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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of the 14th day of May, 2001 (the
"Agreement") by and between Service Merchandise Company, Inc., a Tennessee
corporation (the "Company"), and Xxxx X. Xxxxxxxxx (the "Executive").
RECITALS
WHEREAS, the Company desires to provide for the employment of the
Executive in accordance with the terms and conditions provided herein; and
WHEREAS, the Executive wishes to perform services for the Company in
accordance with the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the premises hereof and of the
mutual promises and agreements contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to perform services for the
Company, on the terms and conditions set forth herein.
2. Term. The term of employment of the Executive by the Company
hereunder shall commence effective as of May 14, 2001 (the
"Effective Date"), and shall end on May 13, 2003 (the "Initial
Term"), unless further extended or sooner terminated as
hereinafter provided. Commencing on May 14, 2003 and on each
anniversary thereafter (each such date, an "Anniversary
Date"), the term of the Executive's employment shall
automatically be extended for one additional year unless, not
later than the December 31, immediately preceding an
Anniversary Date, either party shall have given notice to the
other party that it does not wish to extend this Agreement (a
"Notice of Non-Renewal"). References herein to the "Term" of
this Agreement shall refer to both the Initial Term and any
extended term of the Executive's employment hereunder.
Notwithstanding the foregoing, if a Change of Control (as
defined in Section 6) occurs during the
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Term, in no event shall the Term end prior to the end of the
twenty-fourth (24th) month following the month in which such
Change of Control occurs.
3. Position and Duties.
(a) The Executive shall serve as President and Chief
Merchandising Officer of the Company and shall have such
responsibilities, duties and authority as are generally
consistent and customary with such position. Executive shall
report solely to the Chief Executive Officer of the Company.
The Executive shall also serve, if requested by the Board of
Directors (the "Board"), as a director or officer of any of
the Company's present or future direct or indirect
subsidiaries.
(b) During the Term, and excluding any periods of
vacation and sick leave to which the Executive is entitled,
the Executive shall devote reasonable attention and time
during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this
Agreement, use the Executive's reasonable best efforts to
carry out such responsibilities faithfully and efficiently. It
shall not be considered a violation of the foregoing for the
Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not
significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement.
4. Compensation.
(a) Base Salary. During the Term, the Executive shall
receive an annual base salary ("Annual Base Salary") of
$520,000. The Annual Base Salary shall be payable in
accordance with the Company's regular payroll practice for its
senior executives, as in effect from time to time. During the
Term, the Annual Base Salary shall be reviewed by the
Compensation Committee of the Board for possible
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increase at least annually. Any increase in the Annual Base
Salary shall not limit or reduce any other obligation of the
Company under this Agreement. The Annual Base Salary shall not
be reduced after any such increase, and the term "Annual Base
Salary" shall thereafter refer to the Annual Base Salary as so
increased.
(b) Annual Bonus; Retention Program. During the Term, the
Executive shall be entitled to receive an annual bonus
("Annual Bonus") pursuant to the Company's annual bonus plan,
as in effect from time to time, and shall be entitled to
participate as a Tier II Employee in the Company's 2001
Retention Program for Key Employees (the "Program"), which
Program was approved by order (the "Order") of the U.S.
Bankruptcy Court for the Middle District of Tennessee (the
"Court") entered on March 28, 2001, respectively, in
connection with the Company's Chapter 11 case (the "Case").
(c) Make-Whole Payment. Executive shall be entitled to
receive a payment equal to $2,500,000 (the "Make-Whole
Payment"). $1,250,000 of the Make-Whole Payment shall be paid
to the Executive in cash, by wire transfer at the first
available time for wire transfers following approval of this
Agreement by the Court and receipt of this Agreement,
fully-executed by the Executive. The remaining portion of the
Make-Whole Payment shall be paid pursuant to draws by the
Executive under an irrevocable letter of credit in accordance
with the terms thereof, including the credit draw certificate
(the letter of credit and draw certificate are referred to
herein as the "Letter of Credit"). The Make-Whole Payment, or
any portion thereof, will not be included in any salary
continuation calculation under sections 5 or 6 of this
Agreement. In the event the Executive voluntarily terminates
her employment, or is duly terminated for Cause (as
hereinafter defined in Section 5) prior to the expiration of
the Initial Term, any portion of the Make-Whole Payment
previously received by the Executive will be paid back to the
Company. Notwithstanding the foregoing, any remaining portions
of the Make-Whole Payment, not yet paid, shall be due in full
upon the termination, for any reason, of the employment of Xxx
Xxxxxx as Chief Executive Officer of the Company.
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(d) Other Benefits. During the Term, the Executive shall
be entitled to participate in other employee benefit plans,
programs and arrangements of the Company, other than Annual
Bonus plans (covered by Section 4(b) above) (the "Benefit
Plans"), now or hereinafter in effect, that are applicable to
the Company's employees generally or to its executive
officers, as the case may be, subject to and on a basis
consistent with the terms, conditions and overall
administration of the Benefit Plans. During the Term, the
Company shall provide to the Executive all of the fringe
benefits and perquisites that are provided to senior
executives of the Company, and the Executive shall be entitled
to participate in and receive any other fringe benefits or
perquisites that become available to the Company's senior
executives. The Company shall provide to the Executive a car
allowance in the amount of $10,000 per annum. The value of the
benefit received by the Executive pursuant to the previous
sentence shall be subject to applicable withholding pursuant
to Section 13.
(e) Vacation and Other Leaves. The Executive shall be
entitled to vacation in an amount equal to the greater of
three (3) weeks or that provided in accordance with the
Company's vacation policy (and to compensation in respect of
earned but unused vacation days) and all paid holidays and
personal leave days that are available generally to executive
officers of the Company.
(f) Expenses; Attorneys' Fees. During the Term, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable and customary expenses incurred by the
Executive in performing his services hereunder, including all
expenses of travel and accommodations while engaged in
business of the Company, provided that such expenses are
incurred and accounted for in accordance with the policies and
procedures established by the Company. Until the end of the
Initial Term, and any extension thereof resulting from a
Change of Control (as defined in Section 6), the Company shall
provide to the Executive, at the Company's expense, a
furnished two-bedroom apartment with housekeeping services,
and shall reimburse the Executive for all reasonable travel
incurred by the Executive for travel between New York City and
Nashville. The Company shall reimburse the Executive for legal
fees and expenses in the amount of $15,000 incurred in
connection with the negotiation and execution of
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this Agreement. The value of the benefit received by the
Executive pursuant to the previous two sentences shall be
subject to applicable withholding pursuant to Section 13.
(g) Services Furnished. During the Term, the Company
shall furnish the Executive with office space, secretarial
and/or administrative assistance, office supplies, support
services and such other facilities and services as shall be
suitable to the Executive's position and adequate for the
performance of his duties hereunder.
5. Compensation on Termination of Employment (Except Within Two
Years Following a Change of Control).
This Section 5 shall apply to termination of the Executive's employment
during the Term and prior to a Change of Control (as hereinafter defined in
Section 6) and to termination of the Executive's employment more than two (2)
years following a Change of Control. This Section 5 shall not apply to
termination of Executive's employment during the Change of Control Period (as
hereinafter defined in Section 6):
(a) Disability. If the Executive's employment with the
Company is terminated by the Executive or the Company due to
the Executive's inability to perform Executive's duties as a
result of physical or mental incapacity as defined in the
Company's long-term disability insurance policy
("Disability"), the Executive shall be paid such amounts, if
any, as the Executive is entitled to receive under the
Company's disability insurance policies then in effect for
Company officers, but shall be entitled to no further
compensation or benefits (unless previously accrued under the
Company's benefit plans).
(b) Other Termination Not Giving Rise to Salary
Continuation. If the Executive's employment shall be
terminated for Cause (as hereinafter defined) or if the
Executive dies or if the Executive terminates Executive's
employment for any reason other than for a material breach of
this Agreement by the Company, the Company shall pay the
Executive any installments of Executive's Annual Base Salary
as then in effect that would otherwise be due through the date
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on which Executive's employment is terminated. The Company
shall then have no further obligations to the Executive under
this Agreement except that in the event of termination by
death, the Executive's estate or beneficiaries, as the case
may be, shall be paid such amounts as may be payable to the
Executive under the Company's insurance policies and/or other
benefit plans. For the purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment
upon (i) the willful engaging by the Executive in misconduct
materially injurious to the Company, (ii) acts of dishonesty
or fraud by the Executive, or (iii) the willful violation by
the Executive of the provisions of Section 8 or Section 9
hereof
(c) Termination Giving Rise to Salary Continuation. If
the Company shall terminate the Executive's employment with
the Company or shall provide a Notice of Non-Renewal for any
reason other than due to the Executive's death or Disability
or for Cause, or if the Executive terminates this Agreement
because of a material breach of this Agreement by the Company,
then, subject to the compliance by the Executive with the
provisions of Sections 8 and 9 hereof, the Company shall pay,
as salary continuation, to the Executive an amount equal to
two (2) times the Executive's maximum Annual Base Salary paid
during the prior five (5) year period (inclusive of the
highest Annual Bonus paid or payable to the Executive during
the prior five (5) year period, but excluding unearned bonuses
negotiated by Executive at the time of the Executive's
employment with the Company), payable in a lump sum, but no
other compensation or benefits (unless accrued under the
Company's benefit plans prior to the date of termination of
employment or as provided in Section 4(e) hereof) shall be
paid to the Executive.
(d) Healthcare Coverage. If the Executive's employment
with the Company is terminated by the Company for any reason
other than due to the Executive's death or Disability or for
Cause, the Company will reimburse the Executive for the
premium paid by the Executive for continued coverage for the
Executive (and any dependents of the Executive covered by the
Company's healthcare plans at the time the Executive's
employment was terminated) under the Company's healthcare plan
pursuant to "COBRA" (or any other mandatory healthcare
continuation law then in effect), such coverage then being
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substantially similar to that provided by the Company to its
senior executives and their eligible dependents. The Executive
will be entitled to reimbursement for such coverage for the
period commencing with the date of termination of employment
and ending on the earlier of (i) the second anniversary of
termination of employment, or (ii) the date the Executive
becomes eligible to receive any healthcare coverage from
another employer of the Executive or Executive's spouse, or
any governmental entity, that does not contain any exclusion
or limitation with respect to any pre-existing condition of
the Executive or Executive's covered dependents. If the
Executive (or Executive's dependents covered at the time of
termination of employment) elects not to continue coverage
under COBRA (or any other mandatory healthcare continuation
law then in effect) or is not eligible to continue coverage
under such healthcare continuation law, and is otherwise
eligible under this Section 5(d), the Company will reimburse
the Executive for the cost of purchasing substantially similar
coverage or a supplement required to achieve substantially
similar coverage under another arrangement approved by the
Company for the same period; however, such reimbursement shall
be limited to the then current premium charged to others by
the Company for substantially similar coverage under COBRA (or
other mandatory healthcare continuation law then in effect).
Any amount payable to the Executive shall be subject to
withholding of applicable taxes as provided in Section 13
hereof. In the event of Executive's death following
termination giving rise to the benefit described in this
Section 5(d), but before the expiration of such benefits,
Executive's dependents shall be entitled to such benefits.
6. Compensation on Termination of Employment Within Two Years
Following A Change of Control.
This Section 6 shall apply to termination of Executive's employment
during the "Change of Control Period" (as defined in this Section 6).
This Section 6 shall not apply to termination of Executive's employment
prior to a Change of Control or more than two (2) years following a
Change of Control:
(a) Definition of Certain Terms.
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(i) "Good Reason" shall mean the occurrence or
continuation, without consent of Executive, after a
Change of Control, of any of the following events
within the Change of Control Period:
(A) the assignment to Executive of any
duties inconsistent with the customary
powers and duties that Executive held
immediately prior to the Change of Control,
or an adverse change in the status, position
or conditions of Executive's employment or
the nature of Executive's responsibilities
in effect immediately prior to such Change
of Control, or any removal of Executive
from, or any failure to re-elect Executive
to, any of such positions;
(B) a reduction by the Company in
Executive's Annual Base Salary as in effect
immediately prior to such Change of Control;
(C) the relocation of Executive's
principal office to a location outside a 35
mile radius from Executive's principal
office immediately prior to such Change of
Control, except for required travel on the
Company's business to an extent
substantially consistent with Executive's
business travel obligations immediately
prior to such Change of Control;
(D) the failure by the Company to
continue in effect any benefit or
compensation plan in which Executive
participates immediately prior to the Change
of Control which is material to Executive's
total compensation, including but not
limited to any stock or stock option,
employee stock ownership, bonus, insurance,
disability and vacation plans which the
Company currently has or any substitute or
additional plans adopted prior to the Change
of Control, unless an equitable arrangement
(embodied in an ongoing substi-
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tute or alternative plan or plans) has been
made with respect to such plan, or the
failure by the Company to continue
Executive's participation therein (or in
such substitute or alternative plan) on a
basis not materially less favorable, both in
terms of the amount of benefits provided and
the level of Executive's participation
relative to other participants, as in
existence immediately prior to such Change
of Control;
(E) the termination, for any reason, of
the employment of Xxx Xxxxxx as Chief
Executive Officer of the Company; or
(F) the failure of the Company to
obtain an agreement from any successor to
assume and agree to perform this Agreement
as contemplated herein.
(ii) A "Change of Control" shall be deemed to
have taken place if (i) any person or entity,
including a "group" as defined in Section 13(d)(3) of
the Securities and Exchange Act of 1934, other than
Company or a wholly-owned subsidiary thereof or any
employee benefit plan of Company or any of its it
subsidiaries, becomes the beneficial owner of the
Company securities having 20% or more of the combined
voting power of the then outstanding securities of
the Company that may be cast for the election of
directors of the Company (other than as a result of
an in issuance of securities initiated by the Company
in the ordinary course of business); or (ii) as the
result of, or in connection with, any cash tender or
exchange offer, merger or other business combination,
sale of assets or contested election, or any
combination of the foregoing transactions, less than
a majority of the combined voting power of the then
outstanding securities of the Company or any
successor corporation or entity entitled to vote
generally in the election of the directors of the
Company or such other corporation or entity after
such transaction is held in the aggregate by the
holders of the Company's securities entitled to vote
generally in the election of directors of the Company
immediately prior
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to such transaction; or (iii) the following
individuals cease for any reason to constitute a
majority of the number of directors then serving:
individuals who, as of the Effective Date, constitute
the Board and any new director (other than a director
whose initial assumption of office is in connection
with an actual or threatened election contest,
including but not limited to, a consent solicitation,
relating to the election of directors of the Company)
whose appointment or election by the Board or
nomination for election by the Company's
shareholders, was approved or recommended by a vote
of at least two-thirds of the directors of the
Company then still in office who were directors of
the Company on the Effective Date or whose
appointment, election or nomination for election was
previously so approved or recommended; provided,
however, that a "Change of Control" shall not be
deemed to have taken place if any of the events
specified (i), (ii) or (iii) of this paragraph occur
in connection with the substantial consummation of a
confirmed plan of reorganization under Chapter 11 of
the Bankruptcy Code prosecuted by the Company.
(iii) "Change of Control Period" shall mean the
two (2) year period following a Change of Control.
(iv) "Change of Control Severance Benefits" shall
mean all of the following payments:
(A) any installments of Executive's
Annual Base Salary through the date of
termination of employment at the rate in
effect at the time the Notice of Termination
is given,
(B) the Special Termination Payment;
and
(C) the Medical Benefits.
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(v) "Change of Control Date" shall mean the date
on which a Change of Control occurs.
(vi) "Medical Benefits" shall mean the
reimbursement for continued medical coverage for
Executive and Executive's dependents described in
Section 5(d) hereof.
(vii) "Notice of Termination" shall refer to
written notice described in Section 6(d) indicating
the specific termination provision of this Agreement
relied upon, setting forth in reasonable detail the
facts and circumstances claimed to provide the basis
for termination of Executive's employment under the
provision so indicated and stating the date of
termination.
(viii) "Special Termination Payment" shall mean an
amount payable in a single lump sum equal to the
product of (x) an amount equal to the Executive's
maximum Annual Base Salary paid in any year of the
five (5) year period preceding the date of
termination (inclusive of the Annual Bonus paid to
Executive during the 12-month period preceding the
date of termination or the Annual Bonus earned by the
Executive with respect to the fiscal year immediately
preceding the date of termination, whichever Annual
Bonus is higher, but excluding unearned bonuses
negotiated by Executive at the time of Executive's
employment with the Company), multiplied by (y) the
number three (3), except that in the event that the
Change in Control is the result of a liquidation of
the Company, the amount specified in (x) will be
multiplied by (y) the number two (2) instead of the
number three (3).
(b) Termination Not Giving Rise To Special Termination
Payments or Medical Benefits. If Executive's employment is
terminated during the Change of Control Period for Cause (as
defined in Section 5(b), or on account of Disability (as
defined in Section 5(a)), or if Executive dies during the
Change of Control Period, or if Executive terminates
Executive's employment during the Change of Control
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Period without Good Reason, the Company shall pay to Executive
any installments of Executive's Annual Base Salary as then in
effect that would otherwise be due through the date on which
Executive's employment is terminated. The Company shall then
have no further obligations to the Executive under this
Agreement (unless accrued under the Company's benefit plans)
except that in the event of termination by death, the
Executive's estate or beneficiaries, as the case may be, shall
be paid such amounts as may be payable to the Executive under
the Company's insurance policies and/or other benefit plans,
and except that in the event of termination by Disability, the
Executive shall be paid such amounts as Executive is entitled
to receive under the Company's disability insurance policies
and plans then in effect covering the Executive.
(c) Termination Giving Rise to Change of Control
Severance Benefits. If the Executive's employment is
terminated or a Notice of Non-Renewal is given by the Company
during the Change of Control Period for any reason other than
Cause, death of the Executive or Disability, or if the
Executive terminates his employment during the Change of
Control Period for Good Reason, then Executive shall be
entitled to receive the Change of Control Severance Benefits,
all of which (except the Medical Benefits) shall be paid to
Executive within ten (10) days following the date of
termination.
(d) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive pursuant to this
Section 6 shall be communicated by written notice of
termination (the "Notice of Termination") to the other party
hereto, which shall indicate the specific termination
provision in the Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment and
shall state the date of termination.
7. Certain Reduction in Payments by the Company.
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(a) Definition of Certain Terms.
(i) A "Payment" shall mean any payment or
distribution in the nature of compensation to or for
the benefit of Executive, whether paid or payable
pursuant to this Agreement or otherwise.
(ii) An "Agreement Payment" shall mean a Payment
paid or payable on account of termination of
employment during the Change in Control Period
pursuant to Section 6 of this Agreement (disregarding
the reduction provided by Section 7(b)).
(iii) "Net After Tax Receipt" shall mean the
Present Value (as defined below) of all Payments that
are contingent on a Change of Control within the
meaning of Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), net of all taxes
imposed on Executive with respect thereto under
Sections I and 4999 of the Code, determined by
applying the highest marginal rate under Section I of
the Code which applied to Executive's taxable income
for the immediately preceding taxable year.
(iv) "Present Value" shall mean such value
determined in accordance with Section 280G(d)(4) of
the Code.
(b) Limitation on Agreement Payments. It is intended that
all Agreement Payments hereunder, together with all other
Payments to Executive contingent upon or in connection with a
Change of Control, are reasonable compensation for Executive's
service to Company and its subsidiaries. Notwithstanding the
foregoing, should Company determine, based upon the opinion of
the independent accounting advisors of Company immediately
prior to the Change of Control ("Accounting Firm"), which
opinion shall be based on generally accepted accounting
principles ("GAAP"), that the Agreement Payments and other
Payments, together with any other amounts
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received by Employee that must be included in such
determination, would result in the payment of an "excess
parachute payment" as defined in Section 280G of the Code,
then Company will reduce the Agreement Payments to the minimum
extent necessary so that no portion of the aggregate Payments
would result in the payment of an "excess parachute payment;"
provided, however, that such reduction will be made if, but
only if, the value of all such Payments (without regard to the
foregoing reduction) would result in Net After Tax Receipts
which are less than the Net After Tax Receipts that would
result after taking into account any such reduction.
(c) Opinion of Accounting Firm. Company may reduce the
Agreement Payments pursuant to this Section 7 only if within
thirty (30) days of Executive's termination it provides
Executive with an opinion of the Accounting Firm, which
opinion shall be based on GAAP, that Executive will be
considered to have received "excess parachute payments" as
defined in Section 280G of the Code if Executive were to
receive the full amounts owing pursuant to the terms of this
Agreement and that the reduced amount proposed to be paid by
the Company will result in Net After Tax Receipts that are
equal to or greater than the Net After Tax Receipts which
would result from reduction in the Agreement Payments by any
other amount.
8. Unauthorized Disclosure.
(a) During the period in which the Executive is employed
by the Company, the Executive shall not, without the prior
written consent of the Board, or a person authorized thereby,
disclose to any person, other than a person to whom disclosure
is necessary or appropriate in connection with the performance
by the Executive of Executive's duties as an officer of the
Company, or its subsidiaries or its affiliates, any
confidential information obtained by Executive while in the
employ of the Company with respect to any of the Company's
products, improvements, formulae, designs or styles,
processes, customers, methods of marketing or distribution,
systems, procedures, plans, proposals, policies or methods of
manufacture, the disclosure of which Executive knows, or
should have reason to know, will be
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materially damaging to the Company or its subsidiaries or its
affiliates, nor shall Executive intentionally make any
materially false statements regarding the Company or its
subsidiaries or its affiliates or take any unreasonable action
which Executive knows, or should have reason to know, will be
materially damaging to the Company or its subsidiaries or its
affiliates; provided, however, that confidential information
shall not include any information known generally to the
public (other than as a result of unauthorized disclosures by
the Executive) or any information of a type not otherwise
considered confidential by persons engaged in the same
business or a business similar to that conducted by the
Company. Following the termination of the Executive's
employment with the Company for any reason, the Executive
shall not disclose any confidential information of the type
described above or take any action of type described above
except as may be required in the opinion of the Executive's
counsel in connection with any judicial or administrative
proceeding or inquiry. The provisions of this Section 8 shall
be binding upon the Executive's heirs, successors and legal
representatives.
(b) Company agrees to refrain from making derogatory or
defamatory statements about or concerning Executive.
9. Non-Competition. During the period in which the Executive is
employed by the Company and for a period of two (2) years
following any termination giving rise to salary continuation
payments pursuant to Section 5(c) or to Change of Control
Severance Benefits pursuant to Section 6(c), the Executive
will not (a) directly or indirectly own, manage, operate,
control or participate in the ownership, management, operation
or control of, or be connected as an officer, employee,
partner, director or otherwise with, or have any financial
interest in, or aid or assist anyone else in the conduct of,
any business which is in substantial competition with any
business conducted by the Company or by any group, division or
subsidiary of the Company in any area where such business is
being conducted at the time of such termination (provided that
ownership of five percent (5%) or less of the voting stock of
any publicly held corporation shall not constitute a violation
hereof) or (b) directly or indirectly employ, solicit for
employment, or advise or recommend to any other persons that
they
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employ or solicit for employment any employee of the Company
or any of its subsidiaries or affiliates.
10. Specific Performance. The Executive acknowledges and agrees
that, in the event of a breach of Section 8 or Section 9
hereof by the Executive, the Company would be irreparably
harmed and that monetary damages would be an inadequate remedy
in favor of the Company. Accordingly, the Executive and the
Company agree that in the event of such a breach, the Company
shall be entitled to injunctive relief against the Executive.
11. Binding Agreement. This Agreement and all obligations of the
Company hereunder shall be binding upon the successors and
assigns of the Company. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
12. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Xx. Xxxx X. Xxxxxxxxx
000 Xxx Xxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
with a copy to:
Xxxxxx X. Xxxxxxxxx
00 Xxxxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
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If to the Company:
Service Merchandise Company, Inc.
7100 Service Xxxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: General Counsel
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement, all federal, state, city
or other taxes as shall be required pursuant to any law or
government regulation or ruling.
14. Governing Law. This Agreement shall be construed according to
the laws of Tennessee, without giving effect to the principles
of conflicts of laws of such State.
15. Amendment, Modification, Waiver. This Agreement may not be
amended except by the written agreement of the parties hereto.
No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Executive and the Company. No
waiver by either party hereto at any time of any breach by the
other party hereto or compliance with any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. However, notwithstanding anything in this
Agreement to the contrary, if in the opinion of the Company's
accountants, which opinion shall be in accordance with GAAP,
any provision of this Agreement would preclude the use of
"pooling of interest" accounting treatment for a Change of
Control transaction that (i) would otherwise qualify for such
accounting treatment and (ii) is contingent upon qualifying
for such accounting treatment, then to
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the extent any provision of this Agreement disqualifies the
transaction as a "pooling of interest" transaction (including,
if applicable, the entire Agreement), such provision(s) shall
be null and void as of the date hereof.
16. Binding Effect. This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of
the other, assign, transfer or delegate this Agreement or any
rights or obligations hereunder except as expressly provided
for herein. Without limiting the generality of the foregoing,
Executive's right to receive payments hereunder shall not be
assignable, transferable or delegable, whether by pledge,
creation of a security interest or other-wise, other than by a
transfer by his will or by the laws of descent and
distribution and, in the event of any attempted assignment or
transfer contrary to this paragraph, the Company shall have no
liability to pay any amount so attempted to be assigned,
transferred or delegated.
17. Entire Contract. This Agreement, together with the Letter of
Credit and the Company's Employee Policy Manual, constitutes
the entire agreement and supersedes all other prior
agreements, employment contracts and understandings, both
written and oral, express or implied with respect to the
subject matter of this Agreement, including, without
limitation, any employment agreement or any severance or
indemnification, by and between the Company and the Executive,
all of such agreements being rendered null and void by this
Agreement.
18. Termination. This Agreement shall be terminable only upon the
occurrence of any one of the following events: (a) expiration
of the Term without Executive's employment having been
previously terminated; (b) the termination of Executive with
payment in full of all the payments/benefits described in
Sections 5 or 6 hereof as appropriate; or (c) the Company (or
its successor in interest) and Executive so agree in writing;
provided, however, that the provisions of Sections 8 and 9
hereof shall survive without limitation.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SERVICE MERCHANDISE COMPANY, INC.
By: /s/ C. Xxxxxx Xxxxx
--------------------------------------
Its: Chief Administrative Officer
Accepted and Agreed:
/s/ Xxxx X. Xxxxxxxxx
-----------------------------
May 16, 2001
------------------
Xxxx X. Xxxxxxxxx
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LETTER OF CREDIT PROVISIONS
This Irrevocable Letter of Credit is established, at the request of
Service Merchandise Company, Inc. (the "Company"), in favor of Xxxx X. Xxxxxxxxx
(the "Beneficiary") in the amount of $1,250,000.00 (such amount, as it may be
reduced from time to time pursuant to the terms hereof, the "Stated Amount")
pursuant to the Employment Agreement dated as of May 14, 2001 between the
Company and the Beneficiary (the "Employment Agreement").
The term "beneficiary" includes any successor by operation of law of
the named beneficiary, including without limitation, any heirs and assigns.
We hereby undertake to promptly honor your sight draft(s) drawn on us,
including our credit number, for all or any part of this credit, subject to the
terms specified in this Letter of Credit, if presented at our office specified
below on or before the expiry date or any automatically extended expiry date.
Except as expressly stated herein, this undertaking is not subject to
any agreement, condition or qualification. The obligation of the Fleet National
Bank under this Letter of Credit is the individual obligation of Fleet National
Bank and is no way contingent upon reimbursement with respect thereto.
Subject to the other terms hereof, the Beneficiary may draw upon this
Letter of Credit prior to its Expiry Date (as defined below) in accordance with
the following schedule:
From and After
--------------
June 1, 2001 $156,250.00
July 1, 2001 $312,500.00, less amounts previously drawn
August 1, 2001 $468,750.00, less amounts previously drawn
September 1, 2001 $625,000.00, less amounts previously drawn
October 1, 2001 $781,250.00, less amounts previously drawn
November 1, 2001 $937,500.00, less amounts previously drawn
December 1, 2001 $1,093,750.00, less amounts previously drawn
January 1, 2002 $1,250,000.00, less amounts previously drawn.
Notwithstanding the foregoing, if, prior to the Expiry Date, either (i)
the Company is liquidated; (ii) the Beneficiary is terminated by the Company,
other than for Cause; or (iii) the employment of Xxx Xxxxxx as Chief Executive
Officer of the Company is terminated, for any reason, any amounts remaining
under this Letter
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of Credit may be immediately drawn by the Beneficiary. In the event of the
foregoing, the Beneficiary shall note the event giving rise to the draw in the
Sight Draft, as further defined below.
A draw on this Letter of Credit may only be made by the Beneficiary by
the presentment to us at our offices located at One Fleet Way, Attn: Letter of
Credit Dept., Xxxxxxxx, XX 00000 of your sight draft, drawn on us and
referencing Irrevocable Letter of Credit Number 151270967 and setting forth the
amount being drawn, accompanied by a executed and dated statement of the
Beneficiary stating that the Beneficiary has not voluntarily terminated the
Beneficiary's employment with or been duly terminated for Cause by Service
Merchandise Company, Inc. on the draw date (the "Sight Draft"). Each draw upon
this Letter of Credit shall reduce the then Stated Amount by the amount of such
draw. If the Beneficiary so requests, we will wire transfer amounts drawn under
the Letter of Credit to a bank account designated by the Beneficiary.
This Letter of Credit shall expire at 5:00 p.m., New York City time, on
January 31, 2002 to the extent not fully drawn prior to then.
This credit is subject to and governed by the laws of the State of New
York and the 1993 Revision of the Uniform Customs and Practice for Documentary
Credits of the International Chamber of Commerce (Publication No. 500).
Very truly yours,
Fleet National Bank
/s/ Xxxx Xxxxx
--------------------------------
Authorized Signature
