Exhibit 10.7
EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN
M.G.A., INC.
AND
XXXXXXX X. XXXXXX
DATED
NOVEMBER 30, 1999
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TABLE OF CONTENTS
EXECUTIVE EMPLOYMENT AGREEMENT
PARAGRAPH PAGE NO.
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1. Background 3
2. Definitions 3
3. Employment 6
4. Responsibilities 6
5. Non-Stock Compensation and Reimbursements 7
6. [Intentionally Left Blank] 9
7. [Intentionally Left Blank] 9
8. Termination 9
9. Proprietary Information 10
10. Covenant Not To Compete 11
11. Severability 11
12. Attorneys' Fees 11
13. Headings 11
14. Notices 11
15. General Provisions 11
16. Entire Agreement 12
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EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is
entered into this 30th day of November, 1999 by and between M.G.A., INC., a
Delaware corporation with its principal offices at 000 Xxxx Xxxx Xxxxxx, Xxxxxx,
Xxxxxxx 00000 (the "Company") and XXXXXXX X. XXXXXX ("Employee"), an individual,
whose address is 000 Xxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxx 00000, and shall be
effective on the Effective Date, as defined below.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements of the parties hereto, the parties do hereby
covenant and agree as follows:
1. Background.
A. The Company is engaged in the business of owning,
managing, and operating video specialty stores.
B. The Company desires to secure and retain the services
of Employee in the office of Senior Vice President - Store Operations, and such
services are considered by the Company to be valuable with regard to the
business of owning, managing and operating video specialty stores.
C. Employee desires to accept full and active employment
with the Company in accordance with the terms and conditions herein set forth.
2. Definitions.
As used in this Agreement, the following terms shall have the
meaning as set forth below, and the parties hereto agree to be bound by the
provisions hereof:
A. Area means the geographic area of the forty-eight (48)
contiguous continental states of the United States which is the area in which
operations are performed, supervised, or assisted in by Employee on behalf of
the Company, both as of the date hereof and as are anticipated to be conducted
throughout the Term.
B. Board of Directors means the Board of Directors of the
Company.
C. Change of Control means the occurrence of any of the
following events:
(i) Merger or consolidation where the Company is not
the consolidated, continuing or surviving company, and the surviving or
resulting company does not expressly agree to be bound by and have the benefits
of the provisions of this Agreement, Employee's corporate position is
eliminated, or the scope of Employee's position or responsibilities is
materially changed;
(ii) Transfer of all or substantially all of the assets
or stock of the Company, and the transferee of the Company's assets or stock
does not expressly agree to be bound by and have the benefits of the provisions
of this Agreement, Employee's corporate position is eliminated, or the scope of
Employee's position or responsibilities is materially changed;
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(iii) Change in control of Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 as in
effect on the date thereof, and any person or persons acting in concert (as such
term is used in Section 13(d) and 14(d)(2) of the Exchange Act) is or becomes
the beneficial holder directly or indirectly of securities of the Company
representing fifty percent (50%) or more of the combined voting power of
Company's then outstanding securities, and the Employee's corporate position is
eliminated, or the scope of Employee's position or responsibilities is
materially changed; or
(iv) Discontinuation of the business by Company.
D. Chief Executive Officer means the Chief Executive
Officer of the Company from time to time.
E. Company means M.G.A., Inc., its parent corporation,
Movie Gallery, Inc., and successors.
F. Constructive Termination means a termination of this
Agreement resulting from any material failure by the Company to fulfill its
obligations under this Agreement which is not cured within thirty (30) days
after receipt of written notice by the Company from Employee specifying the
nature of the failure, which failure shall include, but shall not be limited to,
(a) removal of Employee during the Term, other than removal as a result of a
Termination With Cause or a Voluntary Termination, as Senior Vice President -
Store Operations of the Company or any material change by the Company in the
functions, duties or responsibilities of Employee during the Term from those in
which Employee was engaged as Senior Vice President - Store Operations of the
Company on the Effective Date, without the consent of Employee, (b) a material,
non-voluntary reduction in Employee's Base Salary and eligibility for bonus
amounts, or (c) the occurrence of a Change of Control. Constructive Termination
shall occur only (A) after receipt by the Company of written notice from
Employee specifying Employee's reasonable belief that an event of Constructive
Termination has occurred, as defined herein, and (B) if Employee provides such
notice to the Company and the Board of Directors within sixty (60) days after
the date of such event.
G. Effective Date means October 18, 1999.
H. [Intentionally Left Blank]
I. Initial Term means the basic term of this Agreement,
which shall be twelve (12) months, beginning on the Effective Date and ending on
the date which is twelve (12) months following the Effective Date.
J. Permanent Disability means a physical or mental
condition which renders Employee incapable of performing his regular duties
hereunder for a period of one hundred twenty (120) consecutive days. In the
event of any disagreement between Employee and the Company as to whether
Employee is suffering from Permanent Disability, the determination of Employee's
Permanent Disability shall be made by one or more board certified licensed
physicians practicing the specialty of medicine applicable to Employee's
disorder in accordance with the provisions of this Subsection J. If either the
Company or Employee desires to initiate the procedure provided in this Section,
such party (the "Initiating Party") shall deliver written notice to the other
party (the "Responding Party") in accordance with the provisions of this
Agreement specifying that the Initiating Party desires to proceed with a medical
examination and the procedures specified in this Section. Such notice shall
include the name, address and telephone number of the physician selected by the
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Initiating party (the "Disability Examination Notice"). If the Responding Party
fails within thirty (30) days after the receipt of the Disability Examination
Notice to designate a physician meeting the standards specified herein, the
physician designated by the Initiating Party in the Disability Examination
Notice shall make the determination of Permanent Disability as provided in this
Section. If the Responding Party by written notice notifies the Initiating Party
within thirty (30) days of the receipt by the Responding Party of the Disability
Examination Notice by notice specifying the physician selected by the Responding
Party for purposes of this Section, then each of the two physicians as so
designated by the respective parties shall each examine Employee. Examinations
shall be made by each such physician within thirty (30) days of such physician's
respective designation. Each physician shall render a written report as to
whether Employee is, in such physician's opinion, suffering Permanent
Disability. If the two physicians agree on the status of Employee for purposes
of this Section, such determination shall be conclusive and dispositive for all
purposes of this Section. If the two physicians cannot agree, the two physicians
shall jointly select a third physician meeting the standards specified in this
Section within thirty (30) days after the later report of the two physicians is
submitted. The third physician shall render a written report on the status of
Employee within thirty (30) days of selection and such report shall be
dispositive for purposes of this Section. For purposes of this Subsection J,
Employee agrees that he shall promptly submit to such examinations and tests as
such physicians shall reasonably request for purposes of making a determination
of Permanent Disability as provided herein. Failure or refusal of the Company to
designate a licensed physician to make a determination of Permanent Disability
as required in accordance with this Section or of Employee to submit to the
examination as required by this Section shall constitute a conclusive admission
by the Company or Employee, as appropriate, that Employee is suffering from a
Permanent Disability as provided herein.
K. Renewal Term means the period, if any, following the
Initial Term during which the Agreement is extended as set forth in Section 8B.
L. [Intentionally Left Blank]
X. Xxxxxxxxx Amount shall have the meaning as set forth in
Section 5C.
N. Term means the Initial Term and any Renewal Term.
0. Termination Date means the following: (a) with respect
to Termination With Cause, thirty (30) days after the date the Company notifies
Employee in writing of the actions described in Subsection 2P(i) and the
termination of this Agreement based thereon, or the date which is thirty (30)
days after written notice of violation to Employee pursuant to Subsection 2P(ii)
not cured by Employee; (b) with respect to the death of Employee, the date of
his death; (c) with respect to Termination Without Cause, thirty (30) days after
the date on which the Company gives Employee notice of Termination Without
Cause; (d) with respect to Voluntary Termination, thirty (30) days after the
date on which Employee unilaterally terminates his employment relationship with
the Company; (e) with respect to the Permanent Disability of Employee, the date
Employee is determined to be suffering from Permanent Disability, as provided in
Subsection 2J; and (f) with respect to Constructive Termination, the date which
is thirty (30) days after the receipt by the Company of the notice specified in
Subsection 2F.
P. Termination With Cause means the termination of this
Agreement and the employment relationship of Employee with the Company, only for
the following:
(i) Theft or embezzlement with regard to material
property of the Company; or
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(ii) Continued neglect by Employee in fulfilling his
duties as Senior Vice President - Store Operations of the Company as a result of
alcoholism, drug addiction or nervous breakdown, intentional neglect,
insubordination, or excessive unauthorized absenteeism by Employee, after
written notification thereof from the Chief Executive Officer or Board of
Directors, setting forth in detail the matters involved, and Employee's failure
to cure the problems or matters set forth in such notice within a reasonable
time.
Q. Termination Without Cause means any of the following:
(i) A termination by the Company of this Agreement and
the employment relationship of Employee with the Company during the Term which
is not a Termination With Cause, a Voluntary Termination or a Constructive
Termination, including the expiration of the Term as a result of the Company
electing not to renew this Agreement at the end of the Initial Term or any
Renewal Term.
(ii) Any relocation of Employee by the Company, not
agreed to in writing by the Employee (which must reference this Agreement), to a
location which is outside of a fifty (50) mile radius of Dothan, Alabama.
R. Triggering Event means (i) a termination of Employee's
employment by the Company during the Term due to a Termination Without Cause or
(ii) a Constructive Termination of Employee's employment with the Company.
S. Video Business means the business engaged in by the
Company in owning, managing and operating video specialty stores, and all
ancillary services relating to the ownership, management and operation of video
specialty stores.
T. Voluntary Termination means unilateral termination by
Employee of his employment with the Company prior to the end of the Term and in
the absence of a Triggering Event, or as a result of Employee electing not to
renew this Agreement at the end of the Initial Term or any Renewal Term. Notice
by Employee to the Company of a failure by the Company to fulfill its
obligations under this Agreement pursuant to Section 2F shall not constitute a
Voluntary Termination for purposes of this Agreement.
3. Employment. The Company, through its Board of Directors,
agrees to employ Employee in the office of Senior Vice President - Store
Operations of the Company for the Term, and Employee agrees to accept such
employment and office upon the terms and conditions set forth herein.
4. Responsibilities. Pursuant to this Agreement, Employee
shall assume the responsibilities, perform the duties, and exercise the powers
as Senior Vice President - Store Operations of the Company, as set forth in the
Bylaws of the Company or as designated, assigned or set forth by the Chief
Executive Officer or Board of Directors and consistent with the
responsibilities, duties and powers exercised by Employee as Senior Vice
President - Store Operations of the Company as of the Effective Date and such
other duties as may be assigned from time to time by the Chief Executive Officer
or Board of Directors. The Employee agrees to devote his full time and efforts
to the performance of his duties as Senior Vice President - Store Operations of
the Company. The Employee agrees that he will not engage in any other gainful
occupation during the term of this Agreement, without the prior written consent
of the Company. Nothing contained herein shall be construed, however, to prevent
the Employee from personal business, charitable and professional activities,
from trading, for his own account and benefit, in stocks, bonds, securities,
real estate, commodities, or other forms of investments. Employee agrees to
comply with the Company's policies, rules and regulations as determined by the
Board of Directors.
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5. Non-Stock Compensation and Reimbursements. The Company
shall pay, and Employee agrees to accept, as partial compensation for services
to be rendered hereunder during the Term, the remuneration described below:
A. Annual Salary. The Company shall pay Employee a base
annual salary as of the Effective Date of One Hundred Twenty Five Thousand and
No/100 Dollars ($125,000.00) per year ("Base Salary"), subject to such increases
as the Board of Directors in its sole discretion deems appropriate in accordance
with the Company's customary procedures regarding the salaries of its executive
officers. The Base Salary shall be payable according to the customary payroll
practices of the Company, but in no event less frequently than monthly.
B. Bonuses. During the Term, Employee shall be entitled to
participate in the Company's annual salaried employee bonus program, as amended
from time to time by the Board of Directors. Under the current bonus program,
Employee shall be eligible to receive bonuses of up to forty percent (40%) of
Base Salary. Such bonuses are based on individual performance versus defined
objectives and a corporate performance multiplier. During the Term, Employee
shall be entitled to participate in other incentive and/or bonus, cash and
equity compensation plans of the Company which provide benefits to senior
officers, as determined by the Board of Directors of the Company.
X. Xxxxxxxxx Payments and Agreements.
(i) Upon the occurrence of a Triggering Event, Employee
shall be deemed to have earned the Severance Amount, as defined below, on the
effective date of the Triggering Event. The obligation of the Company under this
Subsection 5C(i) shall take the place of any other obligations of the Company
under this Section 5 to pay to Employee for the balance of the Term Employee's
then Base Salary pursuant to Subsection 5A.
(ii) For purposes of this Agreement, the term Severance
Amount shall mean the following: (a) if a Triggering Event occurs as a result of
a Constructive Termination in connection with a Change of Control, the Severance
Amount shall be an amount equal to one and one half (1 1/2) times Employee's
Base Salary; (b) if a Triggering Event (other than a Constructive Termination in
connection with a Change of Control) occurs within one hundred eighty (180) days
prior or subsequent to the date of a Change of Control, or is in any way related
to, results from, arises out of, or is in connection with a Change of Control,
the Severance Amount shall be an amount equal to one and one half (1 1/2) times
Employee's Base Salary; or (c) if a Triggering Event otherwise occurs, the
Severance Amount shall be an amount equal to one (1) times Employee's Base
Salary.
(iii) If the Severance Amount payable pursuant to this
Section is an amount equal to one and one-half (1 1/2) times Employee's Base
Salary, then the Severance Amount shall be paid within thirty (30) days of the
date of the Triggering Event. Otherwise, the Severance Amount payable pursuant
to this Section shall be paid over the twelve (12) month period following the
Triggering Event according to the Company's payroll practices and procedures in
effect at the time of the Triggering Event.
(iv) Upon the occurrence of a Triggering Event, any and
all stock options to purchase shares of the Company's Common Stock which are
held by Employee shall become one hundred percent (100%) vested and immediately
exercisable as of the date of such Triggering Event, and shall be exercisable by
the Employee over the balance of the remaining stated term of such stock options
(which term shall be the term applicable to the Employee in the absence of
termination of employment), notwithstanding any provision contained in the stock
option agreement to the contrary.
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(v) [Intentionally Left Blank]
(vi) Any controversy or claim arising out of or
relating to whether termination of Employee's employment is due to a Triggering
Event, or is a Termination With Cause, a Termination Without Cause, a
Constructive Termination or a Voluntary Termination as provided herein, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules
("Rules") of the American Arbitration Association ("AAA"). Arbitration shall be
initiated by a party by giving notice in the manner set forth herein to the
other party of its intention to arbitrate, which notice shall contain a
statement setting forth the nature of the dispute, the amount claimed, if any,
and the remedy sought. The initiating party shall then file a copy or copies of
the notice as set forth under the Rules. Dothan, Alabama shall be the location
where the arbitration is held. The parties shall agree upon and appoint three
(3) arbitrators in accordance with the Rules within thirty (30) days of the
effective date of notice of arbitration; however, if the parties fail to make
such designation within thirty (30) days, the AAA shall make the appointment.
The determinations of such arbitrators will be final and binding upon the
parties to the arbitration, and judgment upon the award rendered by the
arbitrators may be entered in any such court having jurisdiction, or application
may be made to such court for a judicial acceptance of the award and an order of
enforcement, as the case may be. The arbitrators shall apply the laws of the
State of Alabama as to both substantive and procedural questions.
D. Car Allowance. The Company shall pay Employee a monthly
car allowance payable monthly in advance in accordance with customary practices
of the Company of not less than Five Hundred and No/100 Dollars ($500.00) per
month.
E. Insurance and Benefits.
(i) Employee shall be entitled to participate in or
receive benefits under all employee and executive benefit plans or arrangements
and perquisites of employment, including, without limitation, plans or
arrangements providing for health and disability insurance coverage, life
insurance for the benefit of Employee's beneficiaries, deferred compensation and
pension benefits, and personal financial, investment, legal or tax advice, all
at the highest level that is available through the Company to other senior
officers of the Company subject to the same terms and conditions as apply to
such other senior officers.
(ii) Employee shall be entitled to all holidays
recognized by the Company and vacation time for not less than three (3) weeks
per year plus such additional time as is available under the vacation policy of
the Company in effect for senior officers with continuing payment of all
compensation as set forth herein. Employee shall be reimbursed by the Company
for all expenses incurred on behalf of the Company in accordance with the then
current reimbursement policies of the Company. Nothing paid to Employee under
any plan, arrangement or perquisite presently in effect or made available in the
future shall be deemed to be in lieu of the salary and other compensation or
payments paid or payable to Employee under this Agreement.
(iii) In the event of a termination of Employee's
employment with the Company as a result of or in connection with a Triggering
Event, and Employee elects under COBRA to continue his individual and/or family
group health coverage, then for a twelve (12) month period following the
Termination Date, the Company shall pay Employee (on a monthly basis) an amount
equal to the actual premium cost to Employee for such continuation coverage.
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F. [Intentionally Left Blank]
6. [Intentionally Left Blank]
7. [Intentionally Left Blank]
8. Termination.
A. This Agreement will commence on the Effective Date and
shall continue during the Initial Term.
B. In addition to the Initial Term, this Agreement shall
be renewed for additional one (1) year periods (the "Renewal"), ad infinitum,
unless either party gives notice of non-renewal at least thirty (30) days prior
to the expiration of the Initial Term or the then current Renewal Term.
C. During the Term, the Company or Employee may terminate
this Agreement, subject to the terms, conditions and obligations hereof, by any
of the following events:
(i) Mutual written agreement expressed in a single
document signed by both the Company and Employee;
(ii) Voluntary Termination by Employee;
(iii) Death of Employee;
(iv) Termination Without Cause;
(v) Termination With Cause;
(vi) Constructive Termination; or
(vii) Permanent Disability.
Upon termination for any of the foregoing reasons, Employee
shall continue to render services and shall be paid his Base Salary and benefits
up to the Termination Date. In the event of such termination, this Agreement
shall be deemed terminated for all purposes, except to the extent otherwise
herein provided.
D. The obligations of Employee under Sections 8 and 9
shall survive termination or expiration of this Agreement. The obligations of
the Company under Section 8, and those obligations under Section 5 that by their
terms are to be paid or to continue after termination of this Agreement, shall
also survive such termination.
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9. Proprietary Information.
A. In performance of services under this Agreement,
Employee may have access to:
(i) information which derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy (hereinafter "Trade Secrets" or
"Trade Secret"); or
(ii) information which does not rise to the level of a
Trade Secret, but is valuable to the Company and provided in confidence to
Employee (hereinafter "Confidential Information").
B. Employee acknowledges and agrees with respect to Trade
Secrets and Confidential Information provided to or obtained by Employee
(hereinafter collectively the "Proprietary Information"):
(i) that the Proprietary Information is and shall
remain the exclusive property of the Company;
(ii) to use the Proprietary Information exclusively for
the purpose of fulfilling the obligations under this Agreement;
(iii) to return the Proprietary Information, and any
copies thereof, in his possession or under his control, to the Company upon
request of the Company, or expiration or termination of this Agreement for any
reason; and
(iv) to hold the Proprietary Information in confidence
and not to copy, publish, or disclose to others or allow any other party to
copy, publish, or disclose to in any form, any Proprietary Information without
the prior written approval of an authorized representative of the Company.
C. The obligations and restrictions set forth in this
section 9 shall survive expiration or termination of this Agreement, for any
reason, and shall remain in full force and effect as follows:
(i) as to Trade Secrets, for so long as such
information remains subject to protection under applicable law;
(ii) as to Confidential Information, for a period of
five (5) years after expiration or termination of this Agreement for any reason.
D. The obligations set forth in this Section 9 shall not
apply or shall terminate with respect to any particular portion of the
Proprietary Information which:
(i) was in Employee's possession, free of any
obligation of confidence, prior to his receipt of the Confidential Information
from the Company;
(ii) is in the public domain at the time the Company
communicates it to Employee, or becomes available to the public through no
breach of this Agreement by Employee; or
(iii) is received by Employee independently and in good
faith from a third party lawfully in possession thereof and having no obligation
to keep such information confidential.
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10. Covenant Not To Compete. Employee hereby agrees that
during the term hereof, and for a period of one (1) year from the date of
expiration or termination of this Agreement for any reason, and within the Area,
Employee will not:
A. compete with the Company in the Video Business, or
engage in or carry on the Video Business, directly or indirectly, through any
person or entity, or in any capacity, including, without limitation, agent,
lender, trustee, consultant, shareholder, director, officer, employee, or
partner;
B. be employed by, or perform any services as employee,
consultant, or otherwise for, any person, firm, partnership, joint venture,
corporation or other entity that competes with the Company in the Video
Business, or that is engaged in the Video Business within the Area;
C. employ, solicit for employment, or advise or recommend
to any other person or entity that such person or entity employ, or solicit for
employment, any employee of the Company; or
D. deal with, invest in (other than as a stockholder of
less than one percent (1%) of the issued and outstanding stock of a publicly
traded corporation having assets in excess of $25,000,000.00), lend money to,
guarantee loans of, make gifts to, advise, or by any other means assist any
other person or entity that competes with the Company, or that is engaged in the
Video Business within the Area.
11. Severability. If any provision of this Agreement is held
to be invalid or unenforceable by any court of competent jurisdiction, such
holdings shall not affect the enforceability of any other provision of this
Agreement, and all other provisions shall continue in full force and effect.
12. Attorneys' Fees. If a dispute between the parties arises
in connection with this Agreement, the prevailing party as determined through
arbitration or final judgment of a court of competent jurisdiction (which
arbitration or judgment is not subject to further appeal due to the passage of
time or otherwise) shall be entitled to reimbursement from the other party for
reasonable attorneys' fees and expenses incurred by the prevailing party in
connection with the resolution of the dispute.
13. Headings. The headings of the several paragraphs in this
Agreement are inserted for convenience of reference only and are not intended to
affect the meaning or interpretation of this Agreement.
14. Notices. All notices, consents, requests, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given or delivered if (i) delivered personally; (ii) mailed by
certified mail, return receipt requested, with proper postage prepaid; or (iii)
delivered by recognized courier contracting for same day or next day delivery
with signed receipt acknowledgment to the Company at its principal offices, or
to Employee at the address last shown on the records of the Company, or at such
other address as the parties hereto may have last designated by notice to the
other party. Any item delivered personally or by recognized courier contracting
for same day or next day delivery shall be deemed delivered on the date of
delivery. Any item mailed shall be deemed to have been delivered on the date
evidenced on the return receipt.
15. General Provisions. This Agreement shall be governed by
and construed under the laws of the State of Alabama, without giving effect to
its conflict of law principles. The terms of this Agreement shall be binding
upon and inure to the benefit of the Company and its successors and assigns.
Neither party may assign his or its rights and obligations under this Agreement
to any other party.
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16. Entire Agreement. This Agreement contains the entire
agreement between the parties hereto, and except as otherwise provided in this
Agreement, supersedes and cancels all previous and contemporaneous written and
oral agreements, including all prior employment agreements between the Company
and Employee and amendments thereto. No amendment or modification of this
Agreement shall be valid or binding unless in writing and signed by the party to
be bound.
IN WITNESS WHEREOF, the parties hereto have affixed their
seals and executed this Agreement effective as of the date first above written.
COMPANY:
ATTEST: M.G.A., INC.
/s/ S. Page Xxxx By: /s/ X. X. Xxxxxxx
------------------------- -----------------------
Secretary X. X. Xxxxxxx
Its: Chief Executive Officer
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Date: January 3, 2000
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EMPLOYEE:
/s/ S. Page Xxxx /s/ Xxxxxxx X. Xxxxxx
------------------------ -------------------------------
Witness Xxxxxxx X. Xxxxxx, Individually
Date: December 22, 1999
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