Exhibit 10.12
EMPLOYMENT AGREEMENT
--------------------
This agreement (the "Agreement") is made as of the 27 day of April, 1998
(the "Effective Date"), by and between Xxxx X. Xxxxxxx (the "Employee") and
Xxxxxxx Shoe Company Inc., a Delaware corporation (the "Company").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes the
Employee's past and continuing contribution to the growth and success of the
Company and desires to assure the Company of the Employee's continued employment
in an executive capacity and to compensate him therefor; and
WHEREAS, the Company and the Employee each wishes that this Agreement
supersede and render void the terms of that certain Employment Agreement dated
as of January 26, 1994 by and between the Company and the Employee; and
WHEREAS, the Employee wishes to continue his employment by the Company and
to commit himself to serve the Company on the terms herein provided;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. Position, Responsibilities and Term of Employment.
-------------------------------------------------
1.01 Position and Responsibilities. The Employee shall serve as Chairman
-----------------------------
of the Board, Chief Executive Officer and President of the Company and in such
additional management position(s) as the Board shall designate. In this
capacity the Employee shall, subject to the by-laws of the Company and to the
direction of the Board, have general supervisory responsibility for the
operations of the Company's business. The Employee shall be accountable to the
Board and shall perform and discharge, faithfully, diligently and to the best of
his ability, his duties and responsibilities hereunder. The Employee shall
devote substantially all of his working time and efforts to the business and
affairs of the Company.
1.02 Term. Subject to the provisions of Sections 1.03, 1.04, 1.05 and
----
1.06 hereof, the term of this Agreement shall commence on the Effective Date and
shall expire on the fifth anniversary of the Effective Date.
1.03 Termination on Account of the Employee's Death. In the event of the
----------------------------------------------
Employee's death during the term of this Agreement, this Agreement shall
terminate except as provided in this Section 1.03. Following the Employee's
death, the beneficiary or beneficiaries indicated below shall be entitled to the
following benefits:
(a) For a period of six months subsequent to the date of the Employee's
death, the Company shall continue to pay an amount equal to the Employee's
Base Salary (as defined in Section 2.01 hereof) to Xxxxx X. Xxxxxxx, the
Employee's beneficiary, or such other beneficiary or beneficiaries as he
may later designate
(or to his estate, if he fails to make such designation) at the salary rate
in effect on the date of his death, said payments to be made on the same
periodic dates as salary payments would have been made to the Employee had
he not died.
(b) For a period of six months subsequent to the date of the Employee's
death, the Employee's surviving spouse, if any, shall continue to receive
all benefits described in Section 2.04 hereof in effect on the date of his
death. For purposes of determining the amount of such benefits, the
Employee shall be deemed to have remained in the employ of the Company,
with an annual salary at the rate in effect on the date of his death. In
addition, service credits under the benefit plans will continue to accrue
during such six-month period as if the Employee had remained an employee of
the Company. If benefits or service credits contemplated by the previous
two sentences cannot be provided under any benefit plan because of a
prohibition in the terms of the plan, the Company shall pay or provide
directly for payment of any benefits which would have been payable if the
terms of such benefit plan allowed for the crediting required by the two
previous sentences.
The Employee may change the beneficiary for the purposes of this Section 1.03 by
making a written designation and delivering such designation to the Secretary of
the Company. If the Employee makes more than one such written designation, the
designation last received by the Chairman of the Board before the Employee's
death shall control.
1.04. Termination for Cause. The Company shall have the right, after
---------------------
fourteen (14) days' written notice to the Employee, to terminate his employment
for cause. For purposes of this Agreement, cause ("Cause") shall mean (a)
committing fraud, misappropriation or embezzlement in the performance of duties
as an employee of the Company, (b) conviction of a felony involving a crime of
moral turpitude, (c) willful disregard of any written directive of the Board
that is not inconsistent with the Company's Certificate of Incorporation, by-
laws or applicable law, (d) an act of the Employee constituting willful material
breach by the Employee of any material provision of this Agreement or (e) the
Employee willfully engaging in any business activity that materially conflicts
with Employee's duties owed to the Company. Any termination of the Employee for
Cause after a Change of Control occurs (as defined in Section 4.03(a) hereof)
must relate to an act or omission of the Employee occurring after the Change of
Control occurs.
1.05 Termination for Other than Cause. Subject to the provisions of
--------------------------------
Section 4 hereof, the Employee's employment may be terminated by either party by
giving thirty (30) days written notice to the other party. If the Employee
terminates his employment, it shall be considered to be a termination of the
Employee's employment by the Company for other than Cause if any of the
following events shall occur: if the Company (a) fails to appoint (or elect)
the Employee to the position or positions listed in Section 1.01 hereof; (b)
fails to comply with the provisions of Section 2 hereof; (c) engages in conduct
that, against the Employee's volition, would cause the Employee to commit
fraudulent acts or would expose the Employee to criminal liability; (d) reduces
or attempts to reduce the Employee's annual compensation (as described in
Section 2
2
hereof); (e) takes or attempts to take from the Employee a title or an
office; or (f) effects or attempts to effect a significant change in the
Employee's responsibilities and/or duties which constitutes a demotion in the
judgment of the Employee (such judgment being exercised in good faith).
1.06 Extensions. On the fifth anniversary of the Effective Date, and on
----------
each subsequent annual anniversary of the Effective Date thereafter, this
Agreement shall be automatically extended for an additional year unless either
party notifies the other in writing more than six months prior to the relevant
anniversary date that this Agreement is no longer to be extended.
2. Compensation.
------------
2.01 Base Salary. For the period beginning with the date hereof through
-----------
October 31, 1998, the Company shall pay to the Employee for the services to be
rendered hereunder a base salary (the "Base Salary") at an annual rate of
$525,000 and, for periods beginning after October 31, 1998, the Base Salary
shall be determined by the Company's Compensation and Stock Option Committee;
provided, however, that such Base Salary shall be paid at an annual rate not
less than $525,000. The Employee's Base Salary shall be payable in periodic
instruments in accordance with the Company's usual practice for its senior
executive officers.
2.02 Performance Bonus. The Employee shall be eligible to receive an
-----------------
annual performance bonus (the "Performance Bonus"), the amount of which shall be
determined pursuant to the Company's Senior Management Incentive Plan
established by the Company's Compensation and Stock Option Committee. Any
Performance Bonus earned under this Section 2.02 shall be payable in accordance
with the Company's normal practices with respect to bonus payments made to the
Company's senior executive officers; provided, however, that any such
Performance Bonus shall be paid not later than thirty (30) days after audited
financial statements with respect to the Company's fiscal year during which such
bonus was earned become available.
2.03 Stock Option. The Company and the Employee acknowledge that, on the
------------
Effective Date, the Company granted a nonqualified stock option to the Employee
to purchase 75,000 shares of the Company's Class A Common Stock at an exercise
price per share equal to the fair market value on the Effective Date and subject
to certain time and stock price performance vesting provisions as set forth in
that certain Stock Option Agreement between the Company and the Employee, dated
as of April 27, 1998 (the "Stock Option Agreement"), a copy of which is attached
hereto as Exhibit A.
2.04 Participation in Benefit Plans. The Employee shall be entitled to
------------------------------
participate in, and receive benefits under, all the Company employee benefit
plans and arrangements in effect on the Effective Date for as long as such plans
and arrangements may remain in effect (including, but not limited to,
participation in any pension and profit-sharing plan adopted by the Company, any
employee stock option plan and all group life, health, dental, disability and
other insurance) or any substitute or additional plans, policies or arrangements
made available in the future to the executives and key management employees of
the Company, subject to and on a
3
basis consistent with the terms, conditions and overall administration of such
plans, policies and arrangements. Nothing paid to the Employee under any plan,
policies or arrangement presently in effect or made available in the future
shall be deemed to be in lieu of other compensation to the Employee hereunder as
described in this Section 2.
2.05 Vacation Days; Sick Leave. The Employee shall be entitled to annual
-------------------------
vacation time and sick leave without reduction in Base Salary in the same amount
and manner as other senior executive officers of the Company.
2.06 Expenses. During the term of his employment hereunder, the Employee
--------
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by him (in accordance with the policies and procedures established by
the Board for its senior executive officers) in performing services hereunder,
provided that the Employee properly accounts therefor in accordance with Company
policy.
3. Rights and Obligations Binding on Employee, the Company and its
---------------------------------------------------------------
Successor(s).
------------
This Agreement and the rights and obligations of the parties hereto shall
bind and inure to the benefit of each of the parties hereto and shall also bind
and inure to the benefit of any successor or successors, or assignee or
assignees, of the Company. Except as to any such successor or assignee of the
Company, neither this Agreement nor any rights, obligations or benefits
hereunder may be assigned by the Company or by the Employee. As used in this
Agreement, a "successor" or "assignee" of the Company shall include but not be
limited to (a) any person or entity succeeding the Company, whether by sale or
exchange of stock or assets, merger, consolidation, recapitalization, or a
reorganization of any kind, including but not limited to all reorganizations
defined in section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"), or (b) any person or entity receiving, directly or indirectly, any
substantial portion of the business, properties or assets of the Company, in any
type of transfer, including, but not limited to, any sale, exchange or other
transfer of any assets of the Company, or any transfer in connection with the
liquidation and/or dissolution of the Company, or the bankruptcy of the Company.
For any such transaction in which the successor or assignee does not succeed to
the obligations of the Company under this Agreement by operation of law, the
Company agrees that it shall be a precondition to the closing of such
transaction that the successor or assignee expressly assume the Company's
obligations under this Agreement. Except as provided in Section 4.03 hereof,
the rights and obligations of the parties to this Agreement shall not be limited
in any way or affected by a Change of Control (as defined in Section 4.03 (a)
hereof).
4. Consequences of Early Termination of Agreement.
----------------------------------------------
4.01 Termination by the Company Other than for Cause. If the Company
-----------------------------------------------
terminates this Agreement other than for Cause (including if the Employee
terminates this Agreement under the circumstances described in the second
sentence of Section 1.05 hereof), then the Employee (or the Employee's
beneficiary designated pursuant to Section 1.03 hereof if the Employee is
deceased at the time of payment) shall continue, throughout the remainder of
what would have been the normal term of this Agreement, to receive such
compensation and benefits as are provided to the Employee pursuant to Section 2
hereof; provided, however, that in no event shall
4
the Employee receive, during the period beginning with the date of termination
of the Employee's employment and the end of what would have been the normal term
of this Agreement, an aggregate amount of compensation and benefits less than
one and one-half (11/2) times the Employee's total compensation (including, for
purposes of computing total compensation under this Section 4.01, the amount of
any bonus or employee benefits accrued during the relevant period) earned during
the twelve-month period immediately preceding the effective date of such
termination. The Employee's right to receive such compensation and benefits
shall not be subject to any obligations on the part of the Employee to perform
any work or other obligations on behalf of the Company, its successor(s) or
assignee(s), or to mitigate his damages; provided, however, that if the Employee
actually receives compensation for services rendered to any person other than
the Company, which services were rendered after the date the Employee was
terminated by the Company and before the date constituting the end of what would
have been the normal term of this Agreement, then the amount of any such
compensation shall be subtracted from the amount otherwise owed to the Employee
by the Company pursuant to this Section 4.01. For the purposes of determining
the amount of benefits to which the Employee shall continue to be entitled
pursuant to Section 2.04 above, the Employee shall be deemed, throughout the
period of his entitlement pursuant to this Section 4.01, to have remained in the
employ of the Company with an annual salary at the rate in effect on the date of
his termination of employment. If continuation of any of the benefits described
in Section 2.04 cannot be provided as contemplated by this Section 4.01 on
account of a prohibition in the terms of a benefit plan, the Company shall pay
or provide directly for payment of any benefits which would have been payable if
the terms of such plan allowed for the crediting anticipated in this Section
4.01.
4.02 Termination by the Company for Cause. If the Company terminates this
------------------------------------
Agreement for Cause, then the Company shall thereafter have no further
obligations or liability to the Employee under this Agreement; provided,
however, that the Employee shall be entitled to receive within thirty (30) days
after the effective date of such termination such compensation and benefits as
are accrued and unpaid on the effective date of such termination.
4.03 Termination Following Change of Control. If there is a Change of
---------------------------------------
Control while this Agreement is in effect, the provisions of this Section 4.03
shall apply and shall continue to apply for a one-year period following the
Change of Control, regardless of whether or not this Agreement is terminated.
If during the one-year period following a Change of Control the Employee's
employment is terminated by the Company without Cause, the Employee (or the
Employee's beneficiary designated pursuant to Section 1.03 hereof if the
Employee is deceased at the time of payment) shall receive such compensation as
is provided to the Employee pursuant to subsection (b) of this Section 4.03.
After said one-year period following said Change of Control, this Section 4.03
shall no longer apply, and all of the other provisions of this Agreement shall
apply and remain in full force and effect.
(a) For the purposes of this Section 4.03, Change of Control shall mean the
occurrence of one or more of the following three events:
5
(i) any one beneficial stockholder or affiliated group of beneficial
stockholders becomes at any time the beneficial holder of twenty-five
percent (25%) or more of the aggregate voting power of the issued and
outstanding securities of the Company with rights to vote for the
election of directors of the Company;
(ii) at any time after any "reorganization" involving the Company, as
such term is defined in section 368 of the Code, or any other type of
reorganization, recapitalization, merger, consolidation or sale of
assets involving the Company, or a contested election of a Company
director, or any combination of the foregoing, the individuals who
were directors of the Company immediately prior thereto shall cease to
constitute a majority of the Board; or
(iii) at any time after a tender offer or exchange offer for voting
securities of the Company (other than by the Company), the individuals
who were directors of the Company immediately prior thereto shall
cease to constitute a majority of the Board.
(b) If the Employee becomes entitled to receive compensation pursuant to
this Section 4.03, then, in addition to any payments to which the Employee
is entitled under Section 4.01 hereof, the Employee shall receive within
thirty (30) days of the termination of his employment a lump-sum payment
equal to three (3) times the Employee's average annual total compensation
(including, for purposes of computing total compensation under this Section
4.03, the amount of any bonus and employee benefits accrued during the
relevant period) earned during the five-year period immediately preceding
the effective date of the change of control (such payment hereinafter
referred to as the "Termination Payment"). If any amount payable to the
Employee pursuant to this Section 4.03 would subject the Employee to the
excise tax imposed by section 4999 of the Code, then the amount of the
Termination Payment that the Employee would otherwise have been entitled to
receive under this Section 4.03 shall be reduced to the amount that
maximizes the amount of the Termination Payment net of such excise tax.
4.04 Other Terminations. If the Employee terminates his employment under
------------------
this Agreement under such circumstances as would not cause the Employee to be
deemed to be terminated by the Company for other than Cause as provided in the
second sentence of section 1.05 hereof, and Section 4.03 does not apply to such
termination, then the Employee shall be entitled to receive within thirty (30)
days after the effective date of such termination such compensation and benefits
as are accrued and unpaid on the effective date of such termination, and neither
party to this Agreement shall thereafter have any further liability to the other
under this Agreement.
6
5. Miscellaneous.
-------------
5.01 Governing Law. This Agreement shall be construed in accordance with
-------------
and governed for all purposes by the laws of The Commonwealth of Massachusetts.
5.02 Interpretation. In case any one or more of the provisions contained
--------------
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
5.03 Legal Fees. Any legal expenses incurred by either party to this
----------
Agreement in enforcing its rights hereunder (including any legal expenses
incurred with respect to any arbitration proceeding pursuant to Section 5.04
hereof) shall be borne and paid solely by such party. Notwithstanding the
foregoing or anything to the contrary contained in this Agreement, no provision
of this Agreement shall be construed as a limitation on or waiver of any rights
that one party to this Agreement may have to be reimbursed by the other party to
this Agreement for such first party's attorneys' fees pursuant to any statute or
other applicable law.
5.04 Arbitration of Disputes. Any controversy or claim arising out of, or
-----------------------
relating to, any provision of this Agreement shall be settled by binding
arbitration in accordance with the laws of The Commonwealth of Massachusetts by
three arbitrators, one of whom shall be appointed by the Company, one by the
Employee, and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators, which shall be as provided in this
Section 5.04. Judgment on the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof.
5.05 Notices. Any notice required or permitted to be given hereunder
-------
shall be effective when received and shall be sufficient if in writing and if
personally delivered or sent by certified or registered mail, return receipt
requested, to the party to receive such notice at its address set forth below or
at such other address as a party may by notice specify to the other.
If to the Company: If to the Employee:
Xxxxxxx Shoe Company Inc. Xxxx X. Xxxxxxx
000 Xxxxxxx Xxxxxx 0 Xxxxxxx Xxxxx
X.X. Xxx 00 Xxxxxxx, XX 00000
Xxxxxxxxx (Xxxxxx), XX 00000
Attn: Xxxxx X. Xxxxxxxx,
Executive Vice President
With a copy to: With a copy to:
Xxxxxxxx X. Xxxxx, Esq. Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx, Xxxx & Xxxxxxxx LLP Peckham, Lobel, Xxxxx, Prince & Tye
000 Xxxxx Xxxxx Xxxxxx Xxxxxx, XX 00000
Xxx Xxxxxxx, XX 00000
7
5.06 Confidential Information. The Employee will not disclose to any
------------------------
other person or entity (except as required by applicable law or in connection
with the performance of his responsibilities hereunder), or use for his own
benefit, any confidential information of the Company obtained by him incident to
his employment with the Company. The term "confidential information" includes,
without limitation, financial information, business plans, prospects and
opportunities which have been discussed or considered by the Company's
management but does not include any information which has become public other
than on account of the Employee's failure to comply with the provisions of this
Section 5.06.
5.07 Non-Competition. The Employee agrees that, for a period of eighteen
---------------
(18) months following the date of termination of this Agreement (other than a
termination that results solely from the expiration of the initial or extended
normal term of this Agreement contemplated by Sections 1.02 and 1.06 hereof), he
will not 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, or solicit any
employees of the Company on behalf of, any entity or business which competes
directly with the footwear or retail businesses conducted by the Company or by
any group, division or subsidiary of the Company, in any area where such
business is being conducted or is proposed to be conducted at such date of
termination; provided, however, that this provision shall not apply if this
Agreement is terminated as provided in the parenthetical phrase set forth above
in this sentence. It is understood and agreed that, for the purposes of the
foregoing provisions of this Section 5.07, (i) no business shall be deemed to be
a business conducted by the Company, or any group, division or subsidiary of the
Company, unless not less than five percent (5%) of the Company's consolidated
gross sales or operating revenues is derived from, or not less than five percent
(5%) of the Company's consolidated assets is devoted to, such business; and (ii)
no business conducted by any entity by which the Employee is employed or in
which he is interested or with which he is connected or associated shall be
deemed competitive with any business conducted by the Company unless it is one
from which five percent (5%) or more its consolidated gross sales or operating
revenues is derived, or to which five percent (5%) or more of its consolidated
assets is devoted; provided, however, that if the actual gross sales or
operating revenues or assets of such entity derived from or devoted to such
business is equal to or in excess of ten percent (10%) of the most nearly
comparable figure for the Company, such business of such entity shall be deemed,
to be competitive with a business of the Company. Furthermore, ownership of five
percent (5%) or less of the voting stock of any publicly held corporation shall
not constitute a violation of this Section 5.07.
5.08 Amendment and Waiver. This Agreement may not be amended, supplemented
--------------------
or waived except by a writing signed by the party against which such amendment,
supplement or waiver is to be enforced. The waiver by any party of a breach of
any provision of this Agreement shall not operate to waive, or be construed as a
waiver of, any other breach of that provision nor as a waiver of any breach of
another provision.
8
5.09 Binding Effect. Subject to the provisions of Section 3 hereof, this
--------------
Agreement shall be binding on the successors and assigns of the parties hereto.
5.10 Other Agreements. This Agreement supersedes and renders void the terms
----------------
of any previously executed employment, including but not limited to that certain
Employment Agreement dated January 26, 1994 between the Company and the
Employee, and/or compensation agreements between the parties, which shall no
longer be considered to have any force or effect.
5.11 Counterparts. This Agreement may be executed in two counterparts,
------------
each of which is an original but which shall together constitute one and the
same instrument.
Upon execution below by both parties, this Agreement will enter into full
force and effect as of April 27, 1998.
XXXXXXX SHOE COMPANY INC. THE EMPLOYEE
By: /s/ Xxxxx X. Xxxxxxxx /s/ Xxxx X. Xxxxxxx
Xxxxx X. Xxxxxxxx Xxxx X. Xxxxxxx
Executive Vice President
9
Exhibit A
---------
Stock Option Agreement
10
