Employment Agreement for
Xxxx X. Xxxxxx
Circuit City Stores, Inc.
March 1 2002
Circuit City Stores, Inc.
Employment Agreement for Xxxx X. Xxxxxx
This EMPLOYMENT AGREEMENT is made, entered into, and is effective as of
the first day of March 2002 (the "Effective Date"), by and between Circuit City
Stores, Inc. (the "Company") and Xxxx X. Xxxxxx (the "Executive").WHEREAS, the
Company desires to employ the Executive as Executive Vice President & Chief
Operating Officer ("COO"); and
WHEREAS, the Company recognizes the Executive's intimate knowledge and
experience in the business of the Company, and desires to secure the employment
of the Executive in the role of COO of the Company.
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:
Article 1. Term of Employment
The Company hereby agrees to employ the Executive and the Executive hereby
accepts employment as COO of 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 herein.
The initial three (3) year period of employment automatically shall be
extended for one (1) additional year at the end of the initial three (3) year
term, and then again after each successive year thereafter. However, either
party may terminate this Agreement at the end of the initial three (3) year
period, or at the end of any successive one (1) year term thereafter, by giving
the other party written notice of intent not to renew, delivered at least three
(3) months prior to the end of the initial period or each successive term
thereafter. In the event of a Change in Control (as defined in Section 8.2) of
the Company, the term of this Agreement shall not be less than two (2) years
from the date of the Change in Control.
The Executive's employment period hereunder ("Employment Period") shall
begin on March 1, 2002 and end on March 1, 2005, on which its term expires by
reason of an election not to renew by the Company or the Executive ("Expiration
Date"), except that if Executive's employment is terminated on a date prior to
the Expiration Date ("Effective Date of Termination") pursuant to Article 6 or
Article 8 hereof, the Employment Period shall terminate on said date.
Article 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as COO of
the Company. In his capacity as COO of the Company, the Executive shall report
directly to the Chief Executive Officer and shall have the duties and
responsibilities of COO, and such other duties and responsibilities not
inconsistent with the performance of his duties as COO.
Article 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.
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 Article 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, nor will this article prohibit his serving on the board of directors of a
noncompeting company.
Article 4. Compensation and Benefits
As remuneration for all services to be rendered by the Executive during
the Employment Period, 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 and approved by the Compensation Committee of
the Board of Directors; provided, however, that such Base Salary shall not be
less than dollars $600,000 per year. This Base Salary shall be subject to all
appropriate federal and state withholding taxes and payable in accordance with
the normal payroll practices of the Company. The 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 Compensation
Committee, 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. In addition to his salary, the Executive shall be
entitled to participate in the Company's short-term incentive program, as such
program may exist from time to time, with bonus opportunities equal to a minimum
of 60% of Base Salary and commensurate with the position of COO, as determined
at the sole discretion of the Company's Compensation Committee. If so increased,
the Annual Bonus Rate as stated above shall, likewise, be increased for all
purposes of this Agreement.
4.3. Long-Term Incentives. The Executive shall be eligible to participate
in the Company's long-term incentive plan, to the extent that the Board of
Directors of the Company or the Compensation Committee, in their discretion,
determines is appropriate. The Board of Directors will make its determination
consistent with the methodology used by the Company for compensating its senior
management employees.
4.4. Retirement Benefits. The Company shall provide to the Executive
participation in all Company pension, insurance, fringe benefit, and executive
compensation plans and programs, subject to the eligibility and participation
requirements of such plans.
4.5. Employee Benefits. The Company shall provide to the Executive all
benefits, as commensurate with the position of COO, but at a minimum not less
than those provided by the Company to other senior executives subject to the
eligibility requirements and other provisions of such arrangements. Such
benefits may include group term life insurance, comprehensive health and major
medical insurance, dental and life insurance, and short-term and long-term
disability.
4.6. Perquisites. The Company shall provide to the Executive, at the
Company's cost, all perquisites, which are commensurate with the position of COO
but at a minimum not less than those provided by the Company to other senior
executives.
4.7. Right to Change Plans. By reason of Sections 4.5 and 4.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan or perquisite, so long as such
changes are similarly applicable to executive employees generally.
Article 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 in which the Executive's participation is in
the best interests of the Company.
Article 6. Employment Terminations
6.1. Termination Due to Retirement or Death. In the event the Executive's
employment is terminated while this Agreement is in force, by reason of
Retirement (defined as voluntary Normal Retirement under the then established
rules of the Company's tax-qualified retirement plan) or death, 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. In addition all stock grants, except performance based grants in
the case of retirement, will become immediately vested and may be exercised by
you, your personal representatives, distributees, legatees, or estate at any
time before the expiration date of the grant.
The Effective Date of Termination shall be ninety (90) days following the
date the Executive provides the Company with written notice that the Executive
is terminating employment by reason of Retirement or on the Executive's date of
death. Upon the Effective Date of Termination, the Company shall be obligated to
pay the Executive or, if applicable, the Executive's estate: (a) any salary that
was accrued but not yet paid as of the Effective Date of Termination; (b) the
unpaid Annual Bonus, if any, with respect to the calendar year preceding the
Effective Date of Termination (such Annual Bonus, if any, to be determined in
the manner it would have been determined and payable at the time it would have
been payable under Section 4.2 had there been no termination of the Employment
Period); (c) a pro rata share of target Annual Bonus for the calendar year in
which the Effective Date of Termination occurs (the calculation by which the
Annual Bonus is multiplied by a fraction, the numerator of which is the number
of full completed days in the bonus plan year through the Effective Date of
Termination, and the denominator of which is three hundred sixty-five (365));
and (d) all other rights and benefits that the Executive is vested in, pursuant
to other plans and programs of the Company
6.2. Termination Due to Disability. In the event that the Executive
terminates employment by reason of Disability (as defined below) during the term
of this Agreement and is, therefore, unable to perform his duties herein for
more than one hundred eighty (180) total calendar days during any period of
twelve (12) consecutive months, or in the event of the Chief Executive Officer's
reasonable expectation that the Executive's Disability will exist for more than
a period of one hundred eighty (180) calendar days, the Company shall have the
right to terminate the Executive's active employment as provided in this
Agreement.
The Effective Date of Termination shall be specified by the Chief
Executive Officer in a written notice that shall be delivered to the Executive
of the Company's intent to terminate for Disability, but shall be no less than
thirty (30) calendar days after the Chief Executive Officer delivers the written
notice to the Executive. Upon the Effective Date of Termination, the Company
shall be obligated to pay the Executive or, if applicable, the Executive's
estate: (a) any salary that was accrued but not yet paid as of the Effective
Date of Termination; (b) the unpaid Annual Bonus, if any, with respect to the
calendar year preceding the Effective Date of Termination (such Annual Bonus, if
any, to be determined in the manner it would have been determined and payable at
the time it would have been payable under Section 4.2 had there been no
termination of the Employment Period); (c) a pro rata share of target Annual
Bonus for the calendar year in which the Effective Date of Termination occurs
(the calculation by which the Annual Bonus is multiplied by a fraction, the
numerator of which is the number of full completed days in the bonus plan year
through the Effective Date of Termination, and the denominator of which is three
hundred sixty-five (365)); and (d) all other rights and benefits that the
Executive is vested in, pursuant to other plans and programs of the Company.
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 Article 2 herein, such
Disability to be determined by the Chief Executive Officer of the Company upon
receipt of and in reliance on competent medical advice from one (1) or more
individuals, selected by the Chief Executive Officer, who are qualified to give
such professional medical advice.
It is expressly understood that the Disability of the Executive for a
period of one hundred eighty (180) calendar days or less in the aggregate during
any period of twelve (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.
If your employment by the Company terminates because you become disabled
all of your outstanding stock grants, including performance based grants, will
become immediately vested, effective as of the date of your disability. Then,
you, your personal representatives, distributees, or legatees may exercise your
grants at any time before the expiration date of the grant.
6.3. Voluntary Termination by the Executive. The Executive may terminate
this Agreement at any time by giving the CEO of the Company written notice of
intent to terminate, delivered at least thirty (30) calendar days prior to the
Effective Date of Termination that is specified by the Executive in the written
notice. Upon the Effective Date of Termination, the Company shall pay the
Executive his full Base Salary, at the rate then in effect as provided in
Section 4.1 herein, through the Effective Date of Termination, plus all other
benefits to which the Executive has a vested right to at that time (for this
purpose, the Executive shall not be paid any Annual Bonus with respect to the
fiscal year in which voluntary termination under this Section 6.3 occurs). The
Company thereafter shall have no further obligations under this Agreement.
6.4. Involuntary Termination by the Company Without Cause. At all times
during the term of this Agreement, the Chief Executive Officer 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 to the Effective Date of Termination that is specified by
the Company in the written notice. In addition, the Company's unilateral
decision to refrain from renewing the term of this Agreement at the Expiration
Date shall be deemed an involuntary termination without Cause.
Upon the Effective Date of Termination, the Company shall pay to the
Executive an amount payable in equal monthly installments over the following
twenty-four (24) months equal to the product of two (2) times both the Base
Salary and the Executive's target Annual Bonus established for the fiscal year
in which the Executive's Effective Date of Termination occurs. The Company shall
also pay to the Executive the amount equal to a pro rata share of target Annual
Bonus for the calendar year in which the Effective Date of Termination occurs
(the calculation by which the Annual Bonus is multiplied by a fraction, the
numerator of which is the number of full completed days in the bonus plan year
through the Effective Date of Termination, and the denominator of which is three
hundred sixty-five (365). In addition, the Company shall continue, at the same
cost to the Executive as existed as of the Effective Date, all health, welfare,
and benefit plan participation for two (2) full years following employment
termination provided that the applicable COBRA health insurance benefit
continuation period shall begin as of the Effective Date of Termination. The
Company shall also provide the Executive with outplacement services not to
exceed a cost of fifty thousand dollars ($50,000).
a) Any unvested stock options or any outstanding restricted
stock, excluding restricted stock grants issued under a
performance based plan, that would become vested (that is,
transferable and nonforfeitable) if the Executive remained an
employee through the Term of this Agreement will become vested
as of the date of the Executive's termination of employment.
The Executive must satisfy the tax withholding requirements
described in Section 10 with respect to the restricted stock.
The Executive will be credited with age and service credit through the end
of the Term of this Agreement for purposes of computing benefits under the
Company's pension, medical and other benefit plans, and the Company will
continue the executive's coverage under the company's benefit plans as if the
executive remained employed through the end of the term of this agreement.
Service credited to the executive for purposes of the company's pension plans
pursuant to this subsection (ii) shall be in addition to any service credited to
the executive pursuant to section 5(c). Notwithstanding the foregoing, if the
company determines that giving such age and service credit or continued coverage
could adversely affect the tax qualification or tax treatment of a benefit plan,
or otherwise have adverse legal ramifications, the company may pay the executive
a lump sum cash amount that reasonably approximates the after-tax value to the
executive of such age and service credit and continued coverage through the end
of the term of this agreement, in lieu of giving such credit and continued
coverage.
The Company thereafter shall have no further obligations under this
Agreement.
6.5. Termination For Cause. Nothing in this Agreement shall be construed
to prevent the Company from terminating the Executive's employment under this
Agreement for "Cause."
"Cause" means the Executive's:
(a) Willful and continued failure to perform substantially the
Executive's duties with the Company after the Company delivers
to the Executive written demand for substantial performance
specifically identifying the manner in which the Executive has
not substantially performed the Executive's duties;
(b) Conviction for a felony;
(c) Willfully engaging in illegal conduct or gross misconduct
which is materially and demonstrably injurious to the Company
or
(d) Failure of the Employee to disclose to the Chief Executive
Officer a conflict of interest, of which he knew or, with
reasonable diligence, would have known, in connection with any
transaction entered into on behalf of the Company.
For purposes of this Section 6.5, no act or omission by the Executive
shall be considered "willful" unless it is done or omitted in bad faith or
without reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act or failure to act based upon advice of
counsel for the Company or Chief Executive Officer, shall be conclusively
presumed to be done or omitted to be done by the Executive in good faith and in
the best interests of the Company.
In the event this Agreement is terminated for Cause, the Company shall pay
the Executive his Base Salary through the Effective Date of 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 thereafter shall have no further obligations under
this Agreement.
6.6. 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 Chief Executive Officer 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.
The Effective Date of Termination shall occur upon the expiration of the
thirty (30) day notice period, and the Company shall pay and provide to the
Executive the benefits set forth in this Section 6.6.
Good Reason shall mean, without the Executive's express written consent,
the occurrence of any one (1) or more of the following:
(a) Assigning to the Executive duties inconsistent with the
Executive's position (including status, offices, titles, and
reporting requirements), authority, or responsibilities in effect
on the Effective Date of this Agreement, or any other action by
the Company which results in a diminution of the Executive's
position, authority, duties, or responsibilities as constituted as
of the Effective Date of this Agreement (excluding an isolated,
insubstantial, and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof if notice is given by Executive);
(b) Reducing the Executive's Base Salary;
(c) Failing to maintain the Executive's participation in the Company's
annual bonus and long-term incentive plan in a manner that is
consistent with the Executive's position, authority, or
responsibilities;
(d) Failing to maintain the Executive's amount of benefits under, or
relative level of participation in, the Company's employee benefit
or retirement plans, perquisites, policies, practices, or
arrangements in which the Executive participates as of the
Effective Date of this Agreement;
(e) Purportedly terminating the Executive's employment otherwise than
as expressly permitted by this Agreement; or
(f) Failing to comply with and satisfy Section 9.1 hereof by requiring
any successor to the Company to assume and agree to perform the
Company's obligations hereunder.
Upon the Effective Date of Termination, 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. Said payment shall commence within thirty (30)
calendar days following the Effective Date of Termination.
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.
Article 7. Noncompetition and Confidentiality
7.1. Noncompetition. During the Employment Period and for a period of two
(2) years after the Effective Date of Termination, the Executive shall not: (a)
directly or indirectly act in concert or conspire with any person employed by
the Company in order to engage in or prepare to engage in or to have a financial
or other interest in any business which is a Direct Competitor (as defined
below); or (b) serve as an employee, agent, partner, shareholder, director, or
consultant for, or in any other capacity participate, engage, or have a
financial or other interest in, any business which is a Direct Competitor
(provided, however, that notwithstanding anything to the contrary contained in
this Agreement, the Executive may own up to two percent (2%) of the outstanding
shares of the capital stock of a company whose securities are registered under
Section 12 of the Securities Exchange Act of 1934).
For purposes of this Agreement, the term "Direct Competitor" is any
business entity which: (a) through the Executive's efforts, induces the
Company's employees to terminate employment for the purpose of being employed by
such business entity; or (b) is engaged in the business of the Company and
engages in Substantial Competition with the Company in one or more Metropolitan
Statistical Areas ("MSAs") in which the Company has its operations, or in which,
at the date the Executive's employment terminates, the Company is engaged in
real estate site selection or has taken further steps toward the commencement of
operations in the future, either alone or in association with another entity,
and in which the Company collectively produced, or is projected to produce in
the first year of operations, more than five million dollars ($5,000,000) of
gross sales. A business will not be considered to be in "Substantial
Competition" with the Company if: (i) the business or the operating unit of the
business in which the Executive is employed or with which the Executive is
associated (the "Business Unit") is not engaged in the retail sales and service
of consumer electronics or (ii) if sales of the Business Unit's products or
services in the retail sales and service of consumer electronics constitute less
than ten percent (10%) of such Business Unit's sales; or (iii) if the sales of
the Business Unit in the retail sales and service of consumer electronics do
constitute more than ten percent (10%) of the sales of the Business Unit, but
there is not significant geographic overlap between such Business Unit's and the
Company's business locations.
In the event that the Executive's employment is terminated within two (2)
years following a Change in Control (as defined in Section 8.2), under
circumstances described in Section 8.3, the Executive shall not be bound by the
provisions of this section.
7.2. Confidentiality. The Company has advised the Executive and the
Executive acknowledges that it is the policy of the Company to maintain as
secret and confidential all Protected Information (as defined below), and that
Protected Information has been and will be developed at substantial cost and
effort to the Company. The Executive shall not at any time, directly or
indirectly, divulge, furnish, or make accessible to any person, firm,
corporation, association, or other entity (otherwise than as may be required in
the regular course of the Executive's employment), nor use in any manner, either
during the Employment Period or after the termination, for any reason, of the
Employment Period, any Protected Information, or cause any such information of
the Company to enter the public domain.
For purposes of this Agreement, "Protected Information" means trade
secrets, confidential and proprietary business information of the Company, and
any other information of the Company, including, but not limited to, customer
lists (including potential customers), sources of supply, processes, plans,
materials, pricing information, internal memoranda, marketing plans, internal
policies, and products and services which may be developed from time to time by
the Company and its agents or employees, including the Executive; provided,
however, that information that is in the public domain (other than as a result
of a breach of this Agreement), approved for release by the Company or lawfully
obtained from third parties who are not bound by a confidentiality agreement
with the Company, is not Protected Information.
7.3. Acknowledgement of Covenants. The parties hereto acknowledge that the
Executive's services are of a special, extraordinary, and intellectual character
which gives him unique value, and that the business of the Company and its
subsidiaries is highly competitive, and that violation of any of the covenants
provided in this Section 7 would cause immediate, immeasurable, and irreparable
harm, loss, and damage to the Company not adequately compensable by a monetary
award. The Executive acknowledges that the time, geographical area, and scope of
activity restrained by the provisions of this Section 7 are reasonable and do
not impose a greater restraint than is necessary to protect the goodwill of the
Company's business. The Executive further acknowledges that he and the Company
have negotiated and bargained for the terms of this Agreement and that the
Executive has received adequate consideration for entering into this Agreement.
In the event of any such breach or threatened breach by the Executive of any one
or more of such covenants, the Company shall be entitled to such equitable and
injunctive relief as may be available to restrain the Executive from violating
the provisions hereof. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available at law or in equity for such
breach or threatened breach, including the recovery of damages and the immediate
termination of the employment of the Executive hereunder.
7.4. Enforceability. If any court determines that the foregoing covenant,
or any part thereof, is unenforceable because of the duration or geographical
scope of such provision, or for any other reason, the duration or scope of such
provision, as the case may be, shall be reduced so that such provision becomes
enforceable and, in its reduced form, such provision shall then be enforceable
and shall be enforced.
Article 8. Change in Control
8.1. Change in Control. This Article 8 shall not become effective, and the
Company shall have no obligation hereunder, if the employment of the Executive
with the Company shall terminate prior to a Change in Control (as defined in
Section 8.2 below) of the Company.
8.2. Definition of Change in Control. Change in Control of the Company
means, and shall be deemed to have occurred upon, the first to occur of any of
the following events:
(a) The acquisition by any individual, entity, or group (a
"Person"), including a "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), but excluding an Affiliate
(as defined below) of the Company, of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of 15 percent (15%) or more of either: (i) the
then outstanding shares of common stock of the Circuit City
Group (the "Outstanding Common Stock"); or (ii) the combined
voting power of the then outstanding securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); excluding, however, the
following: (A) any acquisition directly from the Company
(excluding an acquisition resulting from the exercise of an
option, conversion right, or exchange privilege unless the
security being so exercised, converted or exchanged was
acquired directly from the Company); (B) any acquisition by
the Company; (C) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company; or (D) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii), and (iii) of subsection (c)
of this Section 8.2;
(b) Individuals who, as of the Effective Date, constitute the
Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board;
provided that any individual who becomes a director of the
Company subsequent to the Effective Date, whose election, or
nomination for election by the Company's stockholders, was
approved by the vote of at least a majority of the directors
then comprising the Incumbent Board shall be deemed a member
of the Incumbent Board; and provided further, that any
individual who was initially elected as a director of the
Company as a result of an actual or threatened election
contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf
of any Person other than the Board shall not be deemed a
member of the Incumbent Board;
(c) The consummation of a reorganization, merger or consolidation
of the Company or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate
Transaction"); excluding, however, a Corporate Transaction
pursuant to which: (i) all or substantially all of the
individuals or entities who are the beneficial owners,
respectively, of the Outstanding Common Stock and the
Outstanding Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or
indirectly, more than sixty percent (60%) of, respectively,
the outstanding shares of common stock, and the combined
voting power of the outstanding securities of such corporation
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a
corporation, which as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or indirectly) in substantially the same
proportions relative to each other as their ownership,
immediately prior to such Corporate Transaction, of the
Outstanding Common Stock and the Outstanding Voting
Securities, as the case may be; (ii) no Person (other than:
the Company; any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company; the corporation resulting from such
Corporate Transaction; and any Person which beneficially
owned, immediately prior to such Corporate Transaction,
directly or indirectly, twenty-five percent (25%) or more of
the Outstanding Common Stock or the Outstanding Voting
Securities, as the case may be) will beneficially own,
directly or indirectly, twenty-five percent (25%)or more of,
respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of
directors; and (iii) individuals who were members of the
Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation resulting
from such Corporate Transaction; or
(d) The consummation of a plan of complete liquidation,
dissolution, or sale of substantially all the assets of the
Company.
For purposes of this Article 8, "Affiliate" shall mean with reference to a
specified Person, any Person that directly or indirectly through one (1) or more
intermediaries controls or is controlled by or is under common control with the
specified Person. For purposes of this definition, "control" (including, with
correlative meaning, the terms "controlled by" and "under common control with"),
as used in respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of such Person, whether through ownership of voting securities or by
contract or otherwise.
8.3. Change-in-Control Severance Benefits. If at any time during the term
of this Agreement there is a Change in Control of the Company and the
Executive's employment is terminated for any reason other than death,
Disability, Retirement, Voluntary Termination (other than for Good Reason), or
Cause within two (2) years following the Change in Control [or the Executive
voluntarily terminates for any reason in the thirteenth month following a Change
in Control of the Company], the Company shall provide to the Executive the
following:
(a) Base Salary and all other benefits due him as if he had
remained an employee pursuant to Article 4 through the
remainder of the month in which the termination occurs, less
applicable withholding taxes and other authorized payroll
deductions;
(b) The amount equal to a pro rata share of target Annual Bonus
for the calendar year in which the Effective Date of
Termination occurs (the calculation by which the Annual Bonus
is multiplied by a fraction, the numerator of which is the
number of full completed days in the bonus plan year through
the Effective Date of Termination, and the denominator of
which is three hundred sixty-five (365);
(c) A lump-sum severance allowance in an amount which is equal to
the product of three (3) times both the Executive's Base
Salary at the rate in effect immediately prior to the
termination and the Executive's target Annual Bonus
established for the fiscal year in which the Executive's
termination of employment occurs;
(d) Continuation at the same cost to the Executive as existed as
of the Effective Date, of all health, welfare, and benefit
plan participation for three (3) full years following
employment termination, provided that the applicable COBRA
health insurance benefit continuation period shall begin as of
the Effective Date of Termination;
(e) Provision of outplacement services for the Executive not to
exceed a cost of fifty thousand dollars ($50,000); and
(f) A lump-sum payment equal to the three (3) year costs of
perquisites outlined in Section 4.6 above.
8.4. 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 excise 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 8.4 (including FICA and FUTA),
shall be equal to the Total Payments. The Company shall make such payment to the
Executive as soon as practicable following the Effective Date of Termination,
but in no event beyond thirty (30) days from such date.
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.
The Company's Compensation Committee shall determine, based upon the
advice of the Company's independent certified public accountants, whether any
payments or benefits hereunder are subject to the Excise Tax.
8.5. Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 8.4 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 Compensation Committee.
Article 9. Assignment
9.1. 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 substantially all of the assets or the 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 the agreement of any successor to be
bound by the terms of this 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 a termination of
employment for Good Reason as provided in Section 8.3 herein. Except as herein
provided, the Company may not otherwise assign this Agreement.
9.2. Assignment by Executive. The services to be provided by the Executive
to the Company hereunder are personal to the Executive, and the Executive's
duties may not be assigned by the Executive; provided, however, that this
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive dies 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.
Article 10. Dispute Resolution and Notice
10.1. Issue Resolution. Any disagreement between you and the Company
concerning anything covered by this Agreement or concerning other terms or
conditions of your employment or the termination of your employment will be
settled by final and binding arbitration pursuant to the Company's Associate
Issue Resolution Program. The Dispute Resolution Agreement and the Dispute
Resolution Rules and Procedures are incorporated herein by reference as if set
forth in full in this Agreement. The decision of the arbitrator will be final
and binding on both you and the Company and may be enforced in a court of
appropriate jurisdiction.
10.2. 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.
Article 11. Miscellaneous
11.1. Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto, with respect to the
subject matter hereof, and constitutes the entire agreement of the parties with
respect thereto. Without limiting the generality of the foregoing sentence, this
Agreement completely supersedes any and all prior employment agreements entered
into by and between the Company and the Executive, and all amendments thereto,
in their entirety.
11.2. 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.
11.3. 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.
11.4. Counterparts. This Agreement may be executed in one (1) 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.
11.5. 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 governmental regulation or ruling.
11.6. Beneficiaries. The Executive may designate one (1) 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 Chief Executive Officer. The Executive may make or
change such designation at any time.
11.7. Payment Obligation Absolute. The Company's obligation to make the
payments and the arrangement provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against the Executive or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or demand.
Each and every payment made hereunder by the Company shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive or from whomsoever may be entitled thereto, for any reasons
whatsoever.
The Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of
this Agreement, and the obtaining of any such other employment shall in no event
effect any reduction of the Company's obligations to make the payments and
arrangements required to be made under this Agreement; provided, however, that
continued health, welfare, and benefit plan participation pursuant to Section
6.4 or Section 8.3 herein shall be discontinued in the event the Executive
becomes eligible to receive substantially similar benefits from a successor
employer.
11.8. Contractual Rights to Benefits. This Agreement establishes and vests
in the Executive a contractual right to the benefits to which he is entitled
hereunder. However, nothing herein contained shall require or be deemed to
require, or prohibit or be deemed to prohibit, the Company to segregate,
earmark, or otherwise set aside any funds or other assets, in trust or
otherwise, to provide for any payments to be made or required hereunder.
Article 12. 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
Commonwealth of Virginia, without reference to Virginia's choice of law statutes
or decisions.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the Effective Date.
Circuit City Stores, Inc. Executive: Xxxx X. Xxxxxx
By: /s/ Xxxx X. Xxxxxx ____________________________
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Attest:
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