AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("AGREEMENT"), effective as
of October 2, 2000, by and between Petco Animal Supplies, Inc., a Delaware
corporation (the "COMPANY"), and Xxxxx X. Xxxxxx, an individual ("EXECUTIVE"),
amends and restates the Employment Agreement, entered into as of March 17, 1996,
by and between the Company and Executive.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall employ Executive, and Executive
accepts employment with the Company, upon the terms and conditions set forth
in this Agreement for the period beginning on the date of this Agreement and
ending as provided in Section 5 hereof (the "EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as
Chairman of the Board of Directors of the Company, President and Chief
Executive Officer of the Company, and shall have the normal duties,
responsibilities and authority commensurate with such positions. Executive's
services pursuant to this Agreement shall be performed primarily at the
Company's principal place of business in San Diego County, California, or at
such other facilities of the Company as the Company and Executive may agree
upon from time to time.
(b) During the Employment Period, Executive shall report to the
Board of Directors of the Company (the "BOARD") and Executive shall devote
Executive's reasonable best efforts and Executive's full business time and
attention (except for permitted vacation periods and reasonable periods of
illness or other incapacity) to the business and affairs of the Company during
the normal business hours of the executive offices of the Company; provided,
however, the foregoing shall not prevent Executive from making and expending
any time on passive personal investments, expending reasonable amounts of time
for educational or charitable activities and/or serving as a director on the
boards of the companies listed on EXHIBIT A attached hereto and any other
non-competing companies which shall not include companies involved in the
business of selling, retailing, producing, distributing, or marketing pet
food, pet supplies or other pet-related products or services. Executive shall
perform Executive's duties and responsibilities to the best of Executive's
abilities in a reasonably diligent, trustworthy, businesslike and efficient
manner.
3. BASE SALARY AND BENEFITS.
(a) During the Employment Period, Executive's annual base salary
shall be established annually by the Compensation Committee of the Board of
Directors, but shall in no event be less than $550,000 (the "BASE SALARY")
during each calendar year of the employment period, prorated for any partial
year, which salary shall be payable in regular installments in accordance with
the Company's general payroll practices, including those related to
withholding for taxes, insurance and similar items. In addition, during the
Employment Period or after such Employment Period, as appropriate, Executive
shall be entitled to participate in a Supplemental Executive Retirement
Program as summarized on EXHIBIT B hereto as well as to participate in all of
the Company's employee benefits plans and programs in accordance with their
terms and conditions, including, without limitation, any profit sharing, stock
option, incentive compensation, paid vacation, retirement, deferred
compensation, 401(k) match, investment plans, medical, dental, disability and
all other group or other insurance plans or benefits and other perquisite
plans and programs ("BENEFITS"). Without limiting the foregoing, Executive
shall be entitled to at least the level of Benefits provided to him on the
date hereof.
(b) During the Employment Period, the Company shall reimburse
Executive for all reasonable expenses incurred by Executive in the course of
performing Executive's duties under this Agreement that are consistent with
the Company's policies in effect from time to time with respect to travel,
entertainment and other business expenses, subject to the Company's
requirements with respect to reporting and documentation of such expenses.
Without limiting the foregoing, Executive shall be reimbursed for the costs of
first-class travel.
(c) During the Employment Period, the Company shall pay for or
reimburse Executive for all fees and reasonable expenses of Executive's
participation in professional organizations, trade associations or other
organizations reasonably related to Executive's position and responsibilities
as an officer of the Company.
(d) During the Employment Period, the Company shall provide
Executive with a suite of perquisites appropriate for a senior executive
officer, including but not limited to, a car allowance, life insurance
premiums, club membership, etc., provided that the aggregate cost of such
perquisites shall not exceed $100,000 per year, pro rated for partial years
occurring during the Employment Period.
(e) During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the Company's standard policy for
the Company's executives, but not to be less than five (5) weeks per year
PROVIDED, that Executive shall accrue no more than ten (10) weeks of unused
paid vacation.
(f) Executive's Base Salary shall be subject to review and
increase by the Compensation Committee at least once annually, in a manner and
amount consistent with past practice.
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(g) Upon the termination of the Employment Period, Executive or
Executive's representatives or beneficiaries, shall be entitled to purchase
his personal computer (desktop and/or laptop), printer, personal fax machine,
personal digital assistant, cellular telephone and luxury automobile used in
connection with the business for an aggregate purchase price of $1.00.
Executive shall be responsible for any taxes due with respect to such sale.
4. BONUSES. Executive shall be entitled to participate in the
Company's bonus plan(s) as in effect from time to time, the awards, terms,
targets and other conditions of which shall be designed to produce a bonus at
least as favorable to Executive as the bonus plans of the Company in effect on
the date hereof.
5. TERM.
(a) This Agreement shall become effective on the date
hereof.
(b) The Employment Period under this Agreement shall terminate
upon the earliest to occur of the following events (the date specified in each
such event is referred to as the "TERMINATION DATE"):
i. the third anniversary of the date hereof;
PROVIDED, HOWEVER, that, subject to the
provisions of this Section 5(b), the term
of this Agreement shall automatically be
extended from day to day so that it always
has a remaining term (the "REMAINING TERM")
of three years; PROVIDED, that such renewal
shall cease following written notice (a
"Notice") from the Company to the
Executive, in which case the Remaining Term
shall be three years following the
effective date of such notice, and that
this Agreement shall terminate on the third
anniversary of the effective date of such
notice, PROVIDED, FURTHER, that the Company
shall not deliver a Notice within 6 months
following the Effective Time (as defined in
the Merger Agreement);
ii. the date upon which the Company terminates the
Executive's employment by the Company for Cause or
without Cause, PROVIDED, that such termination shall be
effective following written notice of such event in
which case the Termination Date shall be the effective
date contained in such notice;
iii. the date of the Executive's death;
iv. the date upon which the Company terminates
Executive's employment with the Company as
a result of Executive's Disability,
PROVIDED, that such termination shall be
effective
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following written notice of such event from the
Executive to the Company or from the Company to the
Executive, in which case the Termination Date shall be
the effective date contained in such notice; or
v. the date upon which Executive effects a Voluntary
Termination with or without Good Reason, PROVIDED, that
such termination shall be effective following written
notice of such event, in which case the Termination Date
shall be the effective date contained in such notice.
(c) If the Employment Period is terminated without Cause by the
Company or by Executive with Good Reason, Executive shall be entitled to
receive his Base Salary (determined in accordance with Section 3(a)) for a
period of 36 months from Executive's Termination Date (the "SEVERANCE PERIOD")
and an amount equal to the Executive's highest bonus for a single fiscal year
in the five fiscal years immediately preceding the Termination Date, which
amount shall be paid ratably on an annual basis over the Severance Period.
(d) Notwithstanding the foregoing:
(1) If the Employment Period is terminated by the Company for
Cause or is terminated as a result of Executive's resignation without Good
Reason, Executive shall receive such compensation and Benefits as Executive is
entitled to as of such date.
(2) If the Employment Period is terminated by the Company for
failure to meet the minimum performance objectives set forth in EXHIBIT C hereto
and, at the time of such termination, the Company shall not otherwise be
entitled to terminate Executive's employment for Cause, in addition to any
compensation and Benefits to which Executive is entitled to as of such
Termination Date, Executive shall be entitled to receive his Base Salary for a
period of 18 months from Executive's Termination Date, which amount shall be
paid ratably on an annual basis over such 18-month period.
(e) If the Employment Period is terminated as a result of
Executive's death or Disability, Executive or Executive's representatives or
beneficiaries shall be entitled to receive (i) compensation and Benefits
Executive is entitled to as of the Termination Date, and (ii) an amount, which
shall be paid ratably on an annual basis over the Severance Period, equal to
the Executive's highest bonus for a single fiscal year in the five fiscal
years immediately preceding the Termination Date. If the Employment Period is
terminated by reason of Executive's death or Disability, the Company shall
keep in force existing health insurance covering Executive and his dependents
for the Severance Period on the basis in effect at the termination date.
Executive and his dependents shall also be entitled to any continuation of
coverage rights under any applicable law.
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(f) The amount of Base Salary payable pursuant to Section 5(c),
shall be payable in accordance with the Company's normal payroll practices and
procedures applied to Executive as if he remained an employee of the Company.
The amount of Base Salary payable pursuant to Section 5(e) shall be paid in a
lump sum within 30 days following the termination of the Employment Period and
all other compensation and Benefits, if any, will be payable in accordance
with the Company's normal practices and procedures or otherwise as required by
applicable law.
(g) All of Executive's rights to any other employee benefit
hereunder (except as described above or pursuant to law) accruing after the
termination of the Employment Period shall cease upon such termination. Upon
termination of his employment for any reason whatsoever, Executive or
Executive's representatives or beneficiaries shall have the right to receive
payment for any accrued but unused vacation time and any and all Benefits (to
the extent required by the terms of such Benefits) due Executive pursuant to
Section 3 as of the Termination Date. This Section 5(g) shall have no effect
on Executive's equity ownership (including stock options) in the Company,
which shall be governed by the terms of such equity ownership and of a
Stockholders Agreement between Executive, the Company and certain other
parties.
(h) If the Executive's employment described herein is
terminated, the Executive shall have no duty to mitigate his damages or seek
other employment, and the Company shall have no right to offset any amounts
which are paid to or earned by Executive from other employment obtained by
Executive (including self-employment), except for employment obtained by
Executive which is inconsistent with the provisions of Section 8 of this
Agreement, against any amounts which are payable to Executive pursuant to this
Agreement.
(i) At Executive's own expense, Executive and Executive's
dependants shall also be entitled to any continuation of health insurance
coverage rights after his termination of employment under any applicable law;
PROVIDED, HOWEVER, that in the event of the termination of Executive's
employment with the Company without Cause or by Executive for Good Reason,
Executive's health and life insurance coverage shall be provided at the
Company's expense for three (3) years after Executive's date of termination on
the same basis as for other senior management employees of the Company,
including the same employee contributions and co-payments which are required
for other senior management employees.
(j) Upon the termination of Executive's employment by the
Company without Cause or by the Executive for Good Reason within twelve months
following the occurrence of a Change of Control, (i) Executive shall be
entitled to receive his Base Salary (determined in accordance with Section
3(a)) for the Severance Period and an amount equal to three times the
Executive's average annual bonus for the three fiscal years immediately
preceding the Termination Date, which amounts shall be payable in a lump sum
at the time of termination, (ii) all of Executive's unvested or restricted (a)
shares of common stock of the Company, (b) options to acquire shares of common
stock of the Company and (c) other equity
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interests of the Company shall immediately vest or the restrictions thereon
shall immediately lapse, as applicable, and such shares, options and other
equity interests shall become immediately exercisable, (iii) the Company's
Call Option (as defined in the Stockholders Agreement) shall lapse as to all
of Executive's shares, options or other equity interests of the Company, and
(iv) this Agreement shall remain in full force and effect, and shall be
binding upon any and all successors and assigns on the Company, unless
otherwise agreed to by Executive, in writing.
(k) Upon the termination of Executive's employment by the
Company for Cause or by the Executive without Good Reason within twelve months
following the occurrence of a Change of Control, (i) Executive shall be
entitled to receive his Base Salary (determined in accordance with Section
3(a)) for the Severance Period and an amount equal to the highest bonus paid
to Executive for a single fiscal year for the five fiscal years immediately
preceding the Termination Date, which amounts shall be payable in a lump sum
at the time of termination, (ii) all of Executive's unvested or restricted (a)
shares of common stock of the Company, (b) options to acquire shares of Common
Stock of the Company and (c) other equity interests of the Company shall
immediately vest or the restrictions thereon shall immediately lapse, as
applicable, and such shares, options and other equity interests shall become
immediately exercisable, (iii) the Company's Call Option (as defined in the
Stockholders Agreement) shall lapse as to all of Executive's shares, options
or other equity interests of the Company, and (iv) this Agreement shall remain
in full force and effect, and shall be binding upon any and all successors and
assigns on the Company, unless otherwise agreed to by Executive, in writing.
(l) Executive acknowledges that pursuant to the terms of the
Waiver of Certain Change in Control Benefits, which is attached hereto as
ANNEX A, benefits payable under this Agreement are contingent upon the
approval of the Company's Stockholders and that, if such stockholder approval
is not received, Executive will not be entitled to receive such benefits. In
the event such stockholder approval is received and it is nonetheless
determined that any payment or distribution (including benefits and
acceleration of vesting of options) which is made by the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of the Agreement or otherwise (a "PAYMENT") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"EXCISE TAX"), the Company shall make a payment (a "Gross-Up Payment") to or
for the benefit of Executive in an amount such that, after payment by
Executive of all income or other taxes (and any interest and penalties imposed
with respect thereto) imposed on the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment sufficient to pay the Excise Tax imposed on the
Payments.
(m) For purposes of the Agreement, "CAUSE" shall mean (i) the
conviction of any act (other than a traffic offense) constituting a felony
under the laws of any state or of the United States, involving moral turpitude
and having a direct, substantial and adverse effect on
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the Company, or (ii) willful misconduct by Executive, but only if Executive
shall not have discontinued such misconduct within 10 days after receiving
written notice from the Company describing the misconduct and stating that the
Company will consider the continuation of such misconduct as cause for
termination of this Agreement, or (iii) substantial failure to perform the
duties required by Section 2(a) hereof (other than as a result of physical or
mental illness) which is not cured within 10 days after receiving written
notice from the Company describing the failure to perform and stating that the
Company will consider the continuation of such failure to perform as cause for
termination of this Agreement PROVIDED, HOWEVER, that the failure of the
Company to achieve projected or budgeted results at any time or from time (as
provided in Section 5(d)(2)) to time shall not be a basis for termination for
Cause. Notwithstanding the foregoing, termination by the Company for Cause
shall not be effective until and unless the Board has voted (at a meeting of
the Board duly called and held as to which termination of the Executive is an
agenda item) by a majority vote to terminate the Executive for Cause after
Executive has been given notice of particular acts or circumstances which are
the basis for the termination for Cause and the Executive has been afforded at
least seven (7) days notice of the meeting and an opportunity to be heard at
the meeting and to present his position and the Board has given notice of
termination to the Executive within seven (7) days after such meeting.
(n) For purposes of the Agreement, "DISABILITY" means an
inability by the Executive to perform a substantial portion of the Executive's
duties by reason of physical or mental incapacity or disability for a total of
ninety (90) days or more in any consecutive period of three hundred and
sixty-five (365) days, as determined by the reasonable judgment of a physician
selected by the Executive and reasonably acceptable to the Company.
(o) For purposes of the Agreement, "GOOD REASON" shall mean the
occurrence, without the express written consent of Executive, of any of the
following events: (i) a reduction or adverse change in, or a change which is
inconsistent with, the Executive's responsibilities, duties, authority,
reporting power, functions, title, working conditions or status as provided
herein, including without limitation, the appointment of any employee to an
executive position at the Company or its successor, the responsibilities and
duties of which are substantially similar to those of the Executive or any
transfer of material responsibilities of Executive to a subsidiary which has
substantially the same effect as such an appointment, or after the date
hereof, the failure to offer to appoint or continue the Executive as chief
executive officer or co-chief executive officer of any company which acquires
the Company, and as the Chief Executive Officer or co-Chief Executive Officer
of the ultimate parent company which is in the same line of business as the
Company and which is within the meaning of Section 414(b) of the Code, a
member of a controlled group of corporations of which the Company is a member,
and which directly or indirectly controls the Company, provided that Executive
agrees to relocate his place of employment to the principal executive office
of such ultimate parent company of the Company; (ii) a material breach by the
Company of the compensation provisions of Section 3 hereof which is not cured
within 5 business days of the written notice of such breach; (iii) the
relocation of the Executive's own office to a location more than 50 miles from
its present location or outside the County of San Diego, California without
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Executive's prior written consent; or (iv) the failure of the Company to
obtain the assumption in writing of its obligation to perform this Agreement
by any successor to all or substantially all of the assets of the Company
within 60 days after a merger, consolidation, sale or similar transaction,
unless such assumption occurs by operation of law.
(p) For purposes of this Agreement, "VOLUNTARY TERMINATION"
shall mean the voluntary termination by Executive of Executive's employment
with the Company by voluntary resignation or any other means, including
without Good Reason or for Good Reason (other than (i) death, Disability, or
(ii) any other termination that would become effective simultaneously with or
following the earlier of (c) the effective date of a termination for Cause or
(y) the occurrence of an event, which if known to the Company at the time of
such voluntary termination by Executive, would give the Company the right to
terminate the Executive for Cause).
(q) For purposes of this Agreement, "CHANGE IN CONTROL" shall be
deemed to have occurred if any person or any persons acting together that
would constitute a group (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) (other than B.D. Recapitalization Holdings
LLC, its members and its co-investors ("BUYER") or their affiliates or a group
in which Buyer or its affiliates are the controlling participants) shall
beneficially own at least 50% of the aggregate voting power of all classes of
capital stock (including shares convertible into voting securities) entitled
to vote generally on the election of directors to the Board. Notwithstanding
the foregoing, a Change in Control shall not include any event, circumstance
or transaction which results from the action of any entity or group which
includes, is affiliated with or is wholly or partly controlled by Executive (a
"MANAGEMENT GROUP"). Without limiting the foregoing, any sale of substantially
all of the Company's assets to another entity (other than an entity associated
with the Management Group) without an express assumption by such entity of the
Company's obligations under this Agreement shall be deemed to constitute
termination without Cause pursuant to Section 5(c) above and the Company shall
be obligated to make the specified payments pursuant to Section 5(c) upon
consummation of the transaction pursuant to which the Company is selling
substantially all of its assets.
6. CONFIDENTIAL INFORMATION. As used herein, the term "CONFIDENTIAL
INFORMATION" shall mean all information disclosed to Executive or known by
Executive as a consequence of or through Executive's employment by the Company
(including, without limitation, information belonging to third parties or
companies affiliated with or related to the Company in the Company's
possession) not generally known in the trade or industry in which such
information is used, about the Company's products, processes, services,
customers, marketing strategy and business plans. Executive agrees that,
except as required in the performance of his duties or by law or to the extent
required to enforce his rights hereunder, Executive shall not disclose to any
unauthorized person or use for Executive's own account any Confidential
Information without the prior written consent of the Board, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Executive's acts or omissions
to act. Executive shall deliver to
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the Company at the termination of the Employment Period, or at any other time
as the Company may request, all memoranda, notes, plans, records, computer
tapes and software and other documents and data (and copies thereof) relating
to the Confidential Information or the business of the Company which Executive
may then possess or have under Executive's control. In the performance of his
duties, Executive has previously had, and may be expected in the future to
have, access to confidential or proprietary information with respect to third
parties which is subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes (the "THIRD-PARTY INFORMATION"). Except in the performance of his
duties to the Company, Executive shall not, during the Employment Period and
at all times thereafter, directly or indirectly for any reason whatsoever,
disclose or use any such Third-Party Information. For purposes of this Section
6, "COMPANY" includes the Company and any of its subsidiaries.
7. NON-SOLICITATION. During the term of this Agreement and for a
period of one (1) year thereafter, Executive shall not directly or indirectly
through another entity (A) induce or attempt to induce any employee (excluding
(i) employees junior to regional managers, and (ii) Xxxxx Xxxxx) of the
Company or any subsidiary to leave the employ of the Company or such
subsidiary or (B) hire any person who was an employee (excluding (i) employees
junior to regional managers, and (ii) Xxxxx Xxxxx) of the Company or any
subsidiary of the Company at any time during the Employment Period if such
person was employed by the Company or a direct or indirect subsidiary of the
Company at any time during the one-year period prior to such hiring; PROVIDED,
HOWEVER, the Executive may solicit or hire any person if such person is no
longer employed by, and has not been employed within the last three (3) months
by the Company. In addition, during the period ending on the first anniversary
of the termination of Executive's employment (the "NON-INTERFERENCE PERIOD"),
Executive shall not, directly or indirectly through another entity, induce or
attempt to induce any customer, supplier, licensee or other business relation
of the Company or any subsidiary to withdraw, modify, curtail or cease doing
business with the Company or such subsidiary.
8. NONCOMPETITION. During the Employment Period, Executive will not,
directly or indirectly, engage in the business of selling, retailing, producing,
distributing, or marketing pet food, pet supplies or other pet-related products
(the "COMPANY BUSINESS") anywhere in the states of the United States. Executive
will be deemed to be engaged in the Company Business if he engages in the
Company Business directly as an employee or consultant, or owns, manages,
operates, joins or controls or participates in the ownership, management or
control of any other entity which is engaged in the Company Business, provided,
however, that Executive will not be deemed to engage in any of the businesses of
any publicly-traded corporation solely by reason of his passive ownership of
less than 5% of the outstanding stock of such entity.
9. ENFORCEMENT. If, at the time of enforcement of Sections 7 or 8 of
this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
Because Executive's services are unique and because Executive has
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access to Confidential Information, the parties hereto agree that money
damages would be an inadequate remedy for any breach of this Agreement.
Therefore, in the event of a breach or threatened breach of this Agreement,
the Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to
enforce, or prevent any violations of the provisions hereof (without posting a
bond or other security).
10. REPRESENTATIONS.
(a) Executive hereby represents and warrants to the Company that
as of the date hereof (i) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which Executive is bound; (ii)
Executive is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any other person or entity and
(iii) upon the execution and delivery of this Agreement by the Company, this
Agreement shall be the valid and binding obligation of Executive, enforceable
in accordance with its terms, subject to applicable law.
(b) Company hereby represents and warrants to Executive that as of
the date hereof (i) the execution, delivery and performance of this Agreement by
the Company does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which the Company is a party or by which the Company is bound, and (ii) upon the
execution and delivery of this Agreement by Executive, this Agreement shall be
the valid and binding obligation of the Company, enforceable in accordance with
its terms.
11. PETOPIA REPURCHASE. Upon written request by Executive to the
Company, to the extent permitted by applicable law, the Company or its
nominees shall purchase all or any portion of the shares, options or other
equity interests owned by Executive in Xxxxxxx.xxx, Inc. (the "PETOPIA
SHARES") at a purchase price equal to Executive"s purchase price for such
Petopia Shares; PROVIDED, HOWEVER, that the purchase price for any Petopia
Shares purchased pursuant to this Section 11 shall be offset by any
indebtedness owed by the Executive to the Company at the time of such
purchase. If the Employment Period is terminated by the Company for Cause or
by Executive without Good Reason, such written request shall be delivered to
the Company on or prior to 90 days following the Termination Date.
12. INDEMNIFICATION. The Company agrees to indemnify and defend
Executive to the fullest extent permitted by law, the Company's Certificate of
Incorporation and the Company's Bylaws as in effect on the date hereof and as
amended thereafter, but in no event less favorable to Executive than those in
effect on the date hereof against expenses (including attorneys' fees and
expenses), judgments, claims, fines and amounts paid in settlement actually
and reasonably incurred by Executive in connection with such actions, suits or
proceedings to which Executive is, or is threatened to be made, a party by
reason of the fact that Executive is
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or was a director or officer of the Company, Holding or any of their
affiliates, including without limitation, the class action lawsuits filed in
the United States District Court for the Southern District of California
between August and November, 1999, as explained in the Company"s Annual Report
on Form 10-K, filed with the United States Securities and Exchange Commission
on April 13, 2000. The indemnification pursuant to the foregoing sentence
shall be the equivalent of indemnification provided to all directors and
officers as a group and shall not be deemed to be any greater than that
provided to all of the Company's directors and officers as a group. The
Company will use its commercially reasonable efforts to obtain any directors'
and officers' liability insurance covering all directors and officers as a
group and to the extent Executive continues to serve as an officer of the
Company, the Company shall cause Executive to be named as an insured party
under such policy. This section shall survive for 6 years following
termination of the Employment Period.
13. CONSULTING AGREEMENT. Upon the termination of this Agreement in
accordance with its terms (other than a termination by the Company for Cause
or for failure to meet the minimum performance objectives set forth in EXHIBIT
C hereto or by Executive without Good Reason), the Company and the Executive
shall enter in the Consulting Agreement, attached hereto as EXHIBIT D.
14. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, the Company and its
respective heirs, successors and assigns, except that Executive may not assign
Executive's rights or delegate Executive's obligations hereunder without the
prior written consent of the Company. Without limiting the foregoing, the
Company may not, without Executive's prior written consent, assign rights or
delegate its obligations under this Agreement.
15. SURVIVAL. Sections 6, 7, 9, 10, 11, 12, 16, 17, 20, 21, 22 and 23
shall survive and continue in full force in accordance with their terms,
notwithstanding any termination of the Employment Period.
16. NOTICES Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered by a nationally recognized
overnight courier service, or mailed by certified mail, return receipt
requested, to the recipient at the address indicated below.
NOTICES TO EXECUTIVE:
Xxxxx X. Xxxxxx
c/o Petco Animal Supplies, Inc.
0000 Xxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxx & Xxxxx LLP
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000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Lorne, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
NOTICES TO THE COMPANY:
Petco Animal Supplies, Inc.
c/o Xxxxxxx Xxxxx & Partners, L.P.
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or such other address or to the attention of such person as the recipient party
shall have specified by prior written notice to the sending party. Any notice
under this Agreement will be deemed to have been given when so delivered or
mailed. Any notice of termination of Executive's employment by the Company shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
17. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in
any jurisdiction, such invalidity, illegality or unenforceability will
12
be re-formed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
18. COMPLETE AGREEMENT. This Agreement embodies the complete agreement
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
19. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
20. CHOICE OF LAW. This Agreement will be governed by and construed
in accordance with the internal laws of the State of California, regardless of
the choice of laws provisions of such state or any other jurisdiction.
21. AGREEMENT TO ARBITRATE; EXPENSES. Except for the enforcement of
any covenant herein that would be the subject of specific performance
contemplated by Section 9, any controversy or claim arising out of or relating
to this Agreement or the formation, breach or interpretation hereof, will be
settled by arbitration before one arbitrator in accordance with the Rules for
the Resolution of Employment Disputes of the American Arbitration Association
in San Diego County, California. Judgment upon the award rendered by the
arbitration may be entered and enforced in the court with jurisdiction over
the appropriate party. All controversies not subject to arbitration or
contesting any arbitration will be litigated in the State of California, San
Diego County Superior Court or a federal court in the Southern District of
California (and each of the parties hereto hereby consent to the exclusive
jurisdiction of such courts and waive any objections thereto). The expenses
(including reasonable attorneys' fees) incurred by the prevailing party in any
arbitration or litigation related to this Agreement shall be borne by the
non-prevailing party in such arbitration or litigation.
22. AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
23. WITHHOLDING TAXES. The Company shall withhold any and all United
States Federal, state, local and other taxes required to be withheld in
connection with Executive's employment with the Company and this Agreement and
the Executive shall indemnify the Company for all such amounts.
13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
date first written above.
PETCO ANIMAL SUPPLIES, INC.
By: /s/ XXXXX X. XXXXX
----------------------------
Name XXXXX X. XXXXX
---------------------------
Title Senior Vice President and
Chief Financial Officer
--------------------------
Xxxxx X. Xxxxxx
/s/ XXXXX X. XXXXXX
-------------------------------
14
ANNEX A
WAIVER OF CERTAIN CHANGE IN CONTROL BENEFITS
WHEREAS, the Company and Executive have agreed that upon the Closing
of the Agreement and Plan of Merger by and between Petco Animal Supplies,
Inc. (the "Company") and BD Recapitalization Corp., (the "Merger Agreement"),
the Company and I will enter into the Employment Agreement of which this
Exhibit is a part, which agreement provides for:
(i) the severance payments under certain circumstances,
(ii) the accelerated vesting of certain stock options and other
equity based awards, and
(iii) other benefits that may be treated as "parachute payments"
within the meaning of Section 280G of the Code subject to the excise tax
under Section 4999 of the Code, with the payments provided for thereunder
being referred to herein as the "Payments";
WHEREAS, I understand that upon or following a Change in Control of
the Company, some portion of the value of the Payments may be treated as
parachute payments;
WHEREAS, I understand that, in general, if the aggregate amount of
such parachute payments exceeds 2.99 times my "base amount," as defined in
Code Section 280G (the "Safe Harbor Amount"), I will be subject to an excise
tax imposed under Section 4999 of the Code, in an amount equal to 20% of the
excess of such aggregate parachute payments over one times my "base amount,"
and under Code Section 280G, the Company will not be able to deduct any portion
of the value of such parachute payments in excess of one times my "base amount";
WHEREAS, the Treasury Regulations under Code Section 280G provide,
subject to certain conditions, that payments made pursuant to a change in
effective control or ownership of a privately held corporation will not be
treated as parachute payments if (i) such payments are approved by a vote of
at least 75% of the corporation's stockholders immediately before the change
and (ii) such vote determines the right of the recipient to receive or retain
such payments; and
WHEREAS, the Company, promptly following the Effective Time (as
defined in the Merger Agreement), intends to seek to obtain the approval of
its stockholders of the Payments to the extent such payments would exceed my
Safe Harbor Amount.
NOW, THEREFORE, (i) effective as of the date hereof, (ii) subject to
the closing of the Merger (as defined in the Merger Agreement) and the Terms
and Conditions of Waiver set forth on Appendix A attached hereto, and (iii)
applicable only with respect to the
15
Merger (as defined in the Merger Agreement), I hereby voluntarily and
irrevocably waive, for no separate monetary consideration and with full
knowledge of the effects thereof, such portion of the Payments as shall be
necessary to provide that my aggregate parachute payments in respect of the
Employment Agreement, as reasonably determined by the Company, in
consultation with its independent auditors and tax counsel, in accordance
with Code Section 280G and the applicable rules and regulations thereunder,
shall equal my Safe Harbor Amount; provided, that if at any time on or after
the date hereof the Payments are approved by a vote of at least 75 percent of
the Company's stockholders, then this waiver shall be of no further force or
effect and the Payments shall be paid in full when due in accordance with the
terms of the Employment Agreement.
I hereby acknowledge that I have had the opportunity to review this
Waiver with counsel of my choosing.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of
the day of _____, 2000.
/s/ XXXXX X. XXXXXX
---------------------------------
Xxxxx X. Xxxxxx
Acknowledged and accepted as of the ______ day of ____, 2000, by
PETCO ANIMAL SUPPLIES, INC.
By: XXXXX X. XXXXX
----------------------------
Its: Senior Vice President and
Chief Financial Officer
----------------------------
16
SPOUSAL CONSENT
The undersigned, Xxxxxxx Xxxxxx, represents that she has reviewed
the attached "Waiver of Change in Control Acceleration of Benefits" and
"Terms and Conditions of Waiver" of his spouse, and hereby acknowledges the
effects of and voluntarily consents to such waiver as of the day of
September, 2000. The undersigned acknowledges that she has had the
opportunity to review the Spousal Consent with counsel of her choosing.
/s/ XXXXXXX XXXXXX
-------------------------------
Xxxxxxx Xxxxxx
17
APPENDIX A: TERMS AND CONDITIONS OF WAIVER
In connection with and as a condition of the attached Waiver of
Change in Control Acceleration of Benefits, the undersigned hereby represents,
warrants, covenants, agrees, understands and acknowledges the following:
1. Although the Company has provided me (i) certain sample materials
relating to the potential effects under Code Sections 280G and 4999 of the
Payments in connection with the Merger Agreement and (ii) the opportunity to ask
questions of the Company and its independent auditors and tax counsel regarding
such acceleration and effects, nonetheless, in making my decision as to whether
or not to waive any portion of the Payments, I have not relied in whole or in
part on any statements or advice provided by the Company or any of its officers,
directors, employees, agents or consultants. My decision to make the waiver set
forth herein is solely the result of my own analysis of these issues, in
consultation with my personal financial, tax, accounting and/or legal advisors.
2. I understand that (i) the actual parachute payment calculations will
be performed by the Company in consultation with its independent auditors and
tax counsel and (ii) the determination as to the extent to which Payments
will need to be waived will be made by the Company based upon the advice of
such auditors and tax counsel.
I agree to be irreparably bound by the determinations of the Company
and such auditors and tax counsel in this regard.
3. I further acknowledge that there is a significant degree of
uncertainty under existing law and regulatory authority as to the
calculations to be performed under Code Section 280G in connection with the
determination of the amount of my "parachute payments" and the extent to
which the Payments may need to be waived in order to provide that the
aggregate value of the Payments will not exceed my Safe Harbor Amount, and
that accordingly there can be no assurance that the Internal Revenue Service
will agree with the calculations and waiver determinations made by the
Company and its independent auditors and tax counsel, or that any waiver
provided for hereunder will have the result of avoiding the excise tax under
Section 4999 of the Code.
In consideration of the foregoing, the undersigned hereby forever
releases and discharges the Company, KPMG Peat Marwick, Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP and each of their respective Affiliates (as such term is
defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as
amended), and each of their respective past and present partners, principals,
officers, directors, stockholders, managers, employees, agents, representatives,
successors and assigns (collectively, "Released Parties") from any and all
claims, charges, complaints, liens, demands, causes of action, obligations,
damages and liabilities, known or unknown, suspected or unsuspected, that the
undersigned had, now has, or may hereafter claim to have against any of the
Released Parties, arising out of or relating in any way connected with the
matters that are the subject of this Waiver of Change in Control
18
Acceleration of Benefits (the "Released Claims"), including without
limitation matters relating to the calculations to be performed in
determining the potential amount of my "parachute payments" and the
assumptions made in performing such calculations.
The undersigned expressly waives under Section 1542 of the Civil
Code of the State of California ("Section 1542") all rights with respect to the
Released Claims with respect to each of the Released Parties. Section 1542
states as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
The undersigned hereby acknowledges that he has had the opportunity
to review this Waiver with counsel of his choosing.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of
the _____ day of _______, 2000.
/s/ XXXXX X. XXXXXX
------------------------------
Xxxxx X. Xxxxxx
19
EXHIBIT A
DESIGNATED PERMITTED BOARDS
Xxxxxxx.xxx, Inc.
Wild Oats Markets, Inc.
20
EXHIBIT B
SERP
Term: 20 years
Benefit: 50% of Salary (not Bonus)
Is reduced by any payments received under any other qualified plans other
than qualified plans that are 401(k) plans.
Is reduced by any payments provided for in the Consulting Agreement
(regardless of whether such amounts are actually paid).
Available to Executive regardless of whether Executive's employment is
terminated by the Company with or without Cause or for failure to meet the
minimum performance objectives set forth on Exhibit C, or by Executive with or
without Good Reason.
21
EXHIBIT C
PERFORMANCE CRITERIA
1. EBITDA (as defined in the Credit Agreement among Petco Animal Supplies,
Inc., the Lenders parties thereto, and Union Bank of California, N.A.,
as Agent, dated as of July 15, 1999, as such agreement may be amended,
restated, supplemented, renewed, replaced or otherwise modified from time
to time whether or not with the same agent or lenders, and irrespective
of any changes in the terms and conditions thereof in any one fiscal year
of at least $80 million.
22
EXHIBIT D
CONSULTING AGREEMENT
Term: 10 years
Benefit: 25% of Salary (not bonus)
Is not reduced by any benefits under SERP or qualified plans.
23
