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EMPLOYMENT AGREEMENT
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THIS AGREEMENT, made and entered into as of August 2, 1996 between
PAYLESS CASHWAYS, INC., an Iowa corporation (the "Company"), and XXXXXXX XXXXXX
(the "Executive").
WHEREAS, the Company desires to employ the Executive and the Executive
desires to be employed by the Company on the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants of the parties
herein made, it is hereby agreed:
1. Employment and Duties. The Company hereby agrees to employ the
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Executive, and the Executive hereby accepts employment, to perform such duties
and responsibilities of a senior vice president as are, from time to time,
assigned to the Executive by the Board of Directors, the Company's Chief
Executive Officer or the Company's President/Chief Operating Officer. The
Executive agrees to devote full business time and effort to the diligent and
faithful performance of the Executive's duties under the direction of the
President/Chief Operating Officer of the Company or such other person as
designated by the Company's Board of Directors. Such duties shall be performed
from the Company's principal executive offices in Kansas City, Missouri.
2. Compensation.
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(a) Base Salary. As compensation for the Executive's services,
the Executive shall be paid a base salary at a minimum annual rate of $275,000
payable in equal bi-weekly installments, which salary shall be reviewed and may
be adjusted from time to time at the discretion of the Board of Directors (the
"Base Salary"); provided that the Base Salary shall not be less than the amount
stated in this Paragraph 2(a).
(b) Incentive Compensation. The Executive shall, in addition
to the Base Salary, also be eligible to receive incentive compensation under the
Company's management and executive incentive compensation program or such other
program or plan for executive officers of the Company as from time to time in
effect and as determined by the Compensation Committee of the Board of Directors
(the "Incentive Compensation"). Notwithstanding the foregoing, the Executive
will receive a special incentive award for the first twelve (12) months of his
employment equal to 33% of his Base Salary ("Special Incentive"), which will be
allocated and paid in two (2) installments as follows: (i) the first installment
will be in an amount equal to the Special Incentive multiplied by a
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number, the numerator of which will be the number of days the Executive was
employed during the Company's 1996 fiscal year and the denominator of which will
be 365 days, said installment to be paid on or before January 31, 1997; (ii) the
second installment will be in an amount equal to the Special Incentive less the
amount previously paid under the immediately preceding subsection (i), said
installment to be paid on or before January 31, 1998; provided, however, that if
Incentive Compensation is earned and payable for the Company's 1997 fiscal year
under the Company's management and executive incentive compensation program in
effect for executive officers of the Company for the Company's 1997 fiscal year,
then the Executive will receive said Incentive Compensation or the second
installment of the Special Incentive above, whichever is greater but not both.
(c) Other Benefits. The Executive shall be entitled to
participate in the Company's regular health, life, pension, vacation and
disability plans in accordance with their respective terms. The Company will
also provide employee benefits to the Executive in respect of the Executive's
employment as the Company customarily provides, from time to time, to its senior
officers, including the Company's Supplemental Retirement Plan dated January 1,
1988, as amended (the "Supplemental Retirement Plan") and other benefits for
senior officers set forth in Exhibit A hereto. Nothing herein shall be construed
to limit the Company's discretion to amend, terminate or otherwise modify any
such plans or benefits subject to the Executive's rights under Paragraph
5(c)(iii) below.
(d) Non-Qualified Stock Grant. The Executive is hereby granted
a non-qualified stock option on 40,000 shares of the Company's Class A Common
Stock and 10,000 shares of the Company's Restricted Stock, which stock option
and restricted stock will be governed under the terms and provisions of the
stock option agreement attached hereto as Exhibit "B" (the "Stock Option
Agreement") and the restricted stock grant agreement attached hereto as Exhibit
"C" (the "Restricted Stock Grant Agreement"), respectively, except as may
otherwise be provided in this Agreement.
3. Confidentiality and Solicitation Provisions.
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(a) Confidentiality of Proprietary Information. The Executive
agrees that, at all times, both during the Executive's employment with the
Company and after the termination thereof, the Executive shall not divulge to
any other person, firm or corporation, or in any way use for the Executive's own
benefit, except as required in the conduct of the Company's business or as
authorized in writing on behalf of the Company, any trade secrets or
confidential information (the "Proprietary Information") obtained during the
course of the Executive's employment with the Company. The Proprietary
Information includes, but is not limited to, customer or client lists (including
the names and/or
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positions of persons employed by such customers or clients who play a role in
the decisions of such customers or clients concerning products or services of
the type provided by the Company), financial matters, inventory techniques and
programs, Company records of accounts, business projections, Company contracts,
sales or marketing plans and strategies, pricing information and formulas,
matters contained in unpublished records and correspondence, planned expansion
programs (including areas of expansion and potential customer lists) and any and
all information concerning the business or affairs of the Company which is not
known by or generally available to the public. All papers and records of every
kind relating to the Proprietary Information, including any such papers and
records which shall at any time come into the possession of the Executive, shall
be the sole and exclusive property of the Company and shall be surrendered to
the Company upon termination of the Executive's employment for any reason or
upon request by the Company at any time either during or after the termination
of such employment. All information relating to or owned by customers of the
Company of which the Executive becomes aware or with which the Executive becomes
familiar through the Executive's employment with the Company shall be kept
confidential and not disclosed to others or used by the Executive directly or
indirectly except in the course of the Company's business.
(b) Solicitation Prohibition. During the Executive's
employment with the Company and for a period of one (1) year after the
termination of the Executive's employment with the Company for any reason, the
Executive shall not directly or indirectly, whether as an individual for the
Executive's own account or with any other person, firm, corporation,
partnership, joint venture or entity whatsoever, solicit or endeavor to entice
away from the Company any employee who is or was employed by the Company during
the period that the Executive is employed by the Company. Additionally, the
Executive shall not, during the Executive's employment with the Company or for a
period of one (1) year after the termination of the Executive's employment with
the Company for any reason directly or indirectly, through any other individual
or entity solicit, entice, persuade or induce any individual or entity to
terminate, reduce or refrain from renewing or extending its contractual or
prospective relationship or other relationship with the Company.
(c) Definition of "Company". For the purposes of Paragraph 3,
the term "Company" shall mean the Company and any of its direct or indirect
subsidiaries.
4. Covenant Not to Compete. During the Executive's employment with the
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Company and for a period of one year after termination of the Executive's
employment with the Company if such termination is as a result of a voluntary
termination by the Executive under Paragraph 5(d) or a termination by the
Company for Cause under Paragraph 5(b), the Executive agrees not
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to engage in or act as an officer or director, or on an individual basis as an
employee, consultant or agent, of any other person, firm, corporation,
partnership, joint venture or other entity which is engaged in the business of
building materials retailing if the annual sales of such business (including any
related or commonly owned entity on a combined basis) from the sale of building
materials and all related products and services for the most recently completed
fiscal year exceeds $500,000,000. The foregoing provisions shall not prohibit
the Executive from investing in any securities of any corporation whose
securities, or any of them, are listed on a national securities exchange or
traded in the over-the-counter market if the Executive shall own less than 1% of
the outstanding voting stock of such corporation. The Executive agrees that a
breach of the covenants contained herein will result in irreparable and
continuing damage to the Company for which there will be no adequate remedy at
law and in the event of any breach of such agreement, the Company shall be
entitled to injunctive and such other and further relief, including damages, as
may be proper.
5. Termination.
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(a) Death or Disability. In the event of the Executive's death
or disability as defined in the Company's disability plan then in effect, the
Company's obligation to make further Base Salary payments hereunder shall
thereupon terminate. Execute shall be entitled to receive any Incentive
Compensation which the Executive has earned, prorated to the date of the
termination of the Executive's employment by reason of death or disability, and
the Executive's rights to other compensation and benefits shall be determined
under the Company's benefit plans and policies applicable to Company executives
then in effect.
(b) Termination for Cause by the Company. By following the
procedure set forth in Paragraph 5(f), the Company shall have the right to
terminate the employment of the Executive for "Cause" in the event Executive:
(i) has committed a significant act of dishonesty, deceit or breach of fiduciary
duty in the performance of the Executive's duties as an employee of the Company;
(ii) grossly neglected or willfully failed in any way to perform substantially
the duties of the Executive's employment hereunder, including but not limited to
an act of insubordination; (iii) acted or failed to act in any other way that
reflects materially and adversely upon the Company, including but not limited to
the Executive's conviction of or plea of nolo contendere to (A) any felony
(other than any felony arising out of negligence) or any misdemeanor involving
moral turpitude, or (B) any crime or offense involving dishonesty with respect
to the Company; or (iv) has knowingly and for the Executive's own benefit failed
to comply with the covenants contained in Paragraphs 3 or 4 of this Agreement.
If the employment of the Executive is terminated by the Company for Cause, this
Agreement and the Company's obligation to make further Base
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Salary and Incentive Compensation payments hereunder shall thereupon terminate.
The Executive's rights to other compensation and benefits shall be determined
under the Company's benefit plans and policies applicable to Company executives
then in effect.
(c) Termination for Good Reason by the Executive. By following
the procedure set forth in Paragraph 5(f), the Executive shall have the right to
terminate the Executive's employment with the Company for "Good Reason" in the
event (i) the Executive is not at all times a duly elected senior vice president
of the Company; (ii) there is any material reduction in the scope of the
Executive's authority and responsibility (provided, however, in the event of any
illness or injury which disables the Executive from performing the Executive's
duties, the Company may reassign the Executive's duties to one or more other
employees until the Executive is able to perform such duties); (iii) there is a
reduction in the Executive's Base Salary below the minimum amount specified in
Paragraph 2(a) above, a reduction in the percentage of Base Salary which is the
Incentive Compensation opportunity of the Executive under Paragraph 2(b), an
amendment to the Supplemental Retirement Plan which is materially adverse to the
Executive or a material reduction in the other benefits to which the Executive
is entitled under Paragraph 2(c) above; (iv) the Company requires the
Executive's principal place of employment to be anywhere other than the
Company's principal executive offices, or there is a relocation of the Company's
principal executive offices outside of Kansas City, Missouri; or (v) the Company
otherwise fails to perform its obligations under this Agreement. If the
employment of the Executive is terminated by the Executive for Good Reason, the
Executive shall be entitled to the severance benefits set forth in Paragraph
5(g) below.
(d) Termination Without Cause or Without Good Reason. The
Company may terminate the Executive's employment without Cause at any time, and
in such event the Executive shall be entitled to the severance benefits set
forth in Paragraph 5(g) below. The Executive may voluntarily terminate the
Executive's employment without Good Reason at any time, and in such event the
Executive's rights to further Base Salary payments and Incentive Compensation
(except Incentive Compensation prorated to the date of termination) shall
terminate on the effective date of such resignation and the Executive's rights
to other compensation and benefits shall be determined under the Company's
benefit plans and policies applicable to Company executives then in effect.
(e) Termination Upon Change in Control. In the event of a
Change of Control (as defined below), the Executive may terminate the
Executive's employment hereunder upon thirty (30) days' prior written notice to
the Company; provided that (i) such notice of termination under this Paragraph
5(e) must be given, if at all, during the sixty (60) day period, immediately
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following the first anniversary of the date of the Change of Control, and (ii)
until the termination of the Executive's employment pursuant to this Paragraph
5(e) (subject to the continued right of the Executive to terminate employment
for Good Reason pursuant to Paragraph 5(c) above) the Executive shall continue
to perform the Executive's duties and responsibilities under this Agreement. In
the event the Executive terminates the Executive's employment hereunder pursuant
to this Paragraph 5(e), the Executive shall be entitled to the severance
benefits set forth in Paragraph 5(g) below; provided, however, in the event that
any payment or benefit received or to be received by the Executive in connection
with a termination of the Executive's employment pursuant to this Paragraph 5(e)
(collectively, the "Termination Payments") would (i) constitute a "parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), or any similar or successor provision to Section
280G (the "Termination Parachute Payments") and (ii) but for this proviso, be
subject to the excise tax imposed by Section 4999 of the Code or any similar or
successor provisions to Section 4999 (the "Excise Tax"), then such Termination
Payments shall be reduced to the largest amount which the Company, in the
Company's reasonable discretion, determines would result in no portion of the
Termination Parachute Payments being subject to the Excise Tax. The term "Change
in Control" shall occur when and if:
(i) any person, as defined in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated
pursuant to the Exchange Act), directly or indirectly, of securities of
the Company having 25% or more of the voting power in the election of
directors of the Company, excluding, however, any person or an
"affiliate" (as defined in the Exchange Act) of such person who is the
beneficial owner of any shares of any class (preferred or common) of
the Company's capital stock on the date hereof; or
(ii) the occurrence within any twelve-month period
while this Agreement is in effect of a change in the Board of Directors
of the Company with the result that the Incumbent Members (as defined
below) do not constitute a majority of the Company's Board of
Directors. The term "Incumbent Members" shall mean the members of the
Board on the date immediately preceding the commencement of such
twelve-month period, provided that any person becoming a director
during such twelve-month period whose election or nomination for
election was approved by a majority of the directors who, on the date
of such election or nomination for election, comprised the Incumbent
Members shall be considered one of the Incumbent Members in respect of
such twelve-month period.
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(f) Notice and Right to Cure. The party proposing to terminate
the employment of the Executive for Cause or Good Reason, as the case may be,
under Paragraph 5(b) or 5(c) above shall give written notice to the other,
specifying the reason therefor with particularity. In the case of a termination
pursuant to Paragraphs 5(b)(i), (iii) or (iv), or 5(c)(i), such termination
shall be effective immediately upon delivery of such notice. In the case of any
other proposed termination for Cause or Good Reason, as the case may be, the
notice shall be given with sufficient particularity so that the other party will
have an opportunity to correct any curable situation to the reasonable
satisfaction of the party giving the notice within the period of time specified
in the notice which shall not be less than thirty (30) days. If such correction
is not so made or the circumstances or situation is such that it is not curable,
the party giving such notice may, within thirty (30) days after the expiration
of the time so fixed within which to correct such situation, give written notice
to the other party that the employment is terminated effective forthwith.
(g) Severance Benefits. If the Executive's employment with the
Company is terminated by the Company without Cause, by the Executive for Good
Reason or by the Executive after a Change of Control in accordance with
Paragraph 5(e), then the Executive shall be entitled to the following benefits:
(i) Base Salary. The Company shall continue to pay to
the Executive the Executive's Base Salary when and as such Base Salary
would have been paid for a period of one (1) year after the date the
Executive's employment with the Company is terminated, as if the
Executive continued to be employed during such period and regardless of
the death or disability of the Executive subsequent to the date of
termination (the "Severance Period").
(ii) Incentive Compensation. If the effective date of
such termination occurs before Incentive Compensation for any preceding
fiscal year has been paid, the Company shall pay to the Executive the
amount of the Executive's Incentive Compensation for the preceding
fiscal year when and as it would have been paid if the Executive
remained employed by the Company.
(iii) Insurance Coverage. During the Severance
Period, the Company shall provide the Executive with health, life and
disability insurance substantially similar to the coverage of the
benefits which the Executive was receiving or entitled to receive under
Paragraph 2(c) immediately prior to the date of termination, the cost
of which was paid by the Company. Such insurance coverage shall be
provided to the Executive for the longer of (A)
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the Severance Period, or (B) the period during which such benefits
would have been provided, at the Company's expense, to the Executive
under the applicable health, life and disability insurance plans of the
Company in effect immediately prior to the date of termination.
(iv) Stock Incentives. All of the Executive's stock
options and restricted stock grants shall continue to vest or be earned
and be exercisable in accordance with their respective terms as if the
Executive continued to be employed by the Company during the Severance
Period (regardless of the death or disability of the Executive
subsequent to the date of termination of employment).
(v) Retirement Benefits. To the extent that benefits
under each of the Company's pension plans and the Company's
Supplemental Retirement Plan are computed on the basis of either the
salary and benefits paid while in the Company's employ or the term of
the Executive's employment with the Company, the benefits payable and
the Executive's eligibility therefor shall be determined as though the
Executive were employed by the Company during the Severance Period.
(vi) Outplacement Benefits. The Company, at its
expense, will provide to the Executive such outplacement benefits as
would be appropriate for a senior officer of a company substantially
equivalent in size to the Company in terms of sales, profits, number of
employees, geographic location and organizational structure, as
determined by a national outplacement service provider selected by
Company.
(h) Survival of Certain Provisions. Notwithstanding any
termination of the Executive's employment with the Company under this Agreement,
the provisions of Paragraphs 3 and 4 shall, to the extent provided therein,
survive any such termination shall be binding upon the Executive in accordance
with the provisions thereof.
6. Arbitration. The parties hereby agree that any dispute arising
hereunder or any claim for breach or violation of any item hereof shall be
submitted to arbitration pursuant to the rules of the American Arbitration
Association ("AAA") to a panel of three arbitrators selected by mutual agreement
of the parties or, if the parties do not mutually agree on the arbitration, in
accordance with the rules of the AAA. The award determination of the arbitrators
shall be final and binding upon the parties without right of appeal. Either
party shall have the right to bring an action in any court of competent
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jurisdiction to enforce this Paragraph and to enforce any arbitrators' award
rendered pursuant to this Paragraph. The venue for all proceedings in
arbitration hereunder and for any judicial proceedings related thereof shall be
in Kansas City, Missouri.
7. Business Expenses. The Company shall reimburse the Executive for
entertainment and travel expenses related to the Company's business in
accordance with the practices of the Company in effect on the date hereof with
respect to the Executive, subject to the right of the Company to modify its
general policies relating to expense reimbursement for employees to the extent
such modifications do not materially reduce the extent of reimbursement for the
Executive as in effect on the date hereof.
8. Severability. If any one or more of the provisions of this Agreement
shall be held invalid or unenforceable, the validity and enforceability of all
other provisions of this agreement shall not be affected thereby.
9. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the personal representatives, heirs and assigns of Executive and
any successors in interest and assigns of the Company.
10. Notices. All notices required or permitted to be given hereunder
shall be registered or certified mail addressed to the respective parties at
their addresses set forth below:
To the Executive: Xxxxxxx X. Xxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
To the Company: Payless Cashways, Inc.
Two Pershing Square
2300 Main, P. O. Xxx 000000
Xxxxxx Xxxx, XX 00000-0000
Attn: Senior Vice President, General
Counsel and Secretary
or such other address as a party hereto may notify the other in writing.
12. Applicable Law. This Agreement, or any portion thereof, shall be
interpreted in accordance with the laws of the State of Missouri.
13. Board of Directors' Approval. This Agreement will not become
effective until approved by the Company's Board of Directors and then executed
by both of the parties hereto.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first written above.
XXXXXXX XXXXXX PAYLESS CASHWAYS, INC.
/s/ Xxxxxxx X. Xxxxxx By /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, Chairman and Chief
Executive Officer
Approval of the foregoing Agreement by the Compensation Committee of
the Board of Directors of the Company is hereby confirmed.
/s/ Xxxx X. Xxxx
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Xxxx X. Xxxx, Chairman
