EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEEMENT, dated as of this 27 day of June, 1997, is by and
between SAX ARTS AND CRAFTS, INC., a Delaware corporation (the "Company") and
XXXXXXX X. XXXXX ("Employee").
RECITALS
The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to accept employment with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. EMPLOYMENT; TERM. The Company hereby employs Employee to perform the
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
four (4) years (the "Term"). This Agreement may be terminated prior to the end
of the Term in the manner provided for in Section 5 below.
2. POSITION AND DUTIES. The Company hereby employs Employee as President
of the Company. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of the president of the Company.
In addition, the Employee shall be responsible for such other duties as the
Board of Directors of the Company may direct. Employee will report directly to
the CEO of School Specialty, Inc. ("School"). Employee hereby accepts this
employment upon the terms and conditions herein contained and agrees to devote
all of his professional time, attention, and efforts to promote and further the
business of the Company. Employee shall faithfully adhere to, execute, and
fulfill all policies established by the Company's Board of Directors. Under no
circumstances shall the Employee be required by the Company to relocate from his
current place of residence to perform the services as described in this
Agreement.
3. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. Effective on the date hereof, the base salary payable
to Employee shall be One Hundred Twenty Five Thousand Dollars ($125,000.00)
per year, payable on a regular basis in accordance with the Company's
standard payroll procedures, but no less than monthly.
(b) INCENTIVE BONUS. During the Term, Employee shall be eligible to
receive an incentive bonus based upon his participation in School's
management bonus program as specified in Exhibit A as attached hereto. The
Employee shall be a participant of the School's management bonus
compensation category. This bonus compensation category normally offers a
30% annual bonus with the actual payout ranging from 0% to 100% of the base
salary of a qualified employee of the Company, based upon the financial
performance of the Company, and School, as well as the individual
performance of the qualified employee. The amount, manner of payment, and
form of consideration, if any, shall be determined by president of School in
his sole and absolute discretion, and such determination shall be binding
and final. To the extent that such bonus is to be determined in light of
financial performance during a specified fiscal period and this Agreement
commences on a date after the start of such fiscal period, any bonus payable
in respect of such fiscal period's results may be prorated. In addition, if
the
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period of Employee's employment hereunder expires before the end of a fiscal
period, and if Employee is eligible to receive a bonus at such time (such
eligibility being subject to the restrictions set forth in Section 5 below),
any bonus payable in respect of such fiscal period's results may be
prorated.
(c) PERQUISITES, BENEFITS, AND OTHER COMPENSATION. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such
changes, additions, or deletions as the Company may make generally from time
to time, as well as such other perquisites or benefits as may be specified
from time to time by the Board or the President of the Company.
Notwithstanding the foregoing, throughout the Employee's full time
employment with the Company under the terms of this Employment Agreement,
the Company shall provide the Employee with the use of the vehicle that is
currently provided to the Employee by the Company. The Company shall pay for
all operating, maintenance, repair and insurance expense associated with
that vehicle while the Employee is employed by the Company under the terms
of this Employment Agreement. At the discretion of the Company's Board of
Directors, the Employee may in the alternative receive a monthly auto
allowance. The amount of this allowance shall be determined by the Company
to provide the Employee with an equivalent benefit as providing the vehicle
in the manner described above.
4. EXPENSE REIMBURSEMENT. The Company shall reimburse Employee for or, at
the Company's option, pay all business travel and other out-of-pocket expenses
reasonably incurred by Employee in the performance of his services hereunder
during the Term. All reimbursable expenses shall be appropriately documented in
reasonable detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense reporting
policy, as well as applicable federal and state tax record keeping requirements.
5. TERMINATION; RIGHTS ON TERMINATION. Employee's employment may be
terminated in any one of the followings ways, prior to the expiration of the
Term:
(a) DEATH. The death of Employee shall immediately terminate the Term,
and no severance compensation shall be owed to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or
mental illness or injury, Employee shall have been unable to perform the
material duties of his position on a full-time basis for a period of four
consecutive months, or for a total of four months in any six-month period,
then 30 days after written notice to the Employee (which notice may be given
before or after the end of the aforementioned periods, but which shall not
be effective earlier than the last day of the applicable period), the
Company may terminate Employee's employment hereunder if Employee is unable
to resume his full-time duties at the conclusion of such notice period. If
Employee's employment is terminated as a result of Employee's disability,
the Company shall continue to pay Employee his base salary at the
then-current rate for the lesser of (i) three (3) months from the effective
date of termination, or (ii) whatever time period is remaining under the
then-current period of the Term (without regard to renewals thereof). These
payments shall be subject to lengthening of term or payment of additional
sums if so provided by the then current disability policy of the Company.
Such payments shall be made in accordance with the Company's regular payroll
cycle.
(c) TERMINATION BY THE COMPANY "FOR CAUSE". The Company may terminate
the Term 10 days after written notice to Employee "for cause," which shall
be: (I) Employee's material breach of this Agreement, which breach is not
cured within 10 days of receipt by Employee of written notice from the
Company specifying the breach; (ii) Employee's gross negligence in the
performance of his duties hereunder, intentional nonperformance or
mis-performance of such duties, or refusal to abide by or comply with the
directives of the Board, his superior officers, or the Company's policies
and procedures, which actions continue for a period of at least 10 days
after receipt by Employee of written notice of the need to cure or cease;
(iii) Employee's willful dishonesty, fraud, or misconduct
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with respect to the business or affairs of the Company or U.S. Products
Company ("USOP"), and that in the judgment of the Company or USOP materially
and adversely affects the operations or reputation of the Company or USOP;
(iv) Employee's conviction of a felony or other crime involving moral
turpitude; or (v) Employee's abuse of alcohol or drugs (legal or illegal)
that, in the Company's judgment, materially impairs Employee's ability to
perform his duties hereunder. In the event of a termination "for cause," as
enumerated above, Employee shall have no right to any severance
compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
the Company may, without cause, terminate the Term and Employee's
employment, effective 30 days after written notice is provided to the
Employee. Should Employee be terminated by the Company without cause, the
Company shall continue to pay Employee his base salary at the then-current
rate for the lesser of (i) twelve (12) months from the effective date of
termination, or (ii) whatever time period is remaining under the
then-current period of the Term (without regard to renewals thereof). Such
payments shall be made in accordance with the Company's regular payroll
cycle. If Employee resigns or otherwise terminates his employment for any
reason or for no reason, Employee shall receive no severance compensation.
(e) PAYMENT THROUGH TERMINATION. Upon termination of Employee's
employment for any reason provided above, Employee shall be entitled to
receive all compensation earned and all benefits and reimbursements
(including payments for accrued vacation and sick leave, in each case in
accordance with applicable policies of the Company) due through the
effective date of termination. Additional compensation subsequent to
termination, if any, will be due and payable to Employee only to the extent
and in the manner expressly provided above in this Section 5. With respect
to incentive bonus compensation, Employee shall be entitled to receive any
bonus declared but not paid prior to termination. In addition, in the event
of a termination by the Company under Section 5(b) or 5(d), Employee shall
be entitled to receive incentive bonus compensation through the end of the
Company's fiscal year in which termination occurs, calculated as if Employee
had remained employed by the Company through the end of such fiscal year,
and paid in such amounts, at such times, and in such forms as are determined
pursuant to Section 3(b) above. Except as specified in the preceding two
sentences, Employee shall not be entitled to receive any incentive bonus
compensation after the effective date of termination of his employment. All
other rights and obligations of USOP, the Company, and Employee under this
Agreement shall cease as of the effective date of termination, except that
Employee's obligations under Sections 6, 7, and 8 below shall survive such
termination in accordance with their terms.
6. CONFIDENTIAL INFORMATION. Employee hereby agrees to hold in strict
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to the Company
and/or USOP (including all trade secrets), in whatever form, whether oral,
written, or electronic (collectively, the "Confidential Information"), to which
Employee has, or is given (or has had or been given), access as a result of his
employment by the Company, for the term of his employment with the Company and
for two (2) years thereafter. Notwithstanding the foregoing the Employee shall
have a perpetual obligation to preserve the confidentiality of any confidential
information which would constitute a "trade secret" to the extent that such
confidential information remains a "trade secret" absent disclosure by the
Employee. It is agreed that the Confidential Information is confidential and
proprietary to the Company and/or USOP because such Confidential Information
encompasses technical know-how, trade secrets, or technical, financial,
organizational, sales, or other valuable aspects of the Company's and USOP's
business and trade, including, without limitation, technologies, products,
processes, plans, clients, personnel, operations, and business activities. This
restriction shall not apply to any Confidential Information that (a) becomes
known generally to the public through no fault of the Employee; (b) is required
by applicable law, legal process, or any order or mandate of a court or other
governmental authority to be disclosed; or (c) is reasonably
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believed by Employee, based upon the advice of legal counsel, to be required to
be disclosed in defense of a lawsuit or other legal or administrative action
brought against Employee; PROVIDED, that in the case of clauses (b) or (c),
Employee shall give the Company reasonable advance written notice of the
Confidential Information intended to be disclosed and the reasons and
circumstances surrounding such disclosure, in order to permit the Company to
seek a protective order or other appropriate request for confidential treatment
of the applicable Confidential Information.
7. INVENTIONS. Employee shall disclose promptly to the Company and USOP
any and all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
year thereafter, and that are directly related to the business of activities of
the Company or USOP and that Employee conceives as a result of his employment by
the Company, regardless of whether or not such ideas, inventions, or
improvements qualify as "works for hire." Employee hereby assigns and agrees to
assign all his interests therein to the Company or its nominee. Whenever
requested to do so by the Company, Employee shall execute any and all
applications, assignments, or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. RETURN OF COMPANY PROPERTY. Promptly upon termination of Employee's
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company, USOP or their respective
representatives, vendors, or customers that pertain to the business of the
Company or USOP, whether in paper, electronic, or other form; and (c) all keys,
credit cards, vehicles, and other property of the Company or USOP. Employee
shall not retain or cause to be retained any copies of the foregoing. Employee
hereby agrees that all of the foregoing shall be and remain the property of the
Company or USOP, as the case may be, and be subject at all times to their
discretion and control.
9. INDEMNIFICATION. In the event the Employee is made a party to any
threatened or pending action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by the Company, School,
or USOP against the Employee, and excluding any action by the Employee against
the Company, School or USOP), by reason of the fact that he is or was performing
services under this Agreement or as an officer or director of the Company, then,
to the fullest extent permitted by applicable law, the Company shall indemnify
the Employee against all expenses (including reasonable attorneys' fees),
judgements, fines, and amounts paid in settlement, as actually and reasonably
incurred by the Employee in connection therewith. Such indemnification shall
continue as to the Employee even if he has ceased to be an employee, officer, or
director of the Company and shall inure to the benefit of his heirs and estate.
The Company shall advance to the Employee all reasonable costs and expenses
directly related to the defense of such action, suit, or proceeding within
twenty (20) days after written request therefore by the Employee to the Company,
PROVIDED, that such request shall include a written undertaking by the Employee,
in a form acceptable to the Company, to repay such advances if it shall
ultimately be determined that the Employee is or was not entitled to be
indemnified by the Company against such costs and expenses. In the event that
both the Employee and the Company are made a party to the same third-party
action, complaint, suit, or proceeding, the Company (or, at its option, School
or USOP) will engage competent legal representation, and Employee agrees to use
the same representation; PROVIDED, that if counsel selected by the Company (or,
School or USOP) shall have a conflict of interest that prevents such counsel
from representing the Employee, the Employee may engage separate counsel and the
Company shall pay all reasonable attorneys' fees os such separate counsel. The
provisions of this Section 9 are in addition to, and not in derogation of, the
indemnification provisions of the Company's Bylaws. Notwithstanding anything to
the contrary within in this Section 9, the Employee shall not receive
indemnification hereunder to the extent that such claim, damages and or expenses
are based upon the actions or omissions
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of the Employee which result in the criminal conviction of the Employee or which
are determined by the Company, in its sole discretion, to be a willful or
grossly negligent act or omission of the Employee.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent that Employee had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and the Company, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement.
This Agreement may be assigned or transferred by the Company without the
prior written consent of Employee. Subject to the preceding first sentence
of this Section 11, this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors, and assigns. Notwithstanding the
foregoing it is intended that USOP, the Company or its assign will be a
third-party beneficiary of the rights of the Company under this Agreement.
No other Person shall be a third-party beneficiary.
12. COMPLETE AGREEMENT; WAIVER; AMENDMENT. This Agreement is not a
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement other than a Covenant Not to Compete Agreement entered into on
even date herewith. This written Agreement may not be later modified except
by a further writing signed by a duly authorized officer of the Company and
Employee, and no term of this Agreement may be waived except by a writing
signed by the party waiving the benefit of such term.
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13. NOTICE. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
To the Company: School Specialty, Inc.
0000 Xxxxx Xxxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxx, XX 00000-0000
Attention: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
With a copy to: U.S. Office Products Company
0000 Xxxxxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000 Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Director
Fax: (000) 000-0000
To Employee: Xxxxxxx X. Xxxxx
X.X. Xxx 00000
Xxx Xxxxxx, XX 00000
(Marked "Personal and Confidential")
With a copy to: Xxxxxx X. Xxxxxxx XX, Esq.
Xxxxxxx & Xxxxxxx, S.C.
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Notice shall be deemed given and effective three days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or, if sent by express delivery, hand
delivery, or facsimile, when actually received. Either party may change the
address for notice by notifying the other party of such change in accordance
with this Section 13.
14. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
15. EQUITABLE REMEDY. Because of the difficulty of measuring economic
losses to the Company and/ or USOP as a result of a breach of the restrictive
covenants set forth in Sections 6 and 7, and because of the immediate and
irreparable damage that would be caused to the Company and/or USOP for which
monetary damages would not be a sufficient remedy, it is hereby agreed that in
addition to all other remedies that may be available to the Company or USOP at
law or in equity, the Company and USOP shall be entitled to specific performance
and any injunctive or other equitable relief as a remedy for any breach or
threatened breach of the aforementioned restrictive covenants.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in Milwaukee, Wisconsin. Notwithstanding
the foregoing, the Company and/or USOP shall be entitled
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to seek injunctive or other equitable relief, as contemplated by Section 15
above, from any court of competent jurisdiction, without the need to resort to
arbitration.
17. GOVERNING LAW. This Agreement shall in respects be construed according
to the laws of the State of Delaware, without regard to its conflict of laws
principles.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.
Company: SAX ARTS AND CRAFTS, INC.
/s/ XXXXXX X. XXXXXXXX
------------------------------------------
Xxxxxx X. Xxxxxxxx,
EXECUTIVE VICE-PRESIDENT
Employee:
/s/ XXXXXXX X. XXXXX
------------------------------------------
Xxxxxxx X. Xxxxx,
INDIVIDUALLY
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