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EXHIBIT 10.6
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment"), made and
entered into this 30th day of September, 1996, by and among MAZEL COMPANY L.P.,
a Delaware limited partnership (the "Partnership"), MAZEL STORES, INC., an Ohio
corporation (the "Company"), and XXXXX X. XXXXXXX (the "Employee") is to
evidence the following agreements and understandings:
WITNESSETH:
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WHEREAS, the Employee made and entered into an Employment Agreement
with the Partnership effective November 1, 1995 (the "Agreement"); [capitalized
terms not defined herein shall have the meanings ascribed to them in the
Agreement]
WHEREAS, the Company has acquired all of the assets and assumed
substantially all of the liabilities of the Partnership in exchange for capital
stock in the Company;
WHEREAS, the Company is now contemplating an Initial Public Offering of
its Common Stock (the "Initial Public Offering");
WHEREAS, in order to facilitate the consummation of the Initial Public
Offering, Employee has agreed to adjust his Annual Salary and Annual Bonus; and
WHEREAS, the parties have agreed to amend the Agreement in the manner
set forth below.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt, adequacy, and
sufficiency of which are hereby acknowledged, the parties agree as follows:
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1. ANNUAL SALARY.
On the effective date of the Initial Public Offering (the
"Effective Date"), the Annual Salary as defined in Section 3.1 of the Agreement
shall be Two Hundred and Sixty- Five Thousand Dollars ($265,000).
2. ANNUAL BONUS.
Section 3.6 of the Agreement is hereby amended to provide that
the maximum Annual Bonus for the fiscal year ending January 25, 1997 ("Fiscal
1996") and the fiscal year ending January 31, 1998 ("Fiscal 1997") shall be One
Hundred Twenty-five Thousand Dollars ($125,000). For each fiscal year
thereafter, the maximum Annual Bonus shall be fifty-nine and four-tenths percent
(59.4%) of the Annual Salary. Further, for Fiscal 1996 and subsequent years,
the "Target Amount" shall be based on "pre-tax income" in lieu of "operating
income." The Target Amount for fiscal 1996 shall be $9,500,000, which will be
adjusted to reflect both charges and credits attributable to the Initial
Public Offering.
3. STOCK SALARY REDUCTION AWARD, MAXIMUM ANNUAL BONUS REDUCTION
AWARD; ADJUSTMENT TO ANNUAL BONUS.
New sections Section 3.10 and Section 3.11 are added to read as
follows:
3.10 Stock Salary Reduction Award; Maximum Annual Bonus Reduction
Award:
A. In consideration of the salary reduction effected at
the Effective Date, Company grants Employee the
number of Common Shares as equals: (i) 1.25 times the
sum of Fifty Thousand Dollars ($50,000) times the
number of years (or fractional years) in the period
between the
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Effective Date and October 31, 2000, DIVIDED BY (ii)
the Initial Public Offering price (the "Offering
Price").
B. In consideration of the Annual Bonus reductions
effected at the time of the Initial Public Offering,
the Company agrees to grant to Employee an additional
number of Common Shares (rounded up to the nearest
whole share) calculated as follows: Eighty-one
Thousand Five Hundred Dollars ($81,500) DIVIDED BY
the Offering Price.
C. The award of securities under Paragraphs A and B of
this Section 3.10 shall be deemed exempt from the
registration requirements of the Securities Act of
1933, as amended, pursuant to Rule 701 promulgated
under such Act, but shall be subject to any lock-up
agreement required of officers and directors by the
underwriting agreement between the Company and the
underwriters. In furtherance of such agreement, the
Employee agrees, for a period of 180 days following
the Effective Date, not to offer, sell or contract to
sell, or otherwise dispose of any Common Shares of
the Company, without the prior written consent of the
Initial Public Offering's underwriters. In addition
to the foregoing, the Company agrees to lend to
Employee, if requested, an amount that will cover the
Employee's income tax obligations arising from the
grant of the Common Shares. The loan principal and
accrued interest shall be due on the earliest of (i)
five (5) years after the Effective Date; (ii)
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ten (10) days following the date the Employee first
sells any of the Company's Common Stock, but only to
the extent of net proceeds from such sale; and (iii)
thirty (30) days following the date of Employee's
voluntary termination of employment with the Company
or any affiliate. Interest on the loan shall accrue
at the applicable federal rate in effect on the date
of such loans.
D. Notwithstanding anything contained in Section 3.6 to
the contrary, in the event the actual pre-tax income
of the Company during either Fiscal 1996 or Fiscal
1997, or in both years, is less than the Target
Amount for such fiscal years, then the actual Annual
Bonus to which Employee may be entitled in respect of
Fiscal 1998 shall be reduced, on a dollar for dollar
basis, by an amount (herein referred to as the
"Unearned Bonus") equal to the unearned bonus, if
any, for Fiscal 1996 and Fiscal 1997, in the
aggregate. The Unearned Bonus is determined as
follows:
1. If the Fiscal 1996 actual Annual Bonus is
not $125,000, then the Unearned Bonus for
such year shall be the difference between
(a) $32,500 and (b) $32,500 times a
fraction, the numerator of which is the
actual Annual Bonus earned and the
denominator of which is $125,000. To
illustrate the foregoing, assuming the
actual Fiscal 1996 Annual Bonus is $100,000,
the Unearned Bonus for Fiscal 1996 would be:
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$32,500 - (100,000 X 32,500) = $6,500
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125,000
2. If the Fiscal 1997 actual Annual Bonus is
not $125,000, then the Unearned Bonus for
such year shall be the difference between
(A) $32,500 and (b) $32,500 times the
fraction, the numerator of which is the
actual Annual Bonus earned and the
denominator of which is $125,000. To
illustrate the foregoing, assuming the
actual Fiscal 1997 bonus is $100,000, the
Fiscal 1997 Unearned Bonus is:
$32,500 - (100,000 X 32,500) = $6,500
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125,000
In the event the Unearned Bonus exceeds the
Fiscal 1998 Annual Bonus, the Annual Bonuses
for future fiscal years shall be reduced
until the deficiency is eliminated. Employee
shall have no obligation to reimburse the
Company any Unearned Bonus in the event of
his termination of employment at the end of
the Term, termination due to death or
disability, or an earlier termination by the
Company for any reason other than "cause".
3.11 OPTIONS
On the Effective Date, the Employee shall be granted
under the Mazel Stores, Inc. 1996 Stock Option Plan a
non-qualified option to purchase up to One Hundred
Thousand (100,000) Common Shares of the Company at an
exercise price equal to the Offering Price. The
option
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shall expire on the tenth (10th) anniversary of the
Effective Date. The option shall vest at a rate of
twenty percent (20%) per year, assuming the Employee
remains an employee of the Company, commencing with
the first anniversary of the Effective Date.
4. ENTIRE AGREEMENT.
This Amendment, together with the Agreement, contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, with respect thereto. In
the event of any conflict or inconsistency, whether latent or patent, between
the terms and conditions of this Amendment and the terms and conditions of the
Agreement, the terms and conditions of this Amendment shall control. Except as
expressly provided in this Amendment, the terms and conditions of the Agreement
are and shall remain in full force and effect.
5. GOVERNING LAW.
This Amendment shall be governed by and issued in accordance with the
laws of the State of Ohio without regard to principles of conflicts of law.
6. BINDING EFFECT.
This Amendment shall be binding upon and inure to the benefit of the
parties and their respective successors, permitted assigns, heirs, executors and
legal representatives.
7. COUNTERPARTS.
Counterparts to this Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such
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documents together shall constitute one and the same instrument. Each
counterpart may consist of two copies hereof, each signed by one of the parties
thereto.
8. VALIDITY.
This Amendment shall be deemed void and of no effect if the Initial
Public Offering fails to occur prior to December 31, 1996.
IN WITNESS WHEREOF, the parties hereto have signed their names as of
the day and year first above written.
MAZEL COMPANY L.P. MAZEL STORES, INC.
By: ZS Mazel L.P.,
its Managing Partner By: /s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
By: ZS Mazel, Inc., Chairman/CEO
General Partner of
ZS Mazel L.P. /s/ XXXXX X. XXXXXXX
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XXXXX X. XXXXXXX
By: /s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx
Vice President
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