an Annual Bonus or to refrain from changing and/or amending
the annual bonus/incentive plan so long as such changes are similarly applicable
to all executives generally.
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4.3. LONG-TERM INCENTIVES. The Company shall provide the Executive
the opportunity to earn a long-term incentive award, at a level which is
commensurate with the opportunity typically offered to executives having the
same or similar duties and responsibilities as the Executive at companies
similar in size and in character to the Company.
Nothing in this paragraph shall be construed as obligating the Company
to refrain from changing, and/or amending the long-term incentive plan, so long
as such changes are similarly applicable to all executives generally.
4.4. RETIREMENT BENEFITS. The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, including, but not limited to, the 401(k) savings plan,
subject to the eligibility and participation requirements of such plans. The
Executive shall be entitled to benefits provided under the Deferred Compensation
Agreement currently in effect.
4.5. EMPLOYEE BENEFITS. During the term of this Agreement, and as
otherwise provided within the provisions of each of the respective plans, the
Company shall provide to the Executive all benefits to which other executives
and employees of the Company are entitled to receive, as commensurate with the
Executive's position. Such benefits shall include, but not be limited to, group
term life insurance, comprehensive health and major medical insurance, and
short-term and long-term disability.
The Executive shall be entitled to paid vacation of a minimum of five
(5) weeks per calendar year, in accordance with the standard written policy of
the Company with regard to vacations of employees.
The Executive shall likewise participate in any additional benefit as
may be established during the term of this Agreement, by standard written policy
of the Company.
4.6. RETIREE MEDICAL INSURANCE. The Company shall provide the
Executive, and the Executive's surviving spouse, full retiree medical insurance
coverage (as defined under the Company's retiree medical insurance arrangement)
for the remainder of their lives in the event of the Executive's termination of
employment hereunder, due to the Executive's Death (as provided in Paragraph 6.2
herein), due to Retirement (as provided in Paragraph 6.1 herein), due to
Disability (as provided in Paragraph 6.3 herein), due to an involuntary
termination by the Company without Cause (as provided in Paragraph 6.5 herein),
due to a termination by the Executive for Good Reason (as provided in Paragraph
6.7 herein), or in the event this Agreement is not renewed by the Company (as
provided in Section 1 herein).
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Retiree medical insurance coverage will not be provided to the
Executive in the event his employment hereunder is terminated voluntarily by the
Executive (as provided in Paragraph 6.4 herein), or in the event of a for Cause
termination (as provided in Paragraph 6.6 herein).
4.7. PERQUISITES. The Company shall provide to the Executive, at the
Company's cost, all perquisites currently being afforded the Executive as well
as all other perquisites to which other executives of the Company are entitled
to receive and such other perquisites which are suitable to the character of
Executive's position with the Company and adequate for the performance of his
duties hereunder.
4.8. RIGHT TO CHANGE PLANS. By reason of Paragraphs 4.5, 4.6, and 4.7
herein, the Company shall not be obligated to institute, maintain, or refrain
from changing, amending, or discontinuing any benefit plan, program, or
perquisite, so long as such changes are similarly applicable to executive
employees generally.
SECTION 5. EXPENSES
The Company shall pay, or reimburse the Executive, for all ordinary
and necessary expenses, in a reasonable amount, which the Executive incurs in
performing his duties under this Agreement including, but not limited to,
travel, entertainment, professional dues and subscriptions, and all dues, fees,
and expenses associated with membership in various professional, business, and
civic associations and societies of which the Executive's participation is in
the best interest of the Company.
SECTION 6. EMPLOYMENT TERMINATIONS
6.1. TERMINATION DUE TO RETIREMENT. In the event the Executive's
employment is terminated, while this Agreement is in force, by reason of
Retirement (as defined under the then established rules of the Company's tax-
qualified retirement plan), the Executive's benefits shall be determined in
accordance with the Company's retirement, survivor's benefits, insurance, and
other applicable programs of the Company then in effect.
Upon the effective date of such termination, the Company's obligation
to pay and provide to the Executive Base Salary, Annual Bonus, and Long-Term
Incentives (as provided in Paragraphs 4.1, 4.2, and 4.3 herein, respectively),
shall immediately expire. However, the Executive shall receive all rights and
benefits that he is vested in, pursuant to other plans and programs of the
Company including, but not limited to, the retirement benefits as described in
Paragraph 4.4 herein, and the retiree medical insurance coverage as described in
Paragraph 4.6 herein.
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6.2. TERMINATION DUE TO DEATH. In the event of the death of the
Executive during the term of this Agreement, or during any period of Disability
during which he is receiving compensation pursuant to Paragraph 6.3 herein, the
Company shall pay to the Executive's surviving spouse, or other beneficiary as
so designated by the Executive during his lifetime, or to the Executive's
estate, as appropriate, all benefits to which the Executive had a vested right
to pursuant to this Agreement.
The Company also shall provide to the Executive's surviving spouse
medical insurance coverage for the remainder of her life, as further provided in
Paragraph 4.6 herein.
6.3. TERMINATION DUE TO DISABILITY. In the event that the Executive
becomes Disabled during the term of this Agreement and is, therefore, unable to
perform his duties herein for a period of more than ninety (90) calendar days in
the aggregate, during any period of twelve (12) consecutive months, or in the
event of the Board's reasonable expectation that the Executive's Disability will
exist for more than a period of ninety (90) calendar days, the Company shall
have the right to terminate the Executive's active employment as provided in
this Agreement. However, the Board shall deliver written notice to the Executive
of the Company's intent to terminate for Disability at least thirty (30)
calendar days prior to the effective date of such termination.
A termination for Disability shall become effective upon the end of
the thirty (30) day notice period. Upon such effective date, the Company's
obligation to pay and provide to the Executive Base Salary, Annual Bonus, and
Long-Term Incentives (as provided in Paragraphs 4.1, 4.2, and 4.3,
respectively), shall immediately expire. However, the Executive shall receive
all rights and benefits that he is vested in, pursuant to other plans and
programs of the Company, including, but not limited to, short- and long-term
disability benefits, retirement benefits as described in Paragraph 4.4 herein,
and retiree medical insurance coverage as described in Paragraph 4.6 herein.
The term "Disability" shall mean, for all purposes of this Agreement,
the incapacity of the Executive, due to injury, illness, disease, or bodily or
mental infirmity, to engage in the performance of substantially all of the usual
duties of employment with the Company as contemplated by Section 2 herein, such
Disability to be determined by the Board of Directors of the Company upon
receipt and in reliance on competent medical advice from one or more
individuals, selected by the Board, who are qualified to give such professional
medical advice.
It is expressly understood that the Disability of the Executive for a
period of ninety (90) calendar days or less in the aggregate during any period
of twelve
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(12) consecutive months, in the absence of any reasonable expectation that his
Disability will exist for more than such a period of time, shall not constitute
a failure by him to perform his duties hereunder and shall not be deemed a
breach or default and the Executive shall receive full compensation for any such
period of Disability or for any other temporary illness or incapacity during the
term of this Agreement.
6.4. VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may
terminate this Agreement at any time by giving the Board of Directors of the
Company written notice of intent to terminate, delivered at least ninety (90)
calendar days prior to the effective date of such termination (such period not
to include vacation). The termination automatically shall become effective upon
the expiration of the notice period.
Upon the effective date of such termination, the Company shall pay to
the Executive his full Base Salary, at the rate then in effect as provided in
Paragraph 4.1 herein, through the effective date of termination, and a pro rata
bonus payment based upon the level of achievement of preestablished performance
goals up through and including the effective date of termination, plus all other
benefits to which the Executive has a vested right to at that time including,
but not limited to, accrued vacation pay. The Company also shall provide to the
Executive the retirement benefits described in Paragraph 4.4 herein. With the
exception of the covenants contained in Section 8 herein (which shall survive
such termination), the Company and the Executive thereafter shall have no
further obligations under this Agreement.
6.5. TERMINATION BY THE COMPANY WITHOUT CAUSE. At all times prior to
six (6) full calendar months before the effective date of a Change in Control,
or at any time more than two (2) years after the effective date of a Change in
Control, the Board may terminate the Executive's employment, as provided under
this Agreement, at any time, for reasons other than death, Disability,
Retirement, or for Cause, by notifying the Executive in writing of the Company's
intent to terminate, at least thirty (30) calendar days prior the effective date
of such termination.
Upon the effective date of such termination, following the expiration
of the thirty (30) day notice period, the Company shall continue to pay to the
Executive in equal monthly installments the greater of: (a) the Base Salary then
in effect and Bonus, equal to the average of bonuses paid in the prior three (3)
years, for the remaining term of this Agreement (assuming no additional
extensions of this Agreement's term beyond that in effect as of the effective
date of termination), together with continuation of health and welfare benefits
for the remaining term of this Agreement; or (b) two (2) full years of his Base
Salary in effect and Bonus, equal to the average of bonuses paid in the prior
three (3) years, as of the
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effective date of termination, plus a two (2) year continuation of health and
welfare benefits.
Further, the Company shall pay the Executive all other benefits to
which the Executive has a vested right at the time, according to the provisions
of the governing plan or program. The Company and the Executive thereafter shall
have no further obligations under this Agreement.
6.6. TERMINATION FOR CAUSE. Nothing in this Agreement shall be
construed to prevent the Board from terminating the Executive's employment under
this Agreement for "Cause." In the event the Board determines that Cause exists,
the Board shall deliver written notice to the Executive of the facts and
circumstances leading to the Board's determination. Upon receipt of this written
notification, all provisions of this Agreement shall terminate, except for the
noncompete provisions of Section 8 herein (which shall survive such
termination).
"Cause" shall be determined by the Board in the exercise of good faith
and reasonable judgment; and shall mean and be limited to the consistent wilful
misconduct, fraud, conviction of a felony, consistent gross neglect of duties,
or consistent wanton negligence by the Executive in the performance of his
duties hereunder, or the material breach by the Executive of the terms of this
Agreement.
In the event this Agreement is terminated by the Board for Cause, the
Company shall pay to the Executive his Base Salary, at the rate then in effect,
as provided in Paragraph 4.1 herein, through the effective date of the
employment termination and the Executive shall immediately thereafter forfeit
all rights and benefits (other than vested benefits) he would otherwise have
been entitled to receive under this Agreement. The Company and the Executive
thereafter shall have no further obligations under this Agreement.
6.7. TERMINATION FOR GOOD REASON. At any time during the term of this
Agreement, the Executive may terminate this Agreement for Good Reason (as
defined below) by giving the Board of Directors of the Company thirty (30)
calendar days written notice of intent to terminate, which notice sets forth
in reasonable detail the facts and circumstances claimed to provide a basis
for such termination.
Upon the expiration of the thirty (30) day notice period, the Good
Reason termination shall become effective, and the Company shall pay and provide
to the Executive the benefits set forth in this Section 6.7 (or, in the event of
termination for Good Reason within the six (6) full calendar month period prior
to the effective date of a Change in Control, or within twenty-four (24)
calendar months following the effective date of a Change in Control, the
benefits set forth in Section 7.1 herein).
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Good Reason shall mean, without the Executive's express written
consent, the occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent
with the Executive's authorities, duties, responsibilities, and
status (including offices, titles, and reporting requirements) as
an officer of the Company, or a reduction or alteration in the
nature or status of the Executive's authorities, duties, or
responsibilities from those in effect during the immediately
preceding fiscal year;
(b) Without the Executive's consent, the Company's requiring the
Executive to be based at a location which is at least fifty (50)
miles further from the Executive's current primary residence than
is such residence from the Company's current headquarters, except
for required travel on the Company's business to an extent
substantially consistent with the Executive's business obligations
as of the Effective Date;
(c) A material reduction in the Executive's level of participation in
any of the Company's short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans,
policies, practices, or arrangements in which the Executive
participates as of the Effective Date; provided, however, that
reductions in the levels of participation in any such plans shall
not be deemed to be "Good Reason" if the Executive's reduced level
of participation in each such program remains substantially
consistent with the average level of participation of other
executives who have positions commensurate with the Executive's
position; or
(d) The failure of the Company to obtain a satisfactory agreement from
any successor to the Company to assume and agree to perform this
Agreement, as contemplated in Section 10.1 herein.
Upon a termination of the Executive's employment for Good Reason at
any time other than the six (6) full calendar month period prior to the
effective date of a Change in Control, or the twenty-four (24) month period
following the effective date of a Change in Control, the Executive shall be
entitled to receive the same payments and benefits as he is entitled to receive
following an involuntary termination of his employment by the Company without
Cause, as specified in Section 6.4 herein. The payment of Base Salary and pro
rata Bonus shall be made to the Executive within thirty (30) calendar days
following the effective date of employment termination. Upon a termination for
Good Reason within the six (6) full calendar month period prior to the effective
date of a Change in Control, or within the twenty-four (24) months following the
effective date of a Change in Control, the Executive shall be entitled to
receive the
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payments and benefits set forth in Section 7.1 herein in lieu of those set forth
in this Section 6.7.
The Executive's right to terminate employment for Good Reason shall
not be affected by the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent to, or
a waiver of rights with respect to, any circumstance constituting Good
Reason herein.
SECTION 7. CHANGE IN CONTROL
7.1 EMPLOYMENT TERMINATIONS IN CONNECTION WITH A CHANGE IN CONTROL. In
the event of a Qualifying Termination (as defined below) within six (6) full
calendar months prior to the effective date of a Change in Control, or within
twenty-four (24) months following the effective date of a Change in Control,
then in lieu of all other benefits provided to the Executive under the
provisions of this Agreement, the Company shall pay to the Executive and provide
him with the following severance benefits (hereinafter referred to as the
"Severance Benefits"):
(a) An amount equal to three (3) times the highest rate of the
Executive's annualized Base Salary rate in effect at any time up
to and including the effective date of termination;
(b) An amount equal to three (3) times the Executive's average annual
bonus earned over the three (3) fiscal years prior to the Change
in Control (whether or not deferred);
(c) An amount equal to the Executive's unpaid Base Salary and accrued
vacation pay through the effective date of termination;
(d) An amount equal to the Executive's unpaid targeted annual bonus,
established for the plan year in which the Executive's effective
date of termination occurs, adjusted for the Company's performance
through the date of termination, multiplied by a fraction, the
numerator of which is the number of completed days in the then-
existing fiscal year through the effective date of termination,
and the denominator of which is three hundred sixty-five (365);
(e) A continuation of the welfare benefits in effect for three (3)
full years after the effective date of termination. These benefits
shall be provided to the Executive at the same premium cost, and
at the same coverage level, as in effect as of the Executive's
effective date of termination.
However, in the event the premium cost and/or level of coverage
shall change for all employees of the Company, the cost and/or
coverage
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level, likewise, shall change for the Executive in a corresponding
manner.
The continuation of these welfare benefits shall be discontinued
prior to the end of the three (3) year period in the event the
Executive has available substantially similar benefits from a
subsequent employer, as determined by the Company's Board of
Directors or the Board's designee;
(f) A lump-sum cash payment of the actuarial present value equivalent
of the aggregate benefits accrued by the Executive as of the
effective date of termination under the terms of any and all
supplemental retirement plans in which the Executive participates.
For this purpose, such benefits shall be calculated under the
assumption that the Executive's employment continued following the
effective date of termination for three (3) full years (i.e.,
three (3) additional years of age and service credits shall be
added); provided, however, that for purposes of determining "final
average pay" under such programs, the Executive's actual pay
history as of the effective date of termination shall be used;
(g) A lump-sum cash payment of the entire balance of the Executive's
compensation which has been deferred under the Company's
nonqualified deferred compensation plan(s) together with all
interest that has been credited with respect to such deferred
compensation balance;
(h) A lump-sum cash payment of all amounts owed to the Employee under
the Deferred Compensation Plan computed as if the Employee had
continued to participate in the Deferred Compensation Plan and
received a deemed credit thereunder for an additional period equal
to the greater of (A) the number of full and partial years
remaining under the term of this Agreement or (B) three (3) years,
within five (5) days of the Date of Termination.
For purposes of this Section 7, a Qualifying Termination shall mean
any termination of the Executive's employment OTHER THAN: (1) by the Company for
Cause (as provided in Section 6.6 herein); (2) by reason of death, Disability
(as provided in Section 6.2 herein), or Retirement (as such term is then defined
in the Company's tax qualified defined benefit retirement plan; provided that a
termination which qualifies as a Retirement and which occurs within the thirty
(30) day period described in subparagraph (3) of this Section 7.1 will be deemed
to be a Qualifying Termination); or (3) by the Executive without Good Reason (as
provided in Section 6.7 herein, but specifically excluding voluntary
terminations within the period beginning on the first anniversary of the
effective date of the Change in Control and ending thirty (30) days after such
date--i.e.,
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any voluntary termination by the Executive within such period shall be deemed to
be a Qualifying Termination).
7.2 DEFINITION OF "CHANGE IN CONTROL." A Change in Control of the
Company shall be deemed to have occurred as of the first day any one or more of
the following conditions shall have been satisfied:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") (other
than the Company; any trustee or other fiduciary holding
securities under an employee benefit plan of the Company; any
Company-owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership
of the stock of the Company) is or becomes the "beneficial owner"
(as defend in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates) representing
thirty-five percent (35%) or more of the combined voting power of
the Company's then outstanding securities;
(b) During any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board and any new
director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction
described in clause (a), (c), or (d) of this paragraph) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at
the beginning of the period of whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof;
(c) The stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) 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), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, at least
sixty-five percent (65%) of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (B)
a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no
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person acquires more than fifty percent (50%) of the combined
voting power of the Company's then outstanding securities; or
(d) The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the
Company's assets.
Notwithstanding the foregoing, a Change in Control shall not
include (A) any event, circumstance, or transaction that results
from the action of any entity or group that includes, is
affiliated with, or is wholly or partly controlled by the Employee
(e.g., a management-led buyout) or (B) the repurchase by the
Company or the redemption, directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities.
7.3 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Executive
becomes entitled to Severance Benefits or any other payment or benefit under
this Agreement, or under any other agreement with or plan of the Company (in the
aggregate, the "Total Payments"), if any of the Total Payments will be subject
to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any
similar tax that may hereafter be imposed), the Company shall pay to the
Executive in cash an additional amount (the "Gross-Up Payment") such that the
net amount retained by the Executive after deduction of any Excise Tax upon the
Total Payments and any Federal, state and local income tax and Excise Tax upon
the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to the Executive as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.
7.4 TAX COMPUTATION. For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amounts of such Excise
Tax:
(a) Any other payments or benefits received or to be received by the
Executive in connection with a Change in Control of the Company or
the Executive's termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement, or
agreement with the Company, or with any person (which shall have
the meaning set forth in Section 3(a)(9) of the Securities
Exchange Act of 1934, including a "group" as defined in Section
13(d) therein) whose actions result in a Change in Control of the
Company or any person affiliated with the Company or such persons)
shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section
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280G(b)(1) shall be treated as subject to the Excise Tax, unless
in the opinion of tax counsel as supported by the Company's
independent auditors and acceptable to the Executive, such other
payments or benefits (in whole or in part) do not constitute
parachute payments, or unless such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the
Code in excess of the base amount within the meaning of Section
280G(b)(3) of the Code, or are otherwise not subject to the Excise
Tax;
(b) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of: (i) the total
amount of the Total Payments; or (ii) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) (after
applying clause (a) above); and
(c) The value of any noncash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay Federal income taxes at the highest marginal
rate of Federal income taxation in the calendar year in which the Gross-Up
Payment is to be made, and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's residence on the
effective date of termination, net of the maximum reduction in Federal income
taxes which could be obtained from deduction of such state and local taxes.
7.5 SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service adjusts the computation of the Company under Section 7.4 herein so that
the Executive did not receive the greatest net benefit, the Company shall
reimburse the Executive for the full amount necessary to make the Executive
whole, plus a market rate of interest, as determined by the Committee.
SECTION 8. NONCOMPETITION
8.1 PROHIBITION ON COMPETITION. Without the prior written consent of
the Company, during the term of this Agreement, and for the greater of twelve
(12) months following the expiration of this Agreement, or any other period in
which amounts are paid hereunder, the Executive shall not, as an employee or an
officer, engage directly or indirectly in any business or enterprise which is
"in competition" with the Company or its successors or assigns.
8.2 DISCLOSURE OF INFORMATION. The Executive recognizes that he has
access to and knowledge of certain confidential and proprietary information of
the Company which is essential to the performance of his duties under this
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Agreement. The Executive will not, during or after the term of his employment by
the Company, in whole or in part, disclose such information to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever,
nor shall he make use of any such information for his own purposes.
8.3 COVENANTS REGARDING OTHER EMPLOYEES. During the term of this
Agreement, and for a period of twenty four (24) months following the expiration
of this Agreement, the Executive agrees not to attempt to induce any employee of
the Company to terminate his or her employment with the Company, accept
employment with any competitor of the Company, or to interfere in a similar
manner with the business of the Company.
SECTION 9. INDEMNIFICATION
The Company hereby covenants and agrees to indemnify and hold harmless
the Executive fully, completely, and absolutely against and in respect to any
and all actions, suits, proceedings, claims, demands, judgments, costs, expenses
(including attorney's fees), losses, and damages resulting from the Executive's
good faith performance of his duties and obligations under the terms of this
Agreement.
SECTION 10. ASSIGNMENT
10.1. ASSIGNMENT BY COMPANY. This Agreement may and shall be assigned
or transferred to, and shall be binding upon and shall inure to the benefit of,
any successor of the Company, and any such successor shall be deemed substituted
for all purposes of the "Company" under the terms of this Agreement. As used in
this Agreement, the term "successor" shall mean any person, firm, corporation,
or business entity which at any time, whether by merger, purchase, or otherwise,
acquires all or essentially all of the assets of business of the Company.
Notwithstanding such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall immediately entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled in the
event of an involuntary termination by the Company, as provided in
Paragraph 6.6 herein.
Except as herein provided, this Agreement may not otherwise be
assigned by the Company.
10.2. ASSIGNMENT BY EXECUTIVE. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives,
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executors, and administrators, successors, heirs, distributees, devisees, and
legatees. If the Executive should die while any amounts payable to the Executive
hereunder remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, in the absence of such
designee, to the Executive's estate.
SECTION 11. DISPUTE RESOLUTION AND NOTICE
11.1. DISPUTE RESOLUTION. Any dispute arising under or in connection
with this Agreement shall be settled exclusively by arbitration.
Such proceeding shall be conducted before a panel of three (3)
arbitrators sitting in a location selected by the Executive within fifty (50)
miles from the location of his principal place of employment, in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the award of the arbitrator in any court having jurisdiction.
All expenses of such arbitration, including the reasonable fees and
expenses of the legal representation, and necessary costs and disbursements
incurred as a result of such dispute, and any prejudgment interest, shall be
borne by the unsuccessful party.
11.2. NOTICE. Any notices, requests, demands, or other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company or, in the case of the Company, at its principal
offices.
SECTION 12. MISCELLANEOUS
12.1. ENTIRE AGREEMENT. This Agreement supersedes the prior Employment
Agreement between the Company and the Executive dated August 1, 1993 (provided
that the Executive shall continue to be entitled to receive all amounts and
benefits accrued thereunder through the Effective Date) as well as all
negotiations or understandings, oral or written, between the Executive and the
Company, with respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect thereto. The parties acknowledge, however,
that there are various other prior agreements between them, which shall remain
unmodified and in full force and effect.
12.2. MODIFICATION. This Agreement shall not be varied, altered,
modified, canceled, changed, or in any way amended except by mutual agreement of
the parties in a written instrument executed by the parties hereto or their
legal representatives.
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12.3. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
12.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
12.5. TAX WITHHOLDING. The Company may withhold from any benefits
payable under this Agreement all Federal, state, city, or other taxes as may be
required pursuant to any law or govern-mental regulation or ruling.
12.6. BENEFICIARIES. The Executive may designate one or more persons
or entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement. Such designation must be in the form of a signed
writing acceptable to the Board or the Board's designee. The Executive may make
or change such designation at any time.
SECTION 13. GOVERNING LAW
To the extent not preempted by federal law, the provisions of this
Agreement shall be construed and enforced in accordance with the laws of the
state of California.
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IN WITNESS WHEREOF, the Executive and the Company (pursuant to a
resolution adopted at a duly constituted meeting of its Board of Directors) have
executed this Agreement, as of the day and year first above written.
Executive:
/s/XXXXX X. XXXXXXX, III
-----------------------------------------
Xxxxx X. Xxxxxxx, III
Smart & Final Inc.
ATTEST
By: /s/XXXXXX X. XXXXXXXX By: /s/XXXXXX X. XXXXXX
--------------------------- -------------------------------------
Corporate Secretary Xxxxxx X. Xxxxxx
Chairman of the Board of Directors
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