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Exhibit 10.5
FORM OF MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING (this "Memorandum") dated as of
February 13, 1998, sets forth the mutual and binding understanding of [name of
executive] (the "Executive") and NBC Acquisition Corp. (the "Buyer") regarding
the material terms of employment of Executive by Nebraska Book Company, Inc.
(the "Company") following the Merger (as defined below).
The Buyer, NBC Merger Corp. ("Buyer's Sub") and the Company have
entered into an agreement (the "Merger Agreement") to merge Buyer's Sub into the
Company (the "Merger"). This Memorandum will only take effect upon the
consummation of the Merger. For good and fair value and consideration, the
parties agree as follows:
o POSITION:
Executive shall be employed as President and Chief Executive Officer of
the Company.
o TERM:
The term of Executive's employment hereunder (the "Term") shall be from
the date of the consummation of the Merger to March 31, 2001, unless
extended or earlier terminated in accordance with this Memorandum or
otherwise by agreement of the parties. The Term shall be automatically
extended for additional periods of one year each unless either party gives
at least 120 day prior written notice to the other of the intention to
terminate the Executive's employment hereunder at the end of the then
current Term.
o BASE SALARY:
Executive will be paid a base salary at the rate of $[ ](1) per annum.
Increases in base salary for Executive shall be determined by the Board of
Directors of the Company (the "Board") after due consideration of the
recommendation of the Chief Executive Officer of the Company (the "CEO").
Increases in base salary thereafter shall be determined annually in the
same manner.
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(1) The executives' salaries are: Xxxx X. Xxxxxxxx - $187,000; Xxxxx X. Xxxxxx
- $90,000; Xxxxx X. Xxxxx - $105,000; Xxxxxxx X. Xxxxxxxx - $100,000;
Xxxxxxx X. Xxxxx - $100,000; Xxxxxx X. Xxxx - $80,000; and Xxxxxx X. Xxxxx
- $73,500.
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o INCENTIVE BONUSES:
Executive shall be afforded the opportunity to earn an Incentive Bonus
with respect to each of fiscal years 1999, 2000 and 2001 based upon the
attainment of financial objectives established by the Board (or a
committee thereof), following consideration of the recommendation of the
CEO.
o STOCK OWNERSHIP:
Immediately prior to the Merger, Executive shall exchange shares of common
stock of the Company owned by Executive (the "Roll Over Shares") for
securities of the Buyer (the "Buyer Securities"). The Buyer Securities
received by Executive in such exchange shall consist of common stock and
shall be issued on the same terms and in the same proportions as are
applicable to the other investors in the Buyer.
o STOCK OPTIONS:
For each of fiscal years 1999, 2000 and 2001, Executive shall be granted
options to acquire a number of shares of common stock of the Buyer to be
determined by the Board, subject to the achievement by the Company of
annual performance targets to be established by the Board.
The options shall have an exercise price equal to the fair market value
per share as of the date of grant. Each option shall be exercisable as to
25% of the shares covered thereby on the date of grant and shall become
exercisable as to an additional 25% of the shares covered thereby on each
of the first three anniversaries of the date of grant of such option,
subject to Executive's continued employment with the Company on such
anniversary dates. Customary terms and conditions shall apply to such
options.
o TAG-ALONG AND DRAG-ALONG RIGHTS:
In the event of a sale of the majority of the common stock of the Buyer,
all shares of Buyer stock owned by Executive (including shares hereafter
acquired) shall be subject to tag-along and drag-along rights, entitling
and obligating Executive to sell his shares ratably with, and on the same
terms and conditions as, other selling shareholders.
o NON-TRANSFERABILITY OF STOCK:
Other than the sale described above, Executive shall not sell, transfer,
pledge or convey any Buyer stock or options other than (i) for estate
planning purposes, to a family trust or family partnership for the benefit
of immediate members of the Executive's family, (ii) upon Executive's
death, to his estate,
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(iii) upon Executive's disability or (iv) after an initial public offering
of Buyer common stock, subject in each case (except iv) to the tag-along
and drag-along provisions of the immediately preceding paragraph.
o TERMINATION OF EMPLOYMENT PRIOR TO THE EXPIRATION OF TERM:
-Termination by the Company without "cause": Executive entitled to (i)
continued payment of base salary for 12 months, (ii) payment of Incentive
Bonus when otherwise due in respect of year of termination, prorated
through date of termination, and (iii) continuation for 12 months of any
health, life insurance and disability insurance benefits provided to the
Executive immediately before such termination.
-Death/Disability: Executive entitled to (i) payment of base salary
through the date of termination plus an additional six (6) months, and
(ii) payment of Incentive Bonus when otherwise due in respect of year of
termination, prorated through date of termination.
-Executive voluntary resignation or termination by Company for "cause":
Executive entitled to payment of base salary through date of termination.
-Cause Defined: "Cause" shall mean the Executive willfully neglects his
duties hereunder, is convicted of any felony or gross misdemeanor (except
traffic related), is guilty of gross misconduct in connection with the
performance of his duties hereunder, or materially breaches affirmative or
negative covenants or undertakings hereunder (including under Appendix A).
o NON-COMPETITION AND CONFIDENTIALITY AGREEMENTS:
Executive agrees to be bound by the terms of the Non-competition and
Confidentiality Agreement attached as Appendix A, which is hereby
incorporated by reference.
o FRINGE BENEFITS AND EMPLOYEE BENEFITS:
Existing fringe benefit plans and entitlements will be continued.
o COUNTERPARTS AND ADDITIONAL DOCUMENTATION:
This Memorandum may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument, and the signature of any party to any
counterpart shall be deemed a signature to, and may be appended to, any
other counterpart. Upon the request of either of the parties hereto, this
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Memorandum shall be augmented with more extensive documentation, but the
opportunity to request such additional documentation shall not affect the
binding nature of this Memorandum.
NBC ACQUISITION CORP.
By
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Its Chairman
Executive
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Appendix A
Non-Competition and Confidentiality Agreement
Capitalized terms used herein without definition shall have the respective
meanings specified in the Memorandum of Understanding dated as of February 13,
1998 between NBC Acquisition Corp. and [name of executive] (the "Memorandum of
Understanding").
I. Executive acknowledges that (i) the principal business of the Company
is the wholesale distribution of used college textbooks and the ownership (or
management) of college bookstores (the "Company Business"); (ii) he is one of
the limited number of persons who has developed such business; (iii) the
business of the Company is national and international in scope; (iv) his work
for the Company has brought him and will continue to bring him into close
contact with many confidential affairs not readily available to the public; and
(v) the Buyer is spending millions of dollars to acquire the Company and would
not purchase the Company but for the agreements and covenants of Executive
contained herein. Executive covenants and agrees that:
A. Non-Competition. During the term of Executive's employment by the
Company or any of its affiliates and for a period of three years following the
termination (whether for cause or otherwise) of Executive's employment with the
Company and all of its affiliates (the "Restricted Period"), Executive shall not
in the United States of America or in any foreign country, directly or
indirectly, (i) engage in the Company Business for his own account; (ii) enter
the employ of, or render any services to, any person engaged in such activities;
or (iii) become interested in any person engaged in the Company Business,
directly or indirectly, as an individual, partner, shareholder, officer,
director, principal, agent, employee, trustee, consultant or in any other
relationship or capacity; provided, however, that Executive may work for or own
a college bookstore, if the annual sales of the company that owns such bookstore
do not exceed $10,000,000, and that Executive may own, directly, or indirectly,
solely as an investment, securities of any person which are traded on any
national securities exchange if Executive (a) is not a controlling person of, or
a member of a group which controls, such person and (b) does not, directly or
indirectly, own 1% or more of any class of securities of such person.
B. Confidential Information. During the term of Executive's
employment by the Company or any of its affiliates and during the Restricted
Period, Executive 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, all confidential matters of the Company and
its affiliates, including, without limitation, trade "know-how," secrets,
consultant contracts, customer lists, subscription lists, details of consultant
contracts, pricing policies, operational methods, marketing plans or strategies,
product development techniques or plans, business acquisition plans, new
personnel acquisition plans, methods of manufacture,
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technical processes, designs and design projects, inventions and research
projects and other business affairs of the Company and its affiliates learned by
Executive heretofore or hereafter, and shall not disclose them to anyone outside
of the Company and its affiliates, either during or after employment by the
Company or any of its affiliates, except (i) as required in the course of
performing duties hereunder, (ii) with the Company's express written consent,
(iii) if such information is or becomes generally known by the public other than
as a result of a breach hereof or of a similar Non-Competition and
Confidentiality Agreement, or (iv) as required by law or judicial or
administrative process.
C. Property of the Company. All memoranda, notes, lists, records and
other documents (and all copies thereof) made or compiled by Executive or made
available to Executive concerning the business of the Company or any of its
affiliates shall be the Company's property and shall be delivered to the Company
promptly upon the termination of Executive's employment with the Company or any
of its affiliates or at any other time on request.
D. Employees of the Company. During the Restricted Period, Executive
shall not, directly or indirectly, hire, solicit or encourage to leave the
employment of the Company or any of its affiliates, any employee of the Company
or its affiliates or hire any such employee who has left the employment of the
Company or any of its affiliates within one year of the termination of such
employee's employment with the Company and all of its affiliates.
E. Consultants of the Company. During the Restricted Period,
Executive shall not, directly or indirectly, hire, solicit or encourage to cease
to work with the Company or any of its affiliates any consultant, who provides
consulting services material to the operation of the Company Business, then
under contract with the Company or any of its affiliates.
II. Rights and Remedies Upon Breach. If Executive breaches, or threatens
to commit a breach of, any of the provisions of Paragraph I (the "Restrictive
Covenants"), the Company shall have the following rights and remedies, each of
which rights and remedies shall be independent of the other and severally
enforceable, and all of which rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
A. Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
B. Accounting. The right and remedy to require Executive to account
for and pay over to the Company all compensation, profits, monies, accruals,
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increments or other benefits (collectively, "Benefits") derived or received by
Executive as the result of any transactions constituting a breach of any of the
Restrictive Covenants, and Executive shall account for and pay over such
Benefits to the Company.
C. Discontinuance of Payment. The right and remedy to discontinue
the payment of any amounts owing under the Memorandum of Understanding.
III. Severability of Covenants. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
IV. Blue-Pencilling. If any court construes any of the Restrictive
Covenants, or any part thereof, to be unenforceable because of the duration of
such provision or the area covered thereby, such court shall have the power to
reduce the duration or area of such provision and, in its reduced form, such
provision shall then be enforceable and shall be enforced.
