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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of November 29, 1999,
between CROWN BOOKS CORPORATION (the "Company"), and XXXXXXX XXXXXXX (the
"Executive")
W I T N E S S E T H
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to accept such employment, on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual promises,
representations and warranties set forth herein, and for other good and valuable
consideration, it is hereby agreed as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts such employment, upon the terms and
conditions set forth herein.
2. TERM. Subject to the provisions of Section 10 hereof,
the period of the Executive's employment under this Agreement shall be from
November 29, 1999 through November 28, 2002, subject to earlier termination in
accordance with Section 10 hereof (the "Term").
3. POSITION AND DUTIES.
(a) The Executive shall serve as the President and
Chief Executive Officer of the Company and shall have such duties as from time
to time may be prescribed by the Board of Directors of the Company (the
"Board").
(b) The Executive shall devote his best talents,
efforts and abilities to the performance of his duties hereunder.
(c) The Executive shall be nominated to serve on the
Board and, subject to his appointment, the Executive agrees to so serve.
4. SALARY. For the Executive's services hereunder, subject
to the terms hereof, the Company shall pay the Executive a salary (the "Salary")
at the rate of $350,000 per year in accordance with the customary payroll
practices of the Company. Such salary shall be reviewed annually by the Board of
Directors. The Salary may not be reduced without the Executive's consent.
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5. BONUS. For each fiscal year of the Company during the
Term, commencing with the fiscal year that begins on February 1, 2000, the
Executive shall be paid a bonus based upon the Company's "EBITDA" (as
hereinafter defined) for such fiscal year. Such bonus shall be determined on the
basis of the following schedule:
Percentage of Fiscal Year EBITDA Achieved Amount of Bonus
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at least 90% but less than 92.5% $140,000
at least 92.5% but less than 95% $142,500
at least 95% but less than 97.5% $145,000
at least 97.5% but less than 100% $147,500
at least 100% but less than 102.5% $150,000
at least 102.5% but less than 105% $156,250
at least 105% but less than 107.5% $162,500
at least 107.5% but less than 110% $168,750
at least 110% but less than 112.5% $175,000
at least 112.5% but less than 115% $183,750
at least 115% but less than 117.5% $192,500
at least 117.5% but less than 120% $201,250
120% or more $210,000
To the extent that the percentage of EBITDA achieved is more than the lowest
percentage in any of the above percentage classes but less than the highest
percentage, the amount of bonus awarded will be prorated between the amount
awarded for the lowest percentage achieved and the amount of bonus for the next
highest class.
The bonus, if any, for any such fiscal year shall be paid to the
Executive on the 10th business day following the determination of EBITDA by the
Company's independent accountants for such fiscal year, provided that no such
bonus will be paid unless the Executive is employed by the Company on the last
business day of the applicable fiscal year. For purposes hereof, (a) "EBITDA"
for any fiscal year shall mean the Company's earnings before interest, taxes,
depreciation and amortization for such year, as determined by the Company's
independent accountants in accordance with GAAP, and (b) the target EBITDA for
each such fiscal year shall be formulated initially by Executive and approved by
the Board of Directors.
6. OPTION. (a) On the date hereof, the Company shall grant
the Executive an option (the "Option") to purchase 400,000 shares of the common
stock of the Company (the "Shares"). The Option shall be granted under the
Company's Stock Option Plan. The Option shall vest in accordance with the
following schedule:
(i) 1/3 of the total number of Shares subject to the
Option (the "First Year Shares") shall vest immediately;
(ii) On November 28, 2000, provided the Executive is
then employed by the Company or employment has terminated other than for cause,
death, disability or the
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voluntary resignation by Executive, the Option shall be vested with respect to
an additional 1/3 of the total number of Shares subject to the Option (the
"Second Year Shares"); and
(iii) On November 28, 2001, provided the Executive is
then employed by the Company or his employment has terminated other than for
cause, death, disability or the voluntary resignation of Executive, the Option
shall be vested with respect to the remaining 1/3 of the total number of Shares
subject to the Option (the "Third Year Shares").
(b) The exercise price of the Option shall be determined as
follows:
(1) The per share exercise price for the First Year
Shares shall equal $2.72.;
(2) The per share exercise price for the Second Year
Shares shall equal 120% of the per-share exercise price for the First Year
Shares; and
(3) The per share exercise price for the Third Year
Shares shall equal 120% of the per share exercise price for the Second Year
Shares.
The Option shall be exercisable, to the extent vested, during
the period beginning on the 31st day following the date the Shares are listed on
a national stock exchange and ending on November 29, 2004. The Option shall be
exercised upon the Executive's tender of written notice to the Board setting
forth the number of vested Shares with respect to which the Option is being
exercised together with the cash payment of the aggregate exercise price for
such Shares.
7. BENEFITS. During his employment hereunder, the Company
shall make available to the Executive any and all other employee or fringe
benefits (in accordance with their terms and conditions) which the Company
generally makes available to its other executive employees.
8. RELOCATION. In connection with his move to the
Washington, D.C. metropolitan area, the Company shall pay or provide the
Executive as follows:
(a) The Company in lieu of paying or reimbursing the
Executive for all reasonable costs and expenses incurred by him in moving to the
Washington, D.C. metropolitan area, shall make a lump sum payment to Executive
of $67,128.07, plus an amount sufficient to pay income taxes on this payment;
provided that the Company shall pay or reimburse the Executive for the
reasonable cost and expenses incurred by him in transporting Executive's boat to
the Washington, D.C. area.
(b) The Company shall pay or reimburse the Executive
for the reasonable cost incurred by him for temporary housing in the Washington,
D.C. metropolitan area during the six-month period beginning November 29, 1999.
(c) The Company shall pay or reimburse the Executive
for costs incurred by him for round-trip coach airfare to Florida during the
six-month period beginning November 29,
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1999, provided that such payments or reimbursements shall not be made for more
than one such trip every two or three weeks.
(d) In the event that any payments made to the
Executive under this Section 8 are taxable to the Executive for income tax
purposes, as reasonably determined by the Company's accountants or by the
Internal Revenue Service (such taxable payments hereinafter referred to as the
"Payments"), the Company shall pay the Executive an additional amount such that
the net amount retained by the Executive after deduction and/or payment of any
income taxes on the Payments shall be equal to the Payments.
9. RESTRICTIVE COVENANTS.
(a) Noncompetition. Throughout the period commencing
on the date hereof and ending 12 months after the termination of the Executive's
employment with the Company for any reason, the Executive shall not, without the
prior written consent of the Company, directly or indirectly, own, manage,
control or participate in the ownership, management or control of, or be
employed or engaged by or otherwise affiliated or associated with, whether as a
sole proprietor, shareholder (except as a holder of not more than three (3)
percent of the outstanding shares of a publicly held corporation), owner,
partner, joint venturer, employee, agent, manager, salesman, consultant,
advisor, independent contractor, officer, director, promoter or otherwise,
whether or not for compensation, with respect to any corporation, partnership,
proprietorship, firm, association or other business entity, including, without
limitation, any not-for-profit entity, which is engaged in any "Company
Business" (as hereinafter defined). For purposes of this Agreement, the term
"Company Business" shall mean any corporation, partnership, proprietorship,
firm, association or other business entity, including, without limitation, any
not-for-profit entity, which is engaged in (i) any business presently conducted
by the Company, (ii) any other business conducted by the Company during the
period of the Executive's employment with the Company, or (ii) any other
business conducted by the Company during the 12 consecutive month period
following the termination of the Executive's employment with the Company.
(b) Nonsolicitation of Customers or Suppliers.
Throughout the period commencing on the date hereof and ending 12 months after
the termination of the Executive's employment with the Company for any reason,
the Executive shall not, without the prior written consent of the Company,
directly or indirectly, for himself, on behalf of, or through any person or
entity, (i) hire, engage, employ, solicit or contract with, or communicate with
for the purpose of hiring, engaging, employing, soliciting or contracting with,
any employee of the Company or any person or entity who was an employee of the
Company at any time within the one-year period immediately prior to the
termination of the Executive's employment with the Company, or encourage any
employee of the Company to terminate, curtail or otherwise alter its
relationship with the Company, (ii) solicit any past or present customers or
suppliers of the Company, or authors or other persons in a business relationship
with the Company, for business or patronage in any way relating to any aspect of
any Company Business, other than on behalf of the Company in the course of the
Executive's employment; or (iii) request customers or suppliers of the Company,
or authors or other persons in a business relationship with the Company, to
cancel, curtail or divert their business with the Company, or otherwise take
action with respect to
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such customers or suppliers or authors or other persons which might may be
reasonably expected to have an adverse effect on any Company Business.
(c) Nondisclosure of Information. At all times from
and after the date hereof, the Executive shall not, without the prior written
consent of the Company, directly or indirectly, disclose, divulge, discuss,
provide, transmit, copy, make known to any third party, or use or cause to be
used in any manner, including, without limitation, in competition with or
contrary to the interests of the Company, any trade secrets or confidential
information, knowledge or data, whether of a technical or commercial nature,
developed, in whole or in part, by the Executive or received or acquired through
or in connection with the Executive's association with the Company and not known
or available to the general public, including, without limitation, any of the
foregoing relating to managerial or operational policies, ideas, plans, methods,
practices or procedures, customer lists, authors, inventions, products,
manufacturing methods, product research or engineering data, financial
arrangements, financial positions, competitive status, customer or suppliers
matters, internal organizational matters, technical capabilities or other
business affairs of or relating to the Company or the Company Business. The
Executive acknowledges that all of the foregoing constitutes proprietary
information, which is the exclusive property of the Company.
(d) The provisions of this Section 9 shall survive
termination of this Agreement.
10. TERMINATION. The employment hereunder of the Executive
may be terminated prior to the expiration of the Term in the manner described in
this Section 10.
(a) Termination by the Company for Cause. The
Company shall have the right to terminate the employment of the Executive for
Cause (as such term is defined herein) by written notice to the Executive
specifying the particulars of the circumstances forming the basis for such
Cause.
(b) Termination upon Death or Disability. The
employment of the Executive hereunder shall terminate immediately upon his death
or disability.
(c) Voluntary Resignation by the Executive. The
Executive shall have the right to voluntarily resign his employment hereunder by
30 days' advance written notice to the Company.
(d) Resignation by the Executive for Good Reason.
The Executive shall have the right to voluntarily resign his employment
hereunder for Good Reason. "Good Reason" means the occurrence of the following:
the assignment to the Executive of any duties inconsistent in any material
respect with the Executive's then position (including status, offices, titles
and reporting relationships), authority, duties or responsibilities, or any
other action or actions by the Company which when taken as a whole results in a
significant diminution in the Executive's position, authority, duties or
responsibilities, excluding for this purpose any isolated, immaterial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive.
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(e) Termination by the Company Without Cause. The
Company shall have the right to terminate the Executive's employment hereunder
without Cause by written notice to the Executive.
(f) Termination Date. The "Termination Date" is the
date as of which the Executive's employment with the Company terminates. Any
notice of termination given pursuant to the provisions of this Agreement shall
specify the Termination Date.
(g) "Cause". For purposes of this Agreement, "Cause"
shall exist if the Executive (A) willfully or repeatedly fails in any material
respect to satisfactorily perform his obligations hereunder as provided herein;
(B) has been convicted of a crime or has entered a plea of guilty or nolo
contendere with respect thereto; (C) has committed any act in connection with
his employment with the Company which involved fraud, gross negligence,
misappropriation of funds, dishonesty, disloyalty, breach of fiduciary duty or
any other misconduct injurious to the Company or any affiliate thereof; (D) has
engaged in any conduct which may be reasonably expected to adversely affect in
any material respect the reputation or public image of the Company or any
affiliate thereof, or (E) has breached any of the material provisions of this
Agreement, including Section 9, provided that Executive has been given written
notice of same and a ten (10) day opportunity to cure.
(h) "Disability". For purposes of this Agreement,
"Disability" shall mean any condition which renders the Executive unable to
perform the services required pursuant to the Agreement for a period of six
successive months, or aggregate of six months in any twelve month period.
11. OBLIGATIONS OF COMPANY ON TERMINATION. Notwithstanding
anything in this Agreement to the contrary, the Company's obligations on
termination of the Executive's employment hereunder shall be as described in
this Section 11.
(a) Obligations of the Company in the Case of
Termination Without Cause. In the event that prior to the expiration of the
Term, the Company terminates the Executive's employment, pursuant to Section
10(d), without Cause, or the Executive terminates his employment for Good
Reason, the Company shall provide the Executive with the following:
(i) Severance Payment. The Company shall pay
the Executive the "Severance Payments" equal to the continuation, for the
remainder of the Term or a period of 12 months, whichever is greater,
immediately following the Termination Date (the "Severance Period"), of the
Executive's Salary.
(ii) Bonus. The Company shall pay the
Executive a bonus which would have been payable to him for the contract year
during which the termination of employment occurs, pursuant to Section 5 above
assuming that 100% of EBIDTA would be achieved for the year, had his employment
with the Company not terminated.
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(b) Obligations of the Company in case of
Termination for Death, Disability, Voluntary Resignation or Cause. Upon
termination of the Executive's employment upon death or disability (pursuant to
Section 10(b)), as a result of the voluntary resignation of the Executive
(pursuant to Section 10(c)) or for Cause (pursuant to Section 10(a)), the
Company shall have no payment or other obligations hereunder to the Executive,
except for the payment of any Salary accrued but unpaid as of the date of such
termination.
12. SEVERABILITY. Should any provision of this Agreement be
held, by a court of competent jurisdiction, to be invalid or unenforceable, such
invalidity or unenforceability shall not render the entire Agreement invalid or
unenforceable, and this Agreement and each other provision hereof shall be
enforceable and valid to the fullest extent permitted by law.
13. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, without
regard to any rules concerning the conflicts of laws.
14. CONSENT TO JURISDICTION. The Company and the Executive
irrevocably and voluntarily submit to personal jurisdiction in the State of New
York and in the Federal and state courts in such state located in the Southern
District of New York in any action or proceeding arising out of or relating to
this Agreement and agree that all claims in respect of such action or proceeding
may be heard and determined in any such court. The Company and the Executive
further consent and agree that the parties hereto may be served with process in
the same manner as a notice may be given under Section 15. The Company and the
Executive agree that any action or proceeding instituted by one party against
the other party with respect to this Agreement will be instituted exclusively in
the state courts located in, or in the United States District Court for the
Southern District of New York. The Company and the Executive irrevocably and
unconditionally waive and agree not to plead, to the fullest extent permitted by
law, any objection that they may now or hereafter have to the laying of venue or
the convenience of the forum of any action or proceeding with respect to this
Agreement in any such courts
15. NOTICES. All notices, requests and demands given to or
made upon the respective parties hereto shall be deemed to have been given or
made three business days after the date of mailing when mailed by registered or
certified mail, postage prepaid, or on the date of delivery if delivered by
hand, or one business day after the date of delivery to Federal Express or other
reputable overnight delivery service, addressed to the parties at their
addresses set forth below or to such other addresses furnished by notice given
in accordance with this Section 15: (a) if to the Company or the Board, to Crown
Books Corporation, 0000 00xx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, attn: Xxxxxx
Xxxxxx, Chairman of the Board, with a copy to Xxxx Marks & Xxxxx LLP, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, attn: Xxxx Xxxxxx, Esq. and (b) if to the
Executive, to 000 XX 000 Xxxxxxx, Xxxxx Xxxxxxx, Xxxxxxx, 00000, with a copy to
Xxxx Xxxxxxx Xxxxxxx Xxxx & Handler LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, attn: Xxxxxxx X. Xxxxxxx, Esq.
16. WITHHOLDING. All payments required to be made by the
Company to the Executive under this Agreement shall be subject to withholding
taxes, social security and other payroll deductions in accordance with
applicable law and the Company's policies applicable to Executive employees of
the Company.
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17. COMPLETE UNDERSTANDING. This Agreement supersedes any
prior contracts, understandings, discussions and agreements relating to
employment between the Executive and the Company and constitutes the complete
understanding between the parties with respect to the subject matter hereof. No
statement, representation, warranty or covenant has been made by either party
with respect to the subject matter hereof except as expressly set forth herein.
18. MODIFICATION; WAIVER.
(a) This Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company and the Executive or in the case of a waiver, by the
party against whom the waiver is to be effective. Any such waiver shall be
effective only to the extent specifically set forth in such writing.
(b) No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
duly executed in its corporate name by one of its officers duly authorized to
enter into and execute this Agreement, and the Executive has manually signed his
name hereto, all as of the day and year first above written.
CROWN BOOKS CORPORATION
/s/ Xxxx Xxxxxx By: /s/ Xxxxxx Xxxxxx
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Witness
/s/ Xxxxxx Xxxxxx /s/ Xxxxxxx Xxxxxxx
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Witness XXXXXXX XXXXXXX
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