EMPLOYMENT AGREEMENT
Exhibit 10.2
EXECUTION COPY
THIS
EMPLOYMENT AGREEMENT is made and entered into as of the 4th day of May, 2006, by and
between The Sportsman’s Guide., a Minnesota corporation (the “Company”), and Xxxxxxx X. Xxxxxx
(“Employee”), under the following circumstances:
| A. | Employee has been employed by the Company and has significant experience in the operation and management of the Company’s business. | ||
| B. | The Company is entering into an Agreement and Plan of Merger by and among the Company, VLP Corporation (“VLP”), and Panther Subcorp, Inc. (the “Merger Agreement”), pursuant to which the Company will become a subsidiary of VLP (the transactions contemplated by the Merger Agreement, the “Merger”). | ||
| C. | The Company desires to retain Employee’s experience and expertise for the continued success of the Company’s business following the Merger. | ||
| D. | The parties desire to have their rights, obligations and duties specified herein. |
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby
agree as follows:
1. Employment and Duties; Standard of Service. During the Term (as defined in Section
2), the Company shall employ Employee as its Chief Financial Officer, with such duties as may be
determined from time to time by the Board of Directors of the Company (the “Board of Directors”).
Employee hereby agrees that while employed by the Company, he shall devote his full attention and
time during normal business hours to the business and affairs of the Company and shall use his best
efforts to perform faithfully and efficiently such responsibilities.
2. Term.
(a) Term. Subject to Section 3 hereunder, the term of this Agreement (the “Term”)
shall begin as of the Closing Date (as defined in the Merger Agreement) and shall continue until
the second anniversary thereof (the “Expiration Date”).
(b) Survival of Certain Provisions. Notwithstanding anything to the contrary set
forth in this Agreement, the provisions contained in this Section 2(b), Section 3(d) and Sections
5, 6, 7 and 13 of this Agreement shall survive the termination of this Agreement.
3. Early Termination/Compensation Upon Termination.
(a) Death, Disability or Mutual Agreement. The Term shall terminate prior to its
stated termination date, and immediately upon the happening of any of the following events:
(i) the death of Employee;
(ii) the mental or physical disability or incapacity of Employee, which causes Employee
to be unable to perform his duties hereunder, which disability or incapacity shall be deemed
to have occurred upon the earlier of (A) Employee becoming entitled to receive “total
disability benefits” (or their substantive equivalent form of benefits) under the Company’s
disability plan(s) then in effect; (B) a determination that Employee has become permanently
disabled made by an independent physician mutually agreed upon by the Company and Employee
in good faith or (C) Employee shall have been unable, unwilling, or shall have failed to
perform his duties hereunder for a period of 180 days during any 12 consecutive months; or
(iii) execution by the Company and Employee of a written agreement of termination
(which may specify a later effective date of such termination).
(b) By the Company.
(i) The Company may terminate the Term upon the giving of notice by the Company to
Employee of termination for Cause. For this purpose, “Cause” shall mean:
(A) the willful and continued failure by Employee to (I) comply with the terms
of this Agreement, (II) comply with policies of the Board of Directors or (III)
otherwise substantially perform his duties with the Company (other than as a result
of disability of the type described in Section 3(a)(ii)); or
(B) the willful engaging by Employee in conduct which is demonstrably and
materially injurious to Company, monetarily or otherwise; or
(C) (I) dishonesty which is materially injurious to the Company, including,
without limitation, the misappropriation of Company trade secrets or customer
mailing lists, (II) intoxication during normal working hours, (III) actions
involving moral turpitude, (IV) addiction to or abuse of drugs (the effect of which
is materially injurious to the Company) or (V) conviction of a felony.
(ii) The Company may terminate the Term without cause upon 180 days’ written notice to
Employee provided the Company complies with the provisions of Section 3(d)(iv).
(c) By Employee. Employee may terminate the Term in accordance with the following:
(i) immediately upon the giving of notice by Employee to the Company of termination for
Good Reason. For this purpose, “Good Reason” shall mean any one or more of the following:
(A) an adverse change in Employee’s status or position as an executive officer
of the Company including, without limitation, any adverse change in Employee’s
status or position as a result of a material diminution in
-2-
Employee’s duties, responsibilities or authority as of the date of this
Agreement (or any status or position to which Employee may be promoted after the
date hereto) or the assignment to Employee of any duties or responsibilities which
are inconsistent with Employee’s status or position, or any removal of Employee from
or any failure to reappoint or reelect Employee to such position as an officer of
the Company (except in connection with any termination of Employee’s employment
described in Sections 3(a) or (b));
(B) a reduction by the Company in Employee’s Base Salary (as hereinafter
defined) as in effect immediately prior to the date of this Agreement or as the same
may be increased from time to time or, except as otherwise provided herein, a change
in the eligibility requirements or performance criteria under the incentive programs
set forth in this Agreement, which such change is materially adverse to Employee;
(C) without replacement by a Plan (as hereinafter defined) providing benefits
to Employee equal to or greater than those discontinued or reduced, the failure by
the Company to continue in effect, within its maximum stated term, any Plan in which
Employee is participating or the taking of any action by the Company that would
materially and adversely affect Employee’s participation or materially reduce
Employee’s benefits under any Plan;
(D) the taking of any action by the Company that would materially and adversely
affect the physical conditions existing immediately prior to the date of this
Agreement in or under which Employee performs his employment duties;
(E) the Company’s announcement of plans to relocate or undertaking of efforts
to relocate its executive offices (including, without limitation, the offices of
Employee) to a location outside of the Minneapolis/St. Xxxx metropolitan area;
(F) failure by the Company to obtain from any successor in interest thereto
assent to the terms of this Agreement.
Notwithstanding any provision in this Section 3(c) to the contrary, Good Reason shall not include
any reduction in bonus amounts paid or options or other benefits granted to Employee based on the
operating performance and/or financial condition of the Company. In addition, Employee
acknowledges that as a result of the Merger, the Company will no longer be a publicly traded entity
and will instead be a subsidiary of VLP, and recognizes that this restructuring will result in some
modification to the Company’s structure and to Employee’s reporting requirements. Notwithstanding
any provision in this Section 3(c) to the contrary, Employee shall have no right to assert Good
Reason for a termination based on modifications to structure or reporting requirements arising
directly as a result of the Company no longer being a public company or becoming a subsidiary of
VLP.
-3-
(ii) at any time upon 180 days’ prior written notice by Employee to the Company.
(d) Compensation Upon Termination. Upon termination of Employee’s employment during
the Term, Employee shall receive the following:
(i) Death or Disability. Upon any termination of Employee’s employment
described in Sections 3(a)(i) or 3(a)(ii), Employee shall, within 10 days of such
termination, receive the Base Salary specified in Section 4 of this Agreement through the
date of such termination, and without further action by the Board of Directors or any
committee thereof, shall further receive, within 90 days of such termination, a lump sum
payment equal to 12 months of the monthly Base Salary then being received by Employee; such
benefits to be at least partially funded through the Company’s purchase of life and
disability insurance provided that the Company’s failure to obtain and/or maintain any such
insurance shall not relieve the Company of any obligation under this Section 3(d)(i). In
addition, Employee shall be paid a pro rata portion (based on the date of termination) of
the bonus that would have been payable to Employee under the Company’s bonus plan in effect
for such year, but for the termination of Employee’s employment. In making the
determination as to the amount of bonus for which Employee is eligible, the Company and
members of its Board of Directors and/or management charged with making such determination
shall calculate the amount of such bonus as if Employee had achieved all subjective
performance standards applicable to such determination but otherwise based on the actual
operating performance and financial condition of the Company. Any such bonus payable under
this Section 3(d)(i) shall be payable at the time of and in accordance with the terms and
conditions governing the payment of bonuses to other members of the Company’s senior
management employees.
(ii) Termination for Cause or for Voluntary Termination (Other than for Good
Reason). Upon any termination of employment described in Sections 3(b) or 3(c)(ii),
Employee shall be entitled to receive the Base Salary specified in Section 4 of this
Agreement through the date of such termination, and shall not be entitled to additional or
further salary.
(iii) Termination by Mutual Agreement. If Employee’s employment under this
Agreement is terminated by the mutual agreement of Employee and the Company, the Company
shall provide Employee with the payments and benefits specified in such Agreement.
(iv) Termination for Good Reason or Without Cause. Upon any termination of
employment by Employee for Good Reason as described in Section 3(c)(i) (other than Good
Reason arising after a Substantial Event) or any termination of employment by the Company
pursuant to Section 3(b)(ii), the Company, shall, without further action by the Board of
Directors or any committee thereof and within 10 days of such termination, make a lump sum
payment to Employee equal to 24 months of the monthly Base Salary then being received by
Employee, shall maintain in full force and effect, for a period of 24 months commencing on
the date of such termination, all Plans relating to medical, dental, accident and disability
insurance then in effect, at the same
-4-
levels and coverages as senior management employees were receiving immediately prior to
Employee’s termination, and shall continue Employee’s automobile allowance for a period of
24 months in the same amount as immediately prior to termination. In addition, Employee
shall be paid a pro rata portion (based on the date of termination) of the bonus that would
have been payable to Employee under the Company’s bonus plan in effect for such year, but
for the termination of Employee’s employment. In making the determination as to the amount
of bonus for which Employee is eligible, the Company and members of its Board of Directors
and/or management charged with making such determination shall calculate the amount of such
bonus as if Employee had achieved all subjective performance standards applicable to such
determination but otherwise based on the actual operating performance and financial
condition of the Company. Any such bonus payable under this Section 3(d)(iv) shall be
payable at the time of and in accordance with the terms and conditions governing the payment
of bonuses to other members of the Company’s senior management employees.
(v) Termination by Company Following Substantial Event or Termination by Employee
for Good Reason following Substantial Event. In the event that at any time within 24
months after the occurrence of a Substantial Event, the Company terminates Employee’s
employment pursuant to Section 3(b)(ii), or Employee terminates employment for Good Reason,
Employee shall receive the payments and other compensation and benefits described in Section
5(b) hereof.
4. Compensation, Benefits and Expenses.
(a) Base Salary. For all services rendered under this Agreement during the term of
Employee’s employment, the Company shall pay Employee a minimum base salary at an annual rate that
is not less than the annual rate currently being paid Employee, or at such higher annual rate as
may be from time to time determined by action of the Board of Directors or committee thereof (the
"Base Salary”). If the Base Salary is increased from time to time during the Term, the increased
amount shall then constitute the Base Salary for the remainder of the Term, subject to any
subsequent increases. Except as otherwise set forth herein, the Base Salary shall be payable in
accordance with the Company’s customary payroll procedures.
(b) Other Compensation and Benefits. In accordance with their terms, Employee shall
be entitled to participate in any bonus or incentive compensation agreements, plans, programs,
policies or arrangements sponsored, maintained or contributed to by the Company, to which the
Company is a party or under which employees of the Company are covered, including, without
limitation, any annual or long-term incentive (bonus) plan and any employee benefit plan such as a
thrift, pension, profit sharing, deferred compensation, medical, dental, disability, accident, life
insurance, automobile allowance, perquisite, fringe benefit, vacation, sick or parental leave,
severance or relocation plan or policy or any other agreement, plan, program, policy or arrangement
intended to benefit employees or executive officers of the Company (collectively, “Plans” and each
a “Plan”). The Company intends to maintain and continue the 2006 bonus plan with the target goals
tied to base management business plan, with post-Closing Date synergies and pre-Closing Date
transaction expenses excluded from calculations. Following 2006, annual bonuses will be based upon
a business plan agreed upon by Company management and the Board of Directors, and calculations will
exclude bonus and
-5-
take into account synergies. Employee will not receive equity compensation awards following
the Closing Date, but will instead participate in the two-year long-term incentive program outlined
on Exhibit A. The stock options granted to Employee prior to the Closing Date will be settled at
the Closing Date in accordance with the provisions of the Merger Agreement.
(c) Business Expenses. During the term of Employee’s employment under this Agreement,
the Company shall, in accordance with, and to the extent of, its uniform policies in effect from
time to time, bear all ordinary and necessary business expenses incurred by Employee in performing
his duties hereunder including, without limitation, all travel, lodging, meal and entertainment
expenses while away from home on business in the service of the Company, provided that Employee
accounts for such expenses to the Company, in the manner reasonably prescribed from time to time by
the Company.
5. Certain Rights Upon a Substantial Event.
(a) Substantial Event Defined. For purposes of this Agreement, a “Substantial Event”
shall mean the following events:
(i) the Company sells, transfers, or otherwise disposes for value all or substantially
all of its assets, other than to an affiliate of VLP or to an entity controlled by the
public shareholders of PPR; or
(ii) consummation of a merger, consolidation, sale, or other reorganization as a
consequence of which members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of Directors thereafter,
other than any such sale to an affiliate of VLP or to an entity controlled by the public
shareholders of PPR.
Notwithstanding the foregoing, under no circumstances shall the Merger be considered a Substantial
Event for purposes of this Agreement.
(b) Termination of Employment Following Substantial Event. If, (i) during any time
within 24 months following a Substantial Event the Company shall terminate Employee’s employment
other than for Cause or the death, disability or retirement of Employee, or (ii) at any time within
24 months following a Substantial Event, Employee shall terminate the Term for Good Reason, then,
and without further action by the Board of Directors or any committee thereof, the Company shall,
within 10 days of such termination, make a lump sum payment to Employee equal to 36 months of the
monthly Base Salary then being received by Employee, shall maintain in full force and effect, for a
period of 3 years commencing on the date of such termination, all Plans relating to medical,
dental, accident and disability insurance then if effect, at the same levels and coverages as
Employee was receiving on the date immediately prior to the Substantial Event, and shall continue
Employee’s automobile allowance for a period of 36 months in the same amount as immediately prior
to termination. In addition, Employee shall be paid a pro rata portion (based on the date of
termination) of the bonus that would have been payable to Employee under the Company’s bonus plan
in effect for such year, but for the termination of Employee’s employment. In making the
determination as to the amount of bonus for which Employee is eligible, the Company, and members of
its Board of Directors and/or
-6-
management charged with making such determination shall calculate the amount of such bonus as
if Employee had achieved all subjective performance standards applicable to such determination but
otherwise based on the actual operating performance and financial condition of the Company. Any
such bonus payable under this Section 5(b) shall be payable at the time of and in accordance with
the terms and conditions governing the payment of bonuses to other members of the Company’s senior
management employees.
6. Taxes.
(a) Withholding. All payments under this Agreement shall be subject to reduction in
the amount of any income, withholding, social security, disability insurance, or similar taxes of
payments which the Company may be required or authorized to deduct by law or custom.
(b) Excess Parachute Payments. Notwithstanding anything to the contrary set forth in
or construed under this Agreement, if any of the payments or benefits provided for in this
Agreement, together with any other payments which Employee has the right to receive from the
Company or any corporation which is a member of an “affiliated group” (as defined in section
1504(a) of the Internal Revenue Code of 1986, as amended (the “Code”), without regard to Section
1504(b) of the Code) of which the Company is a member, constitute an “excess parachute payment” (as
defined in Section 280G(b) of the Code) solely as a result of the Merger, the payments pursuant to
this Agreement shall be increased to the extent necessary to reimburse Employee (on a federal,
state and local income and employment after-tax basis) for the amount of the excise tax, if any,
imposed against Employee under Section 4999 of the Code, or any applicable state and/or local
counterpart thereto. The determination as to whether any increase in the payments under this
Agreement pursuant to this Section 6(b) is necessary shall be made by Employee in good faith and
such determination shall be conclusive and binding upon the Company. The increased payments
required under this Section 6(b) shall be promptly paid to Employee upon written demand therefor.
For the avoidance of doubt, the tax protection set forth in this paragraph will apply only in
respect of the Merger and will not apply in respect of any future transactions.
7. Restrictive Covenants.
(a) Prohibitions Against Disclosure. Employee agrees that upon termination of his
employment with the Company for whatever reason, he will deliver to the Company all copies of or
information with respect to the Company or its business which is not publicly known and which is in
his possession. Employee further agrees that, without the express written consent of the Company,
he will not, at any time during the term of this Agreement or for a period of 5 years thereafter,
divulge, furnish, disclose or make accessible to any person, firm, organization or corporation, or
use in any manner whatsoever to the detriment of the Company any such information or materials with
respect to the Company, or any aspect of its business or operations, which are not already lawfully
in the public domain.
(b) Non-Solicitation. Employee agrees that he shall not, without the express prior
written consent of the Company, at any time from the date of this Agreement and for a period of one
year from the termination of Employee’s employment, for any reason, with the
-7-
Company and its affiliates (the “Restricted Period”), directly or indirectly, solicit, entice,
call upon or approach any employees of the Company and its affiliates to enter the employment of
Employee or any employer or business with which Employee is associated or in which Employee has a
financial interest. Ownership by Employee of less than 5% of the outstanding voting common stock,
without any other action by or on behalf of Employee, of any publicly held corporation shall not
constitute a violation of this Section 7(b).
(c) Specific Performance. Employee acknowledges that the information received by him
in the course of his employment with the Company is of such character as to render the same unique
and, therefore, agrees disclosure thereof in violation of the covenants of Sections 7(a) or 7(b)
would be of irreparable damage to the Company. Employee acknowledges and agrees that the terms of
this Section 7 (i) are reasonable in light of all of the circumstances, (ii) are sufficiently
limited to protect the legitimate interests of the Company and its affiliates, (iii) impose no
undue hardship on Employee, and (iv) are not injurious to the public. Employee further
acknowledges and agrees that Employee’s breach of the provisions of this Section 7 will cause the
Company irreparable harm, which cannot be adequately compensated by money damages, and that if the
Company elects to prevent Employee from breaching such provisions by obtaining an injunction
against Employee, there is a reasonable probability of the Company’s eventual success on the
merits. In the event of a breach or threatened breach of this Section 7, Employee agrees that the
Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any
such breach or threatened breach, and Employee acknowledges that damages alone would be inadequate
and insufficient. Accordingly, Employee agrees and consents that in the event that any action or
proceeding shall be instituted by the Company to enforce any provision of this Agreement, Employee
waives the claim or defense in such action that there is an adequate remedy at law available to the
company, and Employee shall not urge in any such action or proceeding the claim or defense that
such remedy at law exists. The parties agree that the Company’s remedies for breach of this
Agreement expressly described herein shall be cumulative and the seeking or obtainment of
injunctive relief shall not preclude a claim or award for damages or other relief as provided for
herein or as otherwise may be available to the Company.
8. Full Settlement. If Employee receives payments and benefits pursuant to Sections
3(d)(iv) or 5(b) of this Agreement, Employee shall not be entitled to any severance pay or benefits
under any severance plan, program or policy of the Company and its affiliates, unless otherwise
specifically provided therein in a specific reference to this Agreement.
9. Notices. All notices hereunder shall be in writing and shall be deemed to have
been given at the time when mailed in any general or branch United States Post Office enclosed in a
certified or registered postpaid envelope addressed to the respective party at the address set
forth below, or at such changed address as either party may have fixed by notice; provided,
however, that any notice or change of address shall be effective only upon receipt:
Address of Company:
|
The Sportsman’s Guide, Inc. | |
| 000 Xxxxxxx Xxxxxx | ||
| Xxxxx Xx. Xxxx, XX 00000 |
-8-
with a copy to:
|
Xxxxx X. Xxxxxx, Esq. | |
| Xxxxxxxxx, Xxxxxx & Xxxxx P.L.L. | ||
| 00 Xxxxxxxxxx Xxxxx, X.X. | ||
| Xxxxx 0000 | ||
| Xxxxxx, XX 00000 | ||
Address of Employee:
|
Xxxxxxx Xxxxxx | |
| 00000 00xx Xxxxx X | ||
| Xxxxx Xxxxx, XX 00000 |
10. Divisibility. The provisions of this Agreement are divisible. If any provision
shall be deemed invalid or unenforceable as to any periods of time, territory or business
activities, such provisions shall be deemed limited to the extent necessary to render it valid and
enforceable. If any provision shall be deemed invalid or unenforceable to in other extent, the
remaining provisions of this Agreement shall not be rendered unenforceable as a result thereof.
11. Waiver. Failure by either party to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or
condition nor shall any waiver or relinquishment of any right or power hereunder at any one or more
times be deemed a waiver or relinquishment of such right or power at any other time or times.
12. Captions. The captions used in connection with this Agreement are for reference
purposes only and shall not be construed as a part of this Agreement.
13. Successors and Assigns.
(a) Successors and Assigns of the Company. This Agreement shall be binding upon and
inure to the benefit of any successor of the Company and any such successor shall absolutely and
unconditionally assume all of the Company’s obligations hereunder. Upon Employee’s written
request, the Company shall seek to have any such successor, by agreement in form and substance
satisfactory to Employee, assent to the fulfillment by the Company of its obligations hereunder.
(b) Successors and Assigns of Employee. This Agreement and all rights of Employee
hereunder shall inure to the benefit of and be enforceable by Employee’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
If Employee should die while any amounts would still be payable to Employee hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Employee’s devisee, legatee or other designee or, if there be no such designee, to
Employee’s estate. Except as otherwise expressly set forth in this Section 13(b), Employee may not
assign this Agreement, in whole or in part, without the prior written consent of the Company.
14. Section 409A. If any compensation or benefits provided by this agreement may
result in the application of Section 409A of the Code (“Section 409A”), the Company shall, in
consultation with Employee, modify this Agreement in the least restrictive manner necessary in
order to exclude such compensation from the definition of “deferred compensation” within the
-9-
meaning of such Section 409A or in order to comply with the provisions of Section 409A, other
applicable provisions of the Code and/or any rules, regulations or other regulatory guidance issued
under such statutory provisions. Without limiting the generality of the foregoing, to the extent
required in order to comply with Section 409A, amounts and benefits to be paid or provided under
Section 6 during the period between Employee’s termination of service with the Company and the
six-month anniversary thereof, shall be paid or provided to Employee on the first business day
after the date that is six months following the date of such termination.
15. Complete Agreement and Governing Law. This Agreement shall become effective as of
the Closing Date. Effective as of the Closing Date, this Agreement supersedes all prior agreements
written or oral with respect to the subject matter hereof, including without limitation, the
Employment Agreement between Employee and the Company, dated July 25, 1997. In the event that the
Merger Agreement is terminated prior to the occurrence of a Closing Date, this Agreement shall
become null and void and of no effect. This Agreement is intended as a complete and exclusive
statement of the terms of the Agreement between the parties with respect to its subject matter.
This Agreement may be changed or terminated only in writing executed by each party and shall be
governed by the laws of the State of Minnesota.
-10-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
| THE SPORTSMAN’S GUIDE, INC. | |||||
| By: | /s/ XXXXXXX XXXXXXX | ||||
| Title: | President/CEO | ||||
| EMPLOYEE: | |||||
/s/ XXXXXXX XXXXXX |
|||||
| Xxxxxxx X. Xxxxxx | |||||
-11-
Exhibit A
Two-Year Bonus Plan
January 1, 2006 through December 31, 2007
| If Target Met (% of Base Salary) | ||||
2006 EBIT |
12.5 | % | ||
2007 EBIT |
25 | % | ||
Cumulative EBIT |
12.5 | % | ||
Amounts will be paid by April 15, 2008, based on base salary for year in which payment earned. If
the Target is not met for 2006, the Cumulative EBIT Target may still be achieved for the overall
period. Employee must continue to be employed through the payment date to receive bonus; provided,
however, that if Employee is terminated by the Company other than for Cause or leaves for Good
Reason, Employee is entitled to be paid for (i) the bonus for prior year where Target was met, to
be paid upon termination, and (ii) a pro rata portion of the bonus for the then-current year (if
any) to be paid following determination of whether the Target has been met at the end of the
then-current year (but, for the avoidance of doubt, will have no entitlement to any portion of the
bonus based on Cumulative EBIT). Calculations under this plan will exclude bonuses and synergies,
and will also exclude merger costs.
-12-
