EMPLOYMENT AGREEMENT
(Xxxxx X. Xxxxxxxxx)
THIS AGREEMENT is by and between American Eagle Outfitters, Inc. ("Company")
and Xxxxx X. Xxxxxxxxx ("Executive"), and is effective as of the date it has
been fully executed by both parties. It supercedes and replaces all prior
employment agreements between the Company and Executive.
Executive has served as Company's Chief Merchandising Officer since 1993 and
has led the development of Company's merchandising processes and its successful
growth over the last ten years. Executive desires to continue to provide
services to Company as provided in this Agreement. Company agrees to continue to
employ Executive as President and Vice-Chairman, and Executive hereby accepts
this offer of continued employment and agrees to serve Company subject to the
general supervision, advice and direction of Company's CEO & Board of
Directors ("Board"), and upon the following terms and conditions:
1. TERM. Executive will be employed on a full time basis during fiscal 2005
until January 28, 2006 and will be employed on a part time basis during fiscal
2006 until February 3, 2007 unless sooner terminated as provided herein (the
"Active Term"); and this Agreement shall continue thereafter on the terms set
forth in paragraph 3.9.
2. POSITION AND DUTIES. During fiscal 2005, Executive shall continue to be
employed on a full time basis as Company's President and Vice-Chairman, and,
during fiscal 2006, Executive shall be employed as Vice Chairman on a part time
basis of approximately 39 days per fiscal quarter, in each case with such
authority and duties as are customary for his position, and shall perform such
other services and duties as the CEO & Board may from time to time
designate.
2.1. During the Active Term, Executive agrees to devote his full business
time, best efforts, and undivided attention to the business and affairs of
Company, except for any vacations, illness, or disability. During the Active
Term, Executive shall not engage in any other businesses that would interfere
with his duties, provided that nothing contained herein is intended to limit
Executive's right to make passive investments in the securities of
publicly-owned companies or other businesses which will not interfere or
conflict with his duties hereunder or, with the prior consent of the Chairman,
to sit on the boards of other businesses.
2.2. Executive agrees that he shall at all times observe and be bound by all
rules, policies, practices, and resolutions heretofore or hereafter adopted in
writing by the Company which are generally applicable and provided to Company's
officers and employees and which do not otherwise conflict with this
Agreement.
2.3. Company shall indemnify Executive in the performance of his duties and
responsibilities and advance expenses in connection therewith to the same extent
as other senior executives and officers. Such rights shall not be subject to
arbitration under paragraph 6.
3. COMPENSATION.
3.1. BASE SALARY. During the Active Term, Company shall continue to pay
Executive an annual base salary of $950,000.00 in fiscal 2005 and an annual base
salary of $570,000.00 in fiscal 2006 as compensation for his services hereunder,
payable in equal installments in accordance with Company's payroll practices for
executive employees. Company's Board may increase Executive's base salary at
their discretion.
3.2. INCENTIVE BONUS. During the Active Term, Executive will continue to be
eligible to receive an annual incentive bonus targeted at 100% of his base
salary with potential to receive up to 200% of base salary as a 'maximum' bonus,
under the Company's Management Incentive Plan," or any successor plan ("the
Bonus Plan"). The Bonus Plan conditions the payment of this annual performance
bonus based on achievement of pre-determined performance goals set forth in
writing and based on objective measurements all established by the Board's
Compensation and Stock Option Committee ("Committee"). Committee must verify
that the performance goals and other material terms are met prior to payment. It
is the parties' intention that the Bonus Plan be adopted and administered in a
manner that enables Company to deduct for federal income tax purposes the amount
of any annual incentive bonus. The incentive bonus determined to be due, if any,
will be paid within 120 calendar days after the close of Company's fiscal year
and completion of an outside audit by Company's then current outside audit
firm.
3.3. STOCK.
3.3.1. Restricted Stock. During the Active Term, the CEO shall
recommend to the Committee that Executive receive a grant of restricted stock of
100,000 shares of Company's common stock for fiscal 2005 and a grant of shares
of restricted stock having a grant date value of $4,000,000.00 (as reasonably
determined by the Committee) for fiscal 2006, and each grant will be made
pursuant to and subject to all terms and conditions set forth in the in
Company's 1999 Stock Incentive Plan, or any successor plan ("the Stock Plan").
Pursuant to the terms of the Stock Plan, the Committee will condition the
vesting of this restricted stock based on achievement of pre-determined
performance goals set forth in writing and based on objective measurements all
established by the Committee. Committee must verify that the performance goals
and other material terms are met prior to vesting. If the performance goals are
not met then the restricted stock will be forfeited. It is the parties'
intention that the Stock Plan be adopted and administered in a manner that
enables Company to deduct for federal income tax purposes the full value of all
annual restricted stock grants. The delivery of restricted stock earned, if any,
will be made after certification by the Committee of achievement of performance
goals following completion of the audit of the annual financial statements by
Company's then current outside audit firm. The parties acknowledge that the
grant of any restricted shares by the Committee is contingent upon the
availability of shares under the Stock Plan.
3.3.2. Stock Options. For fiscal 2005, the CEO shall recommend to the
Committee that Executive receive a stock option grant for 200,000 shares of
Company's common stock, exercisable at the fair market value on the grant date
and vesting over three years and otherwise pursuant to and subject to all terms
and conditions set forth in Company's Stock Plan and in a manner consistent with
the Company's then current compensation policies. The fiscal 2005 grant will be
Executive's only stock option grant.
3.4. VACATION. During the Active Term of this Agreement, Executive shall be
entitled to vacation commensurate with other senior executives. The dates of
said vacations shall be mutually agreed upon by Company's Chairman and
Executive.
3.5. CAR. During the Active Term, Company will continue to provide Executive
with a car. Any amount included in Executive's W-2 wages relative to this car
shall be grossed up for tax purposes. (The term " grossed up" as used in this
Agreement refers to a payment to Executive in an amount that, after reduction
for any income or excise taxes due, is equal to the net amount payable.)
3.6. BUSINESS EXPENSES. Company shall pay, advance or reimburse Executive for
all normal and reasonable business-related expenses, including travel expenses,
incurred in the performance of his duties on the same basis as paid to other
senior executives. Company shall furnish Executive with company credit cards
provided to other senior executives for use solely in the performance of his
duties. Company will also pay for legal expenses, for purposes of assistance
with this agreement, up to $15,000 as a one-time expense.
3.7. TAXES. The compensation provided to Executive hereunder shall be subject
to any withholdings and deductions required by any applicable tax laws.
3.8. BENEFIT PLANS. Executive is entitled to participate in any deferred
compensation or other employee benefit plans, including any profit sharing or
401(k) plans; group life, health, hospitalization and disability insurance
plans; deferred compensation plans; discount privileges; incentive bonus plans;
and other employee welfare benefits made available generally to, and under the
same terms as, Company's executives.
3.9. CONSULTING DURING RENEWAL TERM. If Executive has been employed by
Company during the entire Active Term, then this Agreement shall automatically
be continued for an additional term of five fiscal years ending January 28, 2012
(the "Renewal Term"), during which Executive shall continue to be employed by
the Company in a non-executive officer capacity and shall be paid a fixed salary
of $1,343,000.00 per year payable in equal installments in accordance with
Company's payroll practices for executive employees, representing total salary
of $6,715,000.00 over the five years (the "Renewal Term Compensation"),
provided, however, the first six months of salary shall be accumulated and paid
in a lump sum on the first Company pay day after August 5, 2007, with the
balance thereafter paid biweekly or otherwise in accordance with Company's then
current payroll practices. Executive shall be available to consult with senior
management and members of the Board regarding Company business to the extent
Executive determines and without any minimum time commitment during the Renewal
Term. At the commencement of the Renewal Term, Executive shall receive the car
being provided under paragraph 3.5 at no further cost to Executive, provided
Executive shall be responsible for withholding and other income tax on the value
of the car. During the Renewal Term, Executive shall continue to be entitled to
participate in the benefit plans described in paragraph 3.8, to the same extent
as other executives of Company, provided, however if Executive does not qualify
to participate in the health insurance program as a less than full time
employee, the Company shall provide coverage for Executive and his spouse during
the Renewal Term.
4. EXECUTIVE'S OBLIGATIONS.
4.1. CONFIDENTIAL INFORMATION. Executive agrees that during and after his
employment, any "confidential information" as defined below shall be held in
confidence and treated as proprietary to Company. Executive agrees not to use or
disclose any confidential information except to promote and advance the business
interests of Company. Executive agrees that upon his separation from employment,
for any reason whatsoever, he shall not take or copy, and shall immediately
return to Company, any documents that constitute or contain confidential
information. "Confidential information" includes, but is not limited to, any
confidential data, figures, projections, estimates, pricing data, customer
lists, buying manuals or procedures, distribution manuals or procedures, other
policy and procedure manuals or handbooks, supplier information, tax records,
personnel histories and records, company phone directories, lists of associates,
organizational charts, information regarding sales, information regarding
properties, product designs, design processes, manufacturing processes,
information regarding manufacturers and suppliers and any other confidential
information regarding the business, operations, properties or personnel of
Company which are disclosed to or learned by Executive as a result of his
employment, but shall not include his personal personnel records. Confidential
information shall not include any information that (i) Executive had in his
possession prior to his first performing services for Company; (ii) becomes a
matter of public knowledge thereafter through sources independent of Executive;
(iii) is disclosed by Company without restriction on its use; or (iv) is
required to be disclosed by law or governmental order or regulation.
4.2. NON-SOLICITATION.
4.2.1. EMPLOYEES. Executive agrees that during his employment, including the
Renewal Term, and for two years after the end of his employment, for any reason,
he shall not, directly or indirectly, solicit Company's employees to leave their
employment; he shall not employ or seek to employ them; and, he shall not cause
or induce any of Company's competitors to solicit or employ Company's
employees.
4.2.2. THIRD PARTIES. Executive agrees that during his employment, including
the Renewal Term, and for two years following the end of his employment, for any
reason, he shall not, either directly or indirectly, recruit, solicit or
otherwise induce or influence any customer, supplier, sales representative,
lender, lessor or any other person having a business relationship with Company
to discontinue or reduce the extent of such relationship except in the course of
his duties pursuant to this Agreement and with the good faith objective of
advancing Company's business interests.
4.3. NONCOMPETITION. Executive agrees that during his employment, including
the Renewal Term, and for a period of one year following the end of his
employment, for any reason, he shall not, either directly or indirectly, accept
employment with, act as a consultant to, or otherwise perform the same services
(which shall be determined regardless of job title) for any business that
directly competes with Company's business, which is understood to be the design,
manufacture and retail sale (including Internet sales) of mens or womens
specialty clothing, accessories, shoes, and related items regardless of whether
such items are now included in Company's merchandise mix.
4.4. COOPERATION.
4.4.1. WITH COMPANY. Executive agrees to cooperate with Company during the
course of all third-party proceedings arising out of Company's business about
which Executive has knowledge or information. Such proceedings may include, but
are not limited to, internal investigations, administrative investigations or
proceedings, and lawsuits (including pre-trial discovery). For purposes of this
paragraph, cooperation includes, but is not limited to, Executive's making
himself available for interviews, meetings, depositions, hearings, and/or trials
without the need for subpoena or assurances by Company, providing any and all
documents in his possession that relate to the proceeding, and providing
assistance in locating any and all relevant notes and/or documents.
4.4.2. WITH THIRD PARTIES. Executive agrees to communicate with, or give
statements to, third parties relating to any matter about which Executive has
knowledge or information as a result of his employment only to the extent that
it is Executive's good faith belief that such communication or statement is in
Company's business interests; provided, however, the forgoing shall not restrict
or prevent Executive from providing information to governmental or regulatory
authorities as required by law.
4.4.3. WITH MEDIA. Executive agrees to communicate with, or give statements
to, any member of the media (print, television or radio) relating to any matter
about which Executive has knowledge or information as a result of his employment
only to the extent that it is Executive's good faith belief that such
communication or statement is in Company's business interests.
4.5. REMEDIES. Executive agrees that any disputes under this paragraph shall
not be subject to arbitration. If Executive breaches this paragraph, the damage
will be substantial, although difficult to quantify, and money damages may not
afford Company an adequate remedy; therefore, if Employee breaches or threatens
to breach this paragraph, Company shall be entitled, in addition to other rights
and remedies, to specific performance, injunctive relief and other equitable
relief to prevent or restrain such conduct.
5. TERMINATION AND RELATED BENEFITS.
5.1. DEATH. This Agreement shall terminate automatically upon Executive's
death, and Company shall pay his surviving spouse, or if he leaves no spouse,
his estate, any base salary earned by Executive, and any rights or benefits that
have vested through the date of termination, including the payment of the full
Renewal Term Compensation under paragraph 3.9. In addition, Company shall pay
Executive's surviving spouse, or if he leaves no spouse, his estate, any
declared but unpaid bonus that, but for Executive's death, would otherwise have
been payable to Executive.
5.2. PERMANENT DISABILITY. Upon Executive's permanent disability at anytime
during the Active Term, Company shall have the right to terminate this Agreement
immediately with written notice. Company shall not have the right to terminate
this Agreement for Executive's permanent disability during the Renewal Term. For
these purposes, permanent disability shall mean that Executive fails to perform
his duties on a full-time basis for a period of more than 90 calendar days
during any 12-month period, due to a physical or mental disability or infirmity.
If this Agreement is terminated due to Executive's permanent disability, Company
shall pay Executive any base salary earned and any rights or benefits that have
vested through the date of termination, including the payment of the full
Renewal Term Compensation under paragraph 3.9. . In addition, Company shall pay
Executive any declared but unpaid bonus that, but for Executive's disability,
would otherwise have been payable to Executive.
5.3. TERMINATION BY COMPANY.
5.3.1. DURING THE ACTIVE TERM. In addition to as provided below in paragraphs
5.3.2, Company may terminate this Agreement at any time during the Active Term,
for any reason, upon 30 days' written notice to Executive. Company may, in its
sole discretion, require Executive to cease active employment immediately. In
the event of such a termination, Company shall have only the following
obligations:
(i) Pay Executive severance in the form of base salary continuation for one
year; provided, however, that such salary shall cease to be paid if Executive
accepts or performs comparable employment.
(ii) If Executive has been employed the full fiscal year prior to the date of
termination, pay Executive any incentive bonus declared, but unpaid.
(iii) Continue Executive's medical coverage for one year under the same terms
as provided to other Company executives, or pay for COBRA coverage; provided,
however, that such coverage shall cease upon Executive's becoming eligible for
similar coverage under another benefit plan.
(iv) Pay Executive the full Renewal Term Compensation over five years
beginning following the termination date.
5.3.2. FOR CAUSE. Company may terminate this Agreement at any time if it has
"cause" to do so. For purposes of this paragraph, the term "cause" means the
following:
(i) willful violation of laws and regulations governing Company;
(ii) willful failure to substantially comply with any material terms of this
Agreement, provided Company shall make a written demand for substantial
compliance setting forth the specific reason(s) for same and Executive shall
have 60 days to cure, if possible;
(iii) willful breach of fiduciary duties;
(iv) willful damage, willful misrepresentation, willful dishonesty, or other
willful conduct which Company determines has had or is likely to have a material
adverse effect upon Company's operations, assets, reputation or financial
conditions; or
(v) willful breach of any stated material employment policy of
Company.
Failure to meet performance targets and measures shall not constitute "cause"
as that term is used herein. Executive may have an opportunity to be heard by
the Board prior to a termination for cause. For purposes of this paragraph,
Executive's acts or omissions shall be considered "willful" if done without a
good faith, reasonable belief that such act or omission was in Company's best
interest. In the event of termination for cause, Company's obligations hereunder
cease upon notice of termination.
5.3.4. METHOD OF PAYMENT. Executive agrees that Company shall have the option
of paying the present value of any amount(s) due under this paragraph in a lump
sum or in the form of salary continuation, but in no event shall such payout
period exceed one year. Present value shall be calculated based upon National
City Bank's prime interest rate.
5.4. VOLUNTARY RESIGNATION BY EXECUTIVE. Executive may terminate this
Agreement by his voluntary resignation at any time. Executive shall give at
least 60 calendar days' written notice of his intention to resign to Company's
Chairman, which Company may accept immediately. In the event of Executive's
resignation, Company will have no further obligations or liability hereunder
except for the payment of any salary accrued and unpaid at the date of
termination.
5.5. SALARY DUE AT TERMINATION. In the event of any termination of
Executive's employment under this Agreement, Executive (or his estate) shall be
paid any unpaid portion of his salary that has accrued by virtue of his
employment during the period prior to termination, and any unpaid, declared
bonus, together with any unpaid business expenses properly incurred under this
Agreement prior to termination. Such amounts shall be paid within 15 days of the
date of termination, unless otherwise provided herein.
6. ARBITRATION. Except as provided in paragraph 2.3 and in paragraph 4.5, the
parties agree that arbitration shall be the sole and exclusive remedy to redress
any dispute, claim or controversy involving the interpretation of this Agreement
or the terms, conditions or termination of this Agreement or the terms,
conditions or termination of Executive's employment with Company. The parties
intend that any arbitration award shall be final and binding and that a judgment
on the award may be entered in any court of competent jurisdiction and
enforcement may be had according to its terms. This paragraph shall survive the
termination or expiration of this Agreement.
6.1. Arbitration shall be held in Pittsburgh, PA, and shall be conducted by a
retired federal judge or other qualified arbitrator mutually agreed upon by the
parties in accordance with the Voluntary Arbitration Rules of the American
Arbitration Association then in effect. The parties shall have the right to
conduct discovery pursuant the Federal Rules of Civil Procedure; provided,
however, that the Arbitrator shall have the authority to establish an expedited
discovery schedule and cutoff and to resolve any discovery disputes. The
Arbitrator shall not have jurisdiction or authority to change any provision of
this Agreement by alterations of, additions to or subtractions from the terms
hereof. The Arbitrator's sole authority in this regard shall be to interpret or
apply any provision(s) of this Agreement. The Arbitrator shall be limited to
awarding compensatory damages, including unpaid wages or benefits, but shall
have no authority to award punitive, exemplary or similar-type damages.
6.2. Any claim or controversy not sought to be submitted to arbitration, in
writing, within 180 days of when it arose shall be deemed waived and the moving
party shall have no further right to seek arbitration or recovery with respect
to such claim or controversy.
6.3. The arbitrator shall be entitled to award expenses, including the costs
of the proceeding, and reasonable counsel fees.
6.4. The parties hereby acknowledge that since arbitration is the exclusive
remedy, neither party has the right to resort to any federal, state or local
court or administrative agency concerning breaches of this Agreement, except as
otherwise provided in paragraph 2.3 or paragraph 4.5, and that the decision of
the Arbitrator shall be a complete defense to any suit, action or proceeding
instituted in any federal, state or local court before any administrative agency
with respect to any arbitrable claim or controversy.
7. GENERAL PROVISIONS.
7.1. The parties agree that the covenants and promises set forth in
paragraphs 4, 5 and 6 shall survive the termination of this Agreement and
continue in full force and effect.
7.2. Except as otherwise provided in paragraph 6.2 above, failure to insist
upon strict compliance with any term hereof shall not be considered a waiver of
any such term.
7.3. This Agreement along with any other document or policy or practice
referenced herein (which are collectively referred to as "Agreement" herein),
contain the entire agreement of the parties regarding Executive's employment and
supersede any prior written or oral agreements or understandings relating to the
same. No modification or amendment of this Agreement shall be valid unless in
writing and signed by or on behalf of both parties.
7.4. If Executive's employment terminates, for any reason whatsoever, he
shall immediately tender his written resignation from the Board, which
resignation the Chairman may or may not accept.
7.5. Once signed by both parties, this Agreement shall be binding upon and
shall inure to the benefit of the heirs, successors, and assigns of the
parties.
7.6. This Agreement is intended to be performed in accordance with, and only
to the extent permitted by, all applicable laws, ordinances, rules and
regulations. If any provisions of this Agreement, or the application thereof to
any person or circumstance, shall, for any reason and to any extent, be held
invalid or unenforceable, such invalidity and unenforceability shall not affect
the remaining provisions hereof and the application of such provisions to other
persons or circumstances, all of which shall be enforced to the greatest extent
permitted by law.
7.7. The validity, construction, and interpretation of this Agreement and the
rights and duties of the parties hereto shall be governed by the laws of the
State of Pennsylvania, without reference to the Pennsylvania choice of law
rules.
7.8. Any written notice required or permitted hereunder shall be mailed,
certified mail (return receipt requested) or hand-delivered, addressed to
Company's Chairman at Company's then principal office, or to Executive at the
most recent home address on his paycheck. Notices are effective upon
receipt.
7.9. The rights of Executive under this Agreement shall be solely those of an
unsecured general creditor of Company.
7.10. The headings in this Agreement are inserted for convenience of
reference only and shall not be a part of or control or affect the meaning of
any provision hereof.