EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
effective as of 5th day of January, 2006, by and between Xxxxxxxx-ALCO Stores,
Inc., a Kansas corporation (the "Company"), and Xxxxx X. Xxxxxxxxxx, an
individual.
W I T N E S S E T H:
WHEREAS, the Company desires to employ Xxxxx X. Xxxxxxxxxx as the
Company's Senior Vice President - Real Estate, Risk Control, Human
Resources, Travel (hereinafter the "Employee") on the terms and conditions
set forth herein;
NOW, THEREFORE, the Company and the Employee, each intending to be legally
bound, hereby mutually covenant and agree as follows:
SECTION I.
DEFINITIONS
The following terms used in this Agreement shall have the meanings set
forth below:
"Earned Obligations" shall mean, as of the date of Termination of
Employment, the sum of (A) the Employee's aggregate Base Salary through such
date to the extent not theretofore paid, plus(B) all vacation pay, expense
reimbursements and other cash entitlements earned by the Employee hereunder as
of such date to the extent not theretofore paid.
"Base Salary" shall mean the amount set forth in Section 3(a).
"Board" shall mean the board of directors of the Company.
"Cause" shall mean (i) the Employee's material violation of any of
Sections 2(c), 4(a),4(b) or 4(c) of this Agreement; (ii) the Employee engaging
in conduct which is fraudulent or illegal with respect to the Company or any
of its subsidiaries; (iii) the Employee's gross negligence in the performance
or nonperformance of his duties or responsibilities hereunder; (iv) the
Employee's engagement in misconduct which is materially injurious or
materially damaging to the Company or any of its subsidiaries or the
reputation of the Company or any of its subsidiaries; (v) the Employee's
conviction of, or plea of nolo contendere to, a felony; (vi) failure to
cooperate with regulatory or legal proceedings; or (vii) material breach of
Company policy.
"Competitor" shall have the meaning set forth in Section 4(b).
"Confidential Information" shall have the meaning set forth in
Section 4(c).
"Change of Control" shall mean a change in control of a nature as
set forth in the Xxxxxxxx-ALCO Stores, Inc. Incentives Stock Option Plan of
2003, or as may be amended ("ISO Plan").
"Disability" shall mean Employee's permanent disability or
incapacity as determined in accordance with the Company's disability insurance
policy, if such a policy is
then in effect, or if no such policy is then in effect, such
permanent disability or incapacity shall be determined by the Company in its
good faith judgment based upon inability to perform the essential functions of
his position, with reasonable accommodation by the Company, for a period in
excess of 180 days during any period of 365 calendar days.
"Good Reason" means assignment of the Employee to duties and
responsibilities that are substantially inconsistent with the scope of the
duties and responsibilities of Employee or the Company has a Change in Control.
"Person" shall mean an individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
other entity or governmental or other agency or political subdivision thereof.
"Term" shall mean the period beginning on the date of this
Agreement and ending as provided in Section 2(b).
"Termination of Employment" shall mean (i) the Employee's death or
Disability, (ii) termination by the Company of the Employee's employment for
Cause or without Cause, (iii) resignation by the Employee from the employ of
the Company, (iv) retirement of the Employee or (v) expiration of the Term.
SECTION II.
EMPLOYMENT AND TERM
(a) Employment. The Company hereby offers to employ the Employee as
Employee of the Company and each of its subsidiaries, and the Employee hereby
accepts such employment, for the Term.
(b) Term. The Term shall commence on February 1, 2006 and end on January
31, 2007 ("Original Term"). The Term shall automatically extend for successive
one year periods (each, a "Supplemental Term") following the expiration of the
Original Term unless either party delivers written notice to the other party
no later than 60 days preceding the end of the Original Term or any
Supplemental Term, as the case may be, of intent not to renew. See also
Section V. No Supplemental Term may start after the date of Termination of
Employment.
(c) Duties. The Employee shall have all powers, duties and
responsibilities commensurate with his position as set forth in Section 2
hereof or as may be assigned by the Company from time to time (provided any
such powers, duties and responsibilities assigned by the Company are
commensurate with such position). The Employee shall devote substantially all
of his business time, attention and energies to the performance of his duties
hereunder. Notwithstanding the foregoing, nothing in this Agreement shall
restrict the Employee from managing his personal investments, personal
business affairs and other personal matters, or serving on civic or charitable
boards or committees, provided that none of such activities interferes with
the performance of his duties and responsibilities hereunder or conflicts or
competes with the interests of the Company or its subsidiaries. The Employee
shall not serve on the Board of Directors or similar governing body of any
for-profit Person without the consent of the Company, which consents will not
be unreasonably withheld. The Employee shall report to the President of the
Company.
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SECTION III.
COMPENSATION AND BENEFITS
(a) Base Salary. For services performed by the Employee for the Company
and its subsidiaries pursuant to this Agreement, the Company shall pay the
Employee an initial Base Salary of One Hundred Eighty-Five Thousand Eight
Hundred Dollars ($185,800.00) per year, payable in accordance with the
Company's regular payroll practices and subject to annual review by the
Company to consider increases.
(b) Bonus. The Company shall have a bonus plan for the Employee as
follows: If the Company has a Return on Equity ("XXX") as later defined of at
least six percent (6%) after the completion of fiscal year 2006, and such
percentage thereafter as set forth by the Company, Employee will receive a
bonus of thirty-five percent (35%) of his base pay, all paid within 30 days
after determination. XXX is defined for any completed fiscal year as (Earnings
from continuing operation before discontinued operations excluding cumulative
change in accounting and one-time termination benefits recognized in
accordance with FAS 146) divided by (stockholders' equity beginning of year
plus stockholders' equity end of year divided by two). The Company, at its
sole discretion may pay, or not pay any other bonus as it determines. Employee
agrees to reimburse the Company and/or have the Company offset any payments
due to Employee to the extent that any bonuses are paid on financial
information which is later determined to be materially overstated and results
in any financial restatement, which would have lessened the amount paid to
Employee.
(c) Additional Benefits. The Employee shall be eligible for such fringe
benefits, if any, by way of insurance, hospitalization, vacations and bonus
programs normally provided to other members of the executive management of the
Company generally and such additional benefits as may be from time to time
agreed upon in writing between the Employee and the Company.
(d) Expenses. The Company shall reimburse the Employee for all ordinary
and necessary expenses incurred and paid by the Employee in the course of the
performance of the Employee's duties pursuant to this Agreement and consistent
with the Company's policies in effect from time to time with respect to travel,
entertainment and other business expenses, and subject to the Company's
requirements with respect to the manner of approval and reporting of such
expenses.
SECTION IV.
COVENANTS
(a) Non-Interference. For a period ending on the second anniversary of
the Termination of Employment of the Employee, the Employee agrees to refrain
from, directly, indirectly or as an agent on behalf of or in conjunction with
any Person, (i) soliciting or encouraging any Employee of the Company or its
subsidiaries who is employed in an executive, managerial, administrative or
professional capacity or who possesses Confidential Information (as defined
below), to leave the employment of the Company or its subsidiaries or (ii)
soliciting any customer of the Company or any of its subsidiaries on behalf of
any Competitor.
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(b) Noncompetition. For a period ending on the second anniversary of the
Termination of Employment of the Employee, the Employee will not, either
directly or indirectly, own, manage, operate, join or control or participate
(or serve as a consultant or in a similar position) in the ownership,
management operation or control of, any business, entity, firm, partnership,
corporation or other Person, whether, private, governmental or
quasi-governmental ("Competitor"), other than the Company and its
subsidiaries, which is engaged, directly or indirectly, in any state where the
Company has a retail establishment, including (i) the business of the
development, design, production, supply, sale or distribution of small variety
or discount retail stores or (ii) any other business engaged in or being
developed by the Company or its subsidiaries in which the Employee has played
a material role in the acquisition, development or management of such
business; provided, however, that the Employee will not be deemed to engage in
any of the businesses of any publicly traded corporation solely by reason of
his ownership of less than 2% of the outstanding stock of such Person or by
serving as a director on the board of directors of a customer or supplier of
the Company at the request of the Company.
(c) Nondisclosure of Confidential Information.
(l) Company Information. In the performance of his duties, the
Employee has
previously had, and may be expected in the future to have, access to Company
proprietary information, technical data, trade secrets or know-how, including,
but not limited to, research, product plans, products, methods, strategies,
services, customer lists, prospective customer lists, customer records,
telephone lists and all other information with respect to customers (including,
but not limited to, customers of the Company on whom he called or with whom he
became acquainted during the term of his employment), documents, notes, working
papers, records, systems, contracts, agreements, market data and related
information, software, developments, inventions, processes, formulas,
technology, designs, drawings, engineering information, hardware configuration
information, marketing plans, finances, pricing and credit documents and
policies, service development techniques or plans, business acquisition plans,
new personnel acquisition plans or other business information presently owned
or at any time hereafter developed by the Company or its subsidiaries, agents
or consultants or used presently or at any time hereafter in the course of the
business of the Company and its subsidiaries, that are not otherwise part of
the public domain (collectively, the "Company Information"). All such Company
Information is considered secret and has been and/or will be disclosed to the
Employee in confidence, and the Employee acknowledges that, as a consequence of
his employment and position with the Company and its subsidiaries, the Employee
will have access to and become acquainted with Company Information. Except in
the performance of his duties to the Company or its subsidiaries, the Employee
shall not, during the Term and at all times thereafter, directly or indirectly
for any reason whatsoever, disclose or use any such Company Information. All
records, files, drawings, documents, equipment and other tangible items,
wherever located, relating in any way to or containing Company Information,
which the Employee has prepared, used or encountered or shall in the future
prepare, use or encounter, shall be and remain the Company's sole and exclusive
property and shall be included in the Company Information. Upon termination of
this Agreement, or whenever requested by the Company, the Employee shall
promptly deliver to the Company any and all of the Company Information and
copies thereof, not previously delivered to the Company or its subsidiaries,
that may be in the possession or under the control of the Employee. The
foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Information to the
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extent, but only to the extent, (i) expressly permitted or required pursuant to
any other written agreement between or among the Employee and the Company
(and/or any of its subsidiaries), (ii) such Company Information which has
become publicly known and made generally available through no wrongful act of
the Employee or of others who were under confidentiality obligations as to the
item or items involved, (iii) the Employee's general skills and education, and
know-how of broad application known to the Employee or independently developed
by the Employee prior to the Employee's employment by the Company or (iv) the
Employee is required to disclose Company Information by or to any court of
competent jurisdiction or any governmental or quasi-governmental agency,
authority or instrumentality of competent jurisdiction, provided, that the
Employee shall, prior to any such disclosure, immediately notify the Company of
such requirement and provided further, that the Company shall have the right,
at its expense, to object to such disclosures and to seek confidential
treatment of any Company Information to be so disclosed on such terms as it
shall determine.
(2) Third Party Information. In the performance of his duties, the
Employee has previously had, and may be expected in the future to have, access
to confidential or proprietary information with respect to third parties which
is subject to a duty on the Company's part to maintain the confidentiality of
such information and to use it only for certain limited purposes (the "Third
Party Information"). Except in the performance of his duties to the Company or
its subsidiaries, the Employee shall not, during the Term and at all times
thereafter, directly or indirectly for any reason whatsoever, disclose or use
any such Third Party Information.
(d) Enforcement.
(1) The Employee acknowledges that violation of any of the
covenants and agreements set forth in this Section IV would cause the Company
or any of its subsidiaries irreparable damage for which the Company or any of
its subsidiaries cannot be reasonably compensated in damages in an action at
law, and therefore in the event of any breach by the Employee of this Section
IV, the Company or its subsidiaries shall be entitled to make application to a
court of competent jurisdiction for equitable relief by way of injunction or
otherwise (without being required to post a bond). Employee agrees to pay all
of the Company's court costs and attorneys' fees incurred in enforcing its
rights under this Section IV and all other obligations of Employee under this
Employment Agreement. This provision shall not, however, be construed as a
waiver of any of the rights which the Company or its subsidiaries may have for
damages under this Agreement or otherwise, and all of the Company's and its
subsidiaries' rights and remedies shall be unrestricted. This Section IV shall
survive termination of this Agreement or Termination of Employment for any
reason whatsoever.
(2) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction
where it is applicable but for such contravention or invalidity, such
contravention or invalidity shall not invalidate all of the provisions of this
Agreement, but rather the Agreement shall be reformed and construed, insofar as
the laws of that state or jurisdiction are concerned, as not containing the
provision or provisions, but only to the extent that they are contravening or
are invalid under the laws of that state or jurisdiction, and the rights and
obligations created hereby shall be reformed and construed and enforced
accordingly. In particular, if any of the covenants or agreements set forth in
Section IV, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, or otherwise, the
parties hereby expressly agree that
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the court making such determination shall have the power to reduce
the duration and/or the areas of such provision or otherwise limit any such
provision, and, in its reduced form, such provision shall then be enforceable.
The parties intend that each covenant set forth in this Section IV shall be
deemed to be a series of separate covenants, one for each and every county and
political subdivision to which it is applicable.
(3) The Employee understands that the provisions of this Section
IV may limit his ability to earn a livelihood in a business similar to the
business of the Company and its subsidiaries but nevertheless agrees and
hereby acknowledges that such provisions do not impose a greater restraint
than is necessary to protect the goodwill or other business interests of the
Company and its subsidiaries and the consideration provided under this
Agreement, including, without limitation, any amounts or benefits provided
hereunder, is sufficient to compensate the Employee for the restrictions
contained in this Section IV. In consideration of the foregoing and in light
of the Employee's education, skills and abilities, the Employee agrees that he
will not assert, and it should not be considered, that any provisions of this
Section IV prevented him from earning a living or otherwise are void, voidable
or unenforceable or should be voided or held unenforceable.
(4) Each of the covenants of this Section IV is given by the
Employee as part of the consideration for this Agreement and as an inducement to
the Company to enter into this Agreement and accept the obligations hereunder.
SECTION V.
TERMINATIONS
(a) Termination of Agreement. At the Termination of Employment, Sections
4(c), 4(d) and 5(c) will survive, and Sections 4(a) and 4(b) will survive only
to the extent set forth in this Section V.
(b) Procedures Applicable to Termination of Employment. The Employee
may resign upon notice to the Company. The Employee must, however, give at least
thirty (30) days advance notice of his resignation. The Company may notify the
Employee that his employment is terminated, with or without Cause, or for
Disability and in such case the date of Termination of Employment will be the
date such notice is given.
(c) Obligations of the Company and the Employee Upon Termination of
Employment.
(1) Termination In the Event of Death or Disability.
(A) In the event of the Employee's death or Disability, the
Company shall pay to the Employee or the Employee's heirs, estate or legal
representatives, as the case may be, the following:
(i) all Earned Obligations in a lump sum within
thirty (30) days after the date of Termination of Employment; and
(ii) any benefits earned by the Employee as of the
date of Termination of Employment under all qualified and non qualified
retirement, pension, profit
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sharing and similar plans of the Company to such
extent, in such manner and at such time as are provided under the terms of such
plans and arrangements.
(B) In the event of Termination of Employment as a result of
the Employee's Disability, the Company shall keep in force existing health and
dental benefits for the Employee and his dependents for a period of twelve (12)
months from the date of Termination of Employment on the basis in effect at the
time of such Termination of Employment.
(C) In the event of Termination of Employment as a result of
the Employee's Disability, the Employee agrees that the covenants made by the
Employee set forth in Sections 4(a) and 4(b) of this Agreement will remain in
effect for the period specified therein.
(2) Termination Without Cause. for Good Reason. or Company's
Failure to Extend.
(A) In the event that the Company terminates the Employee's
employment without Cause or the Employee terminates his employment for Good
Reason (but excluding Termination of Employment by reason of the Employee's
death or Disability), or the Company fails to extend in accordance with Section
2, the Company shall pay to the Employee the following:
(iii) all Earned Obligations in a lump sum within
thirty (30) days after the date of Termination of Employment;
(iv) any benefits earned by the Employee as of the
date of Termination of Employment under all qualified and nonqualified
retirement, pension, profit sharing and similar plans of the Company to such
extent, in such manner and at such time as are provided under the terms of
such plans and arrangements;
(v) the Company shall pay to the Employee,
subject to applicable withholding, one additional year of Base Salary paid in
accordance with the Company's regular payroll practices; and
(vi) the Company shall continue all benefits
coverage of the Employee and his dependents provided under the Company's
benefit plans or policies (or under other benefit plans or policies that
provide substantially equivalent coverage) for the unexpired portion of the
Original Term and/or Supplemental Term.
(B) If the Employee obtains other employment that would cause
Employee to violate Section 4(b) were it then in effect during the period the
Company remains obligated to compensate Employee as set forth in this Section 5,
the Employee shall promptly notify the Company thereof and of the aggregate
gross compensation payable to Employee in respect of such other employment, and
the Company shall have the right to deduct, dollar for dollar, from the amount
payable by the Company to Employee the gross aggregate amount of compensation
Employee receives from such other employment.
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(C) The Employee agrees that the covenants made by the
Employee set forth in Sections 4(a) and 4(b) of this Agreement will remain in
effect for the period specified therein.
(3) Other Terminations.
(A) In the event of Termination of Employment for any other
reason
(including a termination for Cause or resignation), the Company shall pay
to the Employee the following:
(vii) all Earned Obligations in a lump sum
within thirty (30) days after the date of Termination of Employment; and
(viii) any benefits earned by the Employee as of
the date of Termination of Employment under all qualified and nonqualified
retirement, pension, profit sharing and similar plans of the Company to such
extent, in such manner and at such time as are provided under the terms of
such plans and arrangements.
(B) The Employee agrees that the covenants made by the
Employee set forth in Sections 4(a) and 4(b) of this Agreement will remain in
effect for the periods specified therein.
(4) Exclusivity. The amounts payable to the Employee pursuant to
Sections 5(c), as the case may be, shall be the Employee's sole remedy in the
event of the Termination of Employment of the Employee, and the Employee
waives any and all rights to pursue any other remedy at law or in equity;
provided, however, that this shall not constitute a waiver of any rights
provided under any federal, state or local laws or regulations relating to
discrimination in employment and provided, further, that nothing in this
Section 5(c) or elsewhere in this Agreement is intended to limit the
Employee's rights under Company Plans or applicable law which by their terms
survive the applicable Termination of Employment.
SECTION VI.
EMPLOYEE REPRESENTATIONS
(a) Employee represents that he is free to enter into this Agreement and
that he has no outstanding agreements which would prohibit him from the
execution of this Agreement and carrying out the responsibilities delegated
herein.
SECTION VII.
MISCELLANEOUS
(a) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the heirs and representatives of the Employee and the successors and
assigns of the Company. The Company shall require any successor (whether direct
or indirect, by purchase, merger, reorganization, consolidation, acquisition of
assets or stock, liquidation, or otherwise), by agreement in form and substance
reasonably satisfactory to the Employee, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that
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the Company would be required to perform this Agreement if no such
succession had taken place. Regardless of whether such agreement is executed,
this Agreement shall be binding upon any successor of the Company in accordance
with the operation of law, and such successor shall be deemed to be the
"Company" for purposes of this Agreement.
(b) Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as
follows:
(1) if to the President or the Company, to:
Xxxxxxxx-ALCO Stores, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx, President
(2) if to the Employee to:
Xxxxx X. Xxxxxxxxxx
Xxxxxxxx-Alco Stores, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Any such address may be changed by written notice sent to the other
party at the last recorded address of that party.
(c) Tax Withholding. The Company shall provide for the withholding of
any taxes required to be withheld under federal, state and local law (other
than the employer's portion of such taxes) with respect to any payment in cash
and/or other property made by or on behalf of the Company to or for the
benefit of the Employee under this Agreement or otherwise. The Company may, at
its option: (i) withhold such taxes from any cash payments owing from the
Company to the Employee or (ii) make other satisfactory arrangements with the
Employee to satisfy such withholding obligations.
(d) No Assignment; No Third-Party Beneficiaries. Except as otherwise
expressly provided in Section 6.1 herein, this Agreement is not assignable by
any party, and no payment to be made hereunder shall be subject to alienation,
sale, transfer, assignment, pledge, encumbrance or other charge. No person
shall be, or deemed to be, a third-party beneficiary of this Agreement.
(e) Execution in Counterparts. This Agreement may be executed by the
parties hereto in one or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on anyone counterpart.
(f) Governing Law: Jurisdiction: The validity of this Agreement and the
interpretation and performance of all its terms shall be governed by and
construed in accordance with the
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laws of the State of Kansas, without regard to the choice of law rules
thereof. Each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court sitting the District of Kansas in
the event any dispute that the parties fail to resolve arises out of this
Agreement, (b) agrees that it shall not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such
court, and (c) agrees that it shall not bring any action relating to this
Agreement in any court other than courts set forth above. In any such
proceeding, the parties agree to accept service of process by mail at the
addresses herein provided for notice.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not be construed as part of this Agreement or to
limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
XXXXXXXX-ALCO STORES, INC.
By: /s/ Xxxxx X. Xxxx
------------------------------------
Xxxxx X. Xxxx, President
/s/ Xxxxx X. Xxxxxxxxxx
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Xxxxx X. Xxxxxxxxxx
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