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EXHIBIT 7
EMPLOYMENT AGREEMENT
This Employment Agreement (this "AGREEMENT") dated effective June 7, 1999
(the "EFFECTIVE DATE") is between Garden Ridge, L.P., a Texas limited
partnership (the "COMPANY"), and Xxxx X. Xxxxxx (the "EXECUTIVE").
WHEREAS, the retail and business operations are conducted by and through
the Company and the Company is indirectly owned by Garden Ridge Corporation, a
Delaware corporation ("GARDEN RIDGE");
WHEREAS, the Company desires to retain the services of the Executive as
President and Chief Executive Officer of the Company, and the Executive desires
to be retained in such capacity, all upon the terms and subject to the
conditions set forth in this Agreement.
Accordingly, the parties agree as follows:
1. TERM. The term of the Executive's employment hereunder shall commence
on the Effective Date and shall continue until the first anniversary thereof
(such term, as renewed or extended hereunder is referred to as the "TERM");
provided that commencing on the first anniversary of the Effective Date and on
each anniversary thereafter, the Term shall automatically be extended for one
additional year unless either party gives 60 days prior written notice not to
extend this Agreement prior to 60 days before such extension would be
effectuated; provided further that this Agreement may also be terminated
pursuant to SECTION 7 of this Agreement.
2. EMPLOYMENT. As of the Effective Date, the Company agrees to employ the
Executive and the Executive accepts such employment upon the terms and
conditions of this Agreement. The Executive shall devote his full productive
time, energies and abilities to the Company's business; PROVIDED, HOWEVER, that
the Executive shall be permitted to (a) make personal investments, (b) engage
in charitable activities and (c) with the prior written approval from the Board
of Directors of Garden Ridge ("BOARD"), serve as a member of the board of
directors of corporations other than the Company and its subsidiaries, in all
cases, to the extent that such activities do not materially interfere with his
duties hereunder.
3. DUTIES. The Executive is employed to serve at all times during the
Term as President and Chief Executive Officer of the Company. He shall do and
perform such duties and render such services as customarily performed by a
person in such capacity, subject always to the policies of the Board.
4. COMPENSATION.
4.1 SIGNING BONUS. The Company shall pay the Executive a signing
bonus ("SIGNING BONUS") equal to $300,000. The Signing Bonus shall be paid
within five business days of the execution of this Agreement by the parties
hereto.
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4.2 BASE COMPENSATION. As compensation for all the services to be
rendered pursuant to this Agreement, the Company shall pay the Executive a base
compensation of $550,000 per annum (the "BASE COMPENSATION") payable in
accordance with the regular payroll practices for executives of the Company;
PROVIDED, HOWEVER, that the Executive's Base Compensation shall be
appropriately prorated in the case of a partial year. The Executive's Base
Compensation may be increased, but not reduced, for any fiscal year by such
additional amount as the Compensation Committee of the Board shall, in its sole
discretion, determine. Any amounts payable under this SECTION 4.2 for any
fiscal year shall not affect the computation of Base Compensation or amounts
payable under this SECTION 4.2, in each case, for any subsequent fiscal year.
4.3 ANNUAL BONUS PAYMENTS. In addition to the amounts payable by
the Company under SECTIONS 4.1 and 4.2, the Executive shall be entitled to
receive an annual bonus opportunity with a target objective of fifty percent
(50%) of Base Compensation (the "BONUS PAYMENT"). The bonus opportunities as
provided in this SECTION 4.3 shall be based upon the achievement of certain
performance targets and shall be established in writing by the Compensation
Committee of the Board either prior to, or within 90 days after the beginning
of, each fiscal year of the Company. Any Bonus Payment in excess of fifty
percent (50%) of Base Compensation for any one fiscal year may be paid in
restricted shares of common stock ("COMMON STOCK") of Garden Ridge at the
discretion of the Board. Notwithstanding the calculation of the target
objective of the Bonus Payment for the Executive provided herein, the Executive
shall be entitled to a minimum Bonus Payment of $150,000 for the fiscal year
ending January 30, 2000.
4.4 EQUITY INCENTIVES.
4.4.1 Within seven days after the Effective Date, the
Executive shall purchase from Garden Ridge or on the national exchange
securities market in which the Common Stock is traded, $100,000 (or an amount
as close thereto as possible) of whole shares of non-assessable Common Stock at
a per share price equal to the closing price of the Common Stock, as published
in the WALL STREET JOURNAL ("CLOSING PRICE") on the date of purchase of such
Common Stock.
4.4.2 On the Effective Date, the Company shall cause Garden
Ridge to grant the Executive options ("SIGN-ON OPTIONS") to purchase up to
125,000 shares of Common Stock as provided in this SECTION 4.4.2. The Sign-On
Options to purchase up to 125,000 shares of Common Stock shall be fully vested
on the Effective Date. The Sign-On Options shall have an exercise price equal
to the Closing Price per share on the date such Sign-On Options are granted.
The term on the Sign-On Options issued shall be for 10 years after the date the
Sign-On Options are initially granted. In the event the Executive's employment
is terminated for any reason (other than the death or Disability (as
hereinafter defined) of the Executive), all Sign-On Options shall remain
exercisable for 180 days following the date of such termination of the
Executive. In the event of the death or Disability of the Executive, all
Sign-On Options shall remain exercisable for a period of one year after the
date of the Executive's death or Disability.
4.4.3 On the Effective Date, the Company shall cause Garden
Ridge to grant the Executive an option to purchase 375,000 shares of Common
Stock as provided in this SECTION
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4.4.3. Such option to purchase 375,000 shares of Common Stock shall vest as
follows: the option to acquire 125,000 shares of Common Stock shall vest in the
Executive and shall be exercisable beginning on June 1, 2000 and an additional
125,000 shares of Common Stock shall vest in the Executive and shall be
exercisable on each of the following dates: June 1, 2001 and June 1, 2002. The
options issued to the Executive under this SECTION 4.4.3 shall have an exercise
price equal to the Closing Price on the Effective Date. The term on the option
issued under this SECTION 4.4.3 shall be for 10 years after the Effective Date.
In the event the Executive is terminated for any reason (other than a Change of
Control (as hereinafter defined)), any options issued to the Executive under
this SECTION 4.4.3 that are not otherwise vested shall be forfeited; provided,
however, that in the event of a Change of Control, all unvested options granted
to the Executive under this SECTION 4.4.3 shall immediately vest and shall be
exercisable in accordance with its terms for a period of one year after the
date of the Change of Control. Notwithstanding anything contained in this
SECTION 4.4.3 to the contrary, in the event the Executive's employment is
terminated due to the death or Disability of the Executive, fifty percent (50%)
of the unvested options granted to the Executive under this SECTION 4.4.3 shall
immediately vest and shall be exercisable in accordance with its terms for a
period of 180 days after the date of the Executive's death or Disability.
4.5 RELOCATION AND RELOCATION EXPENSES.
4.5.1 The Executive agrees that he will relocate from his
present residence in Longboat Key, Florida ("CURRENT RESIDENCE") to an area
which is within a reasonable commuting distance to the Company's principal
executive offices which are presently located in the Houston, Texas
metropolitan area ("NEW RESIDENCE"). The Executive agrees to relocate as soon
as practicable following the Effective Date.
4.5.2 The Executive shall be reimbursed (on an after-tax
basis) for all reasonable customary expenses he and his dependents incur
related to the costs of packing, loading, transportation, unloading and
unpacking of household and personal belongings. Such expenses subject to
reimbursement shall include any discount points or closing costs, real estate
brokerage, title and legal fees or administrative fees with respect to the
purchase of a New Residence, but shall not include any discount points or
closing costs, real estate brokerage, title and legal fees or administrative
fees with respect to the sale of the Current Residence.
4.5.3 During the period in which the Executive is attempting
to secure an appropriate New Residence, the Executive shall be entitled to
reimbursement (on an after-tax basis) from the Company from the Effective Date
until October 5, 1999 for all necessary and reasonable expenses for temporary
housing incurred or expended by him and his dependents in moving from the
Current Residence to the New Residence; provided that such expenses shall not
exceed $8,000.00 per month (pro-rated for any partial month). The Company will
reimburse the Executive for these expenses upon his submission to the Company
of vouchers or expense statements evidencing such expenses were incurred.
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4.6 APPLICABLE WITHHOLDING. All payments to the Executive shall be
subject to all federal, state and local withholding obligations which shall be
administered in accordance with the Company's customary payroll practices.
5. EXECUTIVE BENEFITS.
5.1 FACILITIES, SERVICES AND AMENITIES. The Company shall provide
the Executive with office facilities and a secretary, and other services and
amenities substantially similar to the existing practices of the Company.
5.2 FRINGE BENEFIT PLAN. During the Term, the Executive shall be
entitled to participate in all plans and receive all rights and benefits for
which he shall be eligible under any pension, deferred compensation, health,
hospitalization, disability or group life insurance or other so-called "fringe"
benefit plan which the Company provides for its executives generally. After the
Term and until the Executive reaches age 65, the Executive shall be entitled to
participate, at his expense, in all plans and receive all rights and benefits
for which he shall be eligible under any pension, deferred compensation,
health, hospitalization, disability or group life insurance or other so-called
"fringe" benefit plan which the Company provides for its executives generally.
5.3 KEY MAN LIFE INSURANCE. The Company may maintain "key man" life
insurance on the Executive's life for the benefit of the Company to the extent
it deems necessary or advisable, and the Executive shall submit himself for
medical examinations as may be required in connection therewith and shall
otherwise cooperate in arranging for such insurance.
5.4 VACATION. The Executive shall be entitled to four weeks per
year paid vacation as administered pursuant to the Company's existing vacation
policy.
6. BUSINESS EXPENSES. The Company shall pay or reimburse the Executive
for all reasonably incurred travel, hotel, entertainment and other business
expenses upon presentation by him of an itemized account of such expenditures
in accordance with the Company's procedures.
7. TERMINATION.
7.1 EVENTS OF TERMINATION.
7.1.1 The Company may terminate this Agreement immediately
prior to the last day of the Term upon the occurrence of any one or more of the
following events:
(a) the death of the Executive;
(b) a determination of the Disability (as hereinafter
defined) of the Executive;
(c) the failure to move the Executive's family to the
Houston, Texas metropolitan area on or before December 31, 1999;
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(d) any violation by the Executive of the non-compete
or confidentiality covenants set forth in SECTION 8 of this
Agreement;
(e) a material and willful violation of this Agreement
or any lawful direction of the Board consistent with this
Agreement;
(f) the commission by the Executive of a willful or
grossly negligent act in bad faith that causes material harm to the
Company as determined by a majority of the Board;
(g) a final, unappealable conviction of the Executive
in a court of law of any crime or offense resulting in
imprisonment, or that involves fraud, theft, or embezzlement from
the Company, except as may result from actions or omissions to act
that were directed by the Board; or
(h) any drug, alcohol or other substance addiction on
the part of the Executive;
PROVIDED, HOWEVER, that termination of this Agreement under clauses (c) through
(h) shall be made upon 10 days' prior written notice to the Executive by the
Company, specifying in reasonable detail the reason therefor. The term
Disability shall mean, with respect to the Executive, that due to physical or
mental infirmity, whether total or partial, the Executive is substantially
unable to perform his services hereunder, as determined by the Company's
disability carrier, for a period of six months in the aggregate during any
twelve month period.
7.1.2 The Company may terminate this Agreement for any reason
other than the events listed in SECTION 7.1.1; PROVIDED, HOWEVER, that in such
event the Executive shall be entitled to receive the amounts described in
SECTION 7.2.2.
7.1.3 If the Executive resigns or terminates this Agreement
for any reason (other than pursuant to SECTION 7.1.4), the Executive shall be
entitled to receive only the amounts described in SECTION 7.2.1.
7.1.4 If the Executive resigns or terminates this Agreement
because of a willful breach by the Company of its obligations under this
Agreement that continues after notice to the Board and reasonable opportunity
to cure such breach (which shall be no less than 30 days), the Executive shall
be entitled to receive the amounts described in SECTION 7.2.2.
7.2 EFFECT OF TERMINATION.
7.2.1 In the event of a termination of this Agreement under
SECTIONS 7.1.1(C) through (h) or SECTION 7.1.3, the Executive shall be entitled
to receive, within 15 days of such termination (a) any portion of the Base
Compensation (including any increase provided for in SECTION 4.2) relating to
the period prior to the date of such termination which has not been paid, and
(b) all reimbursements due the Executive from the Company for expenses
specified in SECTION 6 which have not been paid.
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7.2.2 In the event of a termination of this Agreement under
SECTIONS 7.1.2 or 7.1.4, the Executive shall be entitled to receive a lump sum
payment in an amount equal to (a) the Base Compensation paid for the fiscal
year prior to the date the Executive's employment was terminated plus (b) the
Bonus Payment, if any, paid for the fiscal year prior to the date the
Executive's employment was terminated; PROVIDED, HOWEVER, that if the Executive
violates at any time the non-compete or confidentiality covenants set forth in
SECTION 8 of this Agreement, the Executive shall have no right thereafter to
receive any compensation or benefit hereunder.
7.2.3 In the event of a termination of the Executive's
employment due to the death or Disability of the Executive, the Executive (or
his legal representative) shall be entitled to continue to receive the Base
Compensation for a period of six months after the Executive's death or
Disability; provided that such payments shall be paid in accordance with the
regular payroll practices of the Company. The Executive shall also be entitled
to any long-term disability benefits under the applicable long-term disability
insurance plan or program of the Company.
7.2.4 Other than the foregoing, if the Company terminates
this Agreement, the Executive or his legal representative, as the case may be,
shall have no claim against the Company and this Agreement shall become null
and void and have no further force or effect, except that this SECTION 7.2 and
SECTION 8 shall survive any such termination.
8. CERTAIN COVENANTS OF THE EXECUTIVE.
8.1 NON-COMPETE AGREEMENT. During the Term and for a period ending
on the second anniversary of the end of the Term (the "RESTRICTED PERIOD"), the
Executive covenants and agrees that he shall not, directly or indirectly, (a)
engage in any business that competes with the Company (as hereinafter defined)
within the United States, or (b) contact or solicit any of the suppliers of the
Company or its affiliates for the purpose of causing or attempting to cause any
such person to change materially its relationship with the Company. As used in
this SECTION 8.1, a business shall be considered to "COMPETE WITH THE COMPANY"
only if more than forty percent (40%) of the sales revenues of such business is
attributable to the retail sale of goods which are the same or substantially
similar to those being offered for sale by the Company or its affiliates at
retail as of the end of the Term (or, if being determined as of any time prior
to the end of the Term, than as of such time).
8.2 CONFIDENTIAL INFORMATION. During the Term and at all times
thereafter, the Executive covenants and agrees that he shall keep secret and
retain in strictest confidence, and shall not use for the benefit of himself or
others except in connection with the business and affairs of the Company and
its affiliates, all confidential matters of the Company and its affiliates, if
any, including, without limitation, trade secrets, customer lists, financial
data and other proprietary information of the Company and all information about
the Company (financial or otherwise), learned by the Executive heretofore or
hereafter, and shall not disclose them to any person outside the Company,
either during or after employment by the Company, except as required in the
course of performing duties hereunder or with the Company's express written
consent.
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8.3 NONSOLICITATION AGREEMENT. During the Restricted Period, the
Executive covenants and agrees that he shall not, directly or indirectly,
solicit the employment or services of, or cause or attempt to cause, to leave
the employment or services of the Company, or any of its affiliates, any person
employed by, or otherwise engaged to perform services for the Company, or any
of its affiliates (whether in the capacity of employee, consultant, independent
contractor, or otherwise).
8.4 REMEDIES. If the Executive commits a breach, or threatens to
commit a breach, of any of the provisions of SECTIONS 8.1, 8.2 or 8.3, the
Company shall have the right and remedy (in addition to, and not in lieu of,
any other rights or remedies available to the Company under law or in equity)
(a) to have the provisions of this Agreement specifically enforced by a court
having jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company, that money
damages will not provide an adequate remedy to the Company for any breach
thereof, and that the Company may obtain injunctive relief for such breach or
threatened breach (any requirements for posting of bond are hereby expressly
waived) and (b) to require the Executive to account for and pay over to the
Company all compensation, profits, monies or other benefits derived or received
by the Executive as a result of any breach of any of the provisions of SECTIONS
8.1, 8.2 or 8.3, and the Executive hereby agrees to account for and pay over
all such amounts to the Company.
9. TERMINATION UPON CHANGE OF CONTROL.
9.1 SEPARATION BENEFIT. Upon termination of the Executive's
employment by the Company after a Change of Control (as hereinafter defined)
transaction is announced, the Company shall pay to the Executive in a lump sum
an amount equal to 200% times the sum of (a) the Executive's Base Compensation
in the Company's most recent fiscal year plus (b) the Executive's Bonus Payment
for the Company's most recent fiscal year. For purposes of this Agreement,
"CHANGE OF CONTROL" shall mean the occurrence of any one of the following
events:
(a) any person or other entity, including any person as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended ("EXCHANGE
ACT"), becoming the beneficial owners, as defined in Rule 13d-3 of the Exchange
Act, directly or indirectly, of more than fifty percent (50%) of the total
combined voting power of all classes of capital stock of Garden Ridge
ordinarily entitled to vote for the election of directors of Garden Ridge;
(b) The Board approving (in one transaction or a series of
transactions) the sale of all or substantially all of the property or assets of
the Company;
(c) The Board approving a consolidation or merger of Garden Ridge
with another corporation, the consummation of which would result in the
occurrence of an event described in subparagraph (a) above.
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10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if delivered personally to the
Executive or sent by certified or registered mail to his residence at 2165 Gulf
of Mexico Drive, Apt. # 112, Longboat Xxx, Xxxxxxx 00000, in the case of the
Executive, or to the principal office of the Company at 00000 Xxxxxx Xxxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000-0000 in the case of the Company, or to such
other address as either party may hereafter notify the other.
11. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other shall not operate or be construed as a
waiver of any subsequent breach by that party.
12. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas, without giving effect to
principles of conflicts of law, applicable to agreements made and to be
performed entirely within such state. Venue for any dispute shall lie in Xxxxxx
County, Texas.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties in respect of the Executive's employment and employment compensation.
14. SECTION HEADINGS. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
15. SEVERABILITY. If any provision or any portion of any provision of
this Agreement shall be arbitrated or adjudicated to be invalid or
unenforceable under law, the parties hereto agree that the remainder of this
Agreement shall not be affected thereby.
16. ASSIGNMENTS. The rights and obligations under this Agreement of the
Executive may not be assigned to any party, unless consented to by the Company.
17. COUNTERPARTS. This Agreement may be executed in several identical
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
18. MODIFICATIONS. This Agreement may be modified only by written
agreements signed by the Executive and the Company.
19. ATTORNEYS FEES AND EXPENSES. Each party shall pay their respective
legal fees and expenses in connection with the preparation and negotiation of
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GARDEN RIDGE, L.P.
By: Garden Ridge Management Corporation, its
General Partner
By: /s/ XXXXXX XXXXXXX
Xxxxxx Xxxxxxx,
Chairman and Chief Executive Officer
/s/ XXXX X. XXXXXX
Xxxx X. Xxxxxx
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