EXHIBIT 10.3
CONSULTING AGREEMENT made as of February 8, 1998, by and between Hills
Department Store Company, a Delaware corporation having its principal office at
00 Xxx Xxxx, Xxxxxx, Xxxxxxxxxxxxx ("Principal Office"), and Hills Stores
Company (the "Company"), a Delaware corporation having its principal office at
the Principal Office, and Xxxxx X. Xxxxxxxxx the ("Consultant"), with an office
address of 0000 Xxxx Xxxxxx-00X, Xxx Xxxx, Xxx Xxxx 00000.
WHEREAS, Consultant is presently working for the Company as a consultant;
and
WHEREAS, the Company desires to secure the continued services of Consultant
and Consultant is willing to continue to provide such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Company and Consultant agree as follows:
SECTION 1. ENGAGEMENT. The Company hereby agrees to continue to engage
Consultant and Consultant hereby accepts such engagement. The Consultant agrees
to provide professional service from time to time and when requested to do so,
to assist the Company with its merchandise, marketing and strategic planning
efforts.
SECTION 2. TERM. The engagement of Consultant by the Company as provided
in Section 1 shall continue to February 7, 1999.
SECTION 3. FEES AND EXPENSES.
(a) FEES. Consultant shall receive the consulting fee, specified in
Schedule A. Consultant will be paid in equal monthly installments on the 1st
day following each calendar month in which consultant's services are provided to
the Company.
(b) BONUS. Consultant shall receive, as a supplemental fee, the bonus
specified in Schedule A, upon the terms and conditions specified in Schedule A.
Such bonus shall be paid to Consultant within sixty (60) days after the end of
the Company's 1998 fiscal year.
(c) EXPENSES. The Company shall reimburse Consultant for all
reasonable and documented out-of-pocket expenses incurred by Consultant in
connection with the business of the Company and in performance of Consultant's
duties under this Agreement.
SECTION 4. TERMINATION BY THE COMPANY. The Company shall have the right
to terminate Consultant's engagement at any time for "Cause." For purposes of
this Agreement, "Cause" shall mean termination by action of a majority of the
members of the Hills Stores Company's Board of Directors, because of:
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(i) The Consultant's willful or intentional failure or refusal to
perform or observe any of the Consultant's material duties,
responsibilities or obligations set forth in, or as contemplated
under, this Agreement, if such breach is not cured within 30 days
after notice thereof to the Consultant by the Company;
(ii) Any willful or intentional act or failure to act involving fraud,
theft, embezzlement, dishonesty or moral turpitude (collectively,
"Fraud") affecting the Company or any supplier or employee of the
Company; or
(iii) Conviction of (or a plea of nolo contendere to) an offense which
is a felony in the jurisdiction involved or which is a misdemeanor
in the jurisdiction involved but which involves Fraud.
The Company shall have the right to terminate Consultant's engagement
hereunder at anytime without "cause." If a termination without "cause" occurs:
(i) The Consultant shall be entitled to continuation of his consulting
fee payments through the end of the term, as set forth in Section 7(b).
(ii) Notwithstanding the termination of the Consulting Agreement, all
stock options and restricted stock grants issued to Consultant pursuant to the
February 8, 1996 Consulting Agreement, which have not been otherwise terminated,
shall remain in effect and all vesting and exercise rights of Consultant shall
continue as scheduled, without accelerated vesting.
SECTION 5. TERMINATION BY DEATH. In the event Consultant dies during the
Term, Consultant's engagement shall terminate and the payment of consulting fees
shall cease.
SECTION 6. TERMINATION BY DISABILITY. In the event that Consultant
suffers a disability which prevents Consultant from substantially performing
Consultant's duties under this Agreement for a period of at least ninety (90)
consecutive or nonconsecutive calendar days within any three hundred sixty-five
(365) calendar day period, the Company shall have the right, after such ninety
(90) calendar day period has elapsed, to terminate Consultant's engagement
hereunder and the payment of consulting fees shall cease as of that date.
SECTION 7. TERMINATION BY CONSULTANT. Notwithstanding any other provision
of this Agreement, Consultant may terminate Consultant's engagement following a
Change in Control, by written notice served upon the Company within thirty (30)
calendar days after Consultant has knowledge of an event constituting "Good
Reason."
(a) For purposes of this Agreement, the term "Change in Control" shall
mean any one of the following events:
(i) any "person" as such term is used in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, other than
Xxxxxxxxx Partners Inc. and its Affiliates becomes a
"beneficial owner", as such term is used in Rule 13-d-3
promulgated under such Act, of 30% or more of the voting
stock of Hills Stores Company or the majority of the Board
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of Directors of Hills Stores Company consist of individuals
other than Incumbent Directors, which term means the members
of the Board on the date of this Agreement; provided that any
person becoming a director subsequent to such date whose
election or nomination for election was supported by a
majority of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent Director;
(ii) the Company adopts any plan of liquidation providing for the
distribution of all or substantially all of the assets of the
Company on a consolidated basis;
(iii) Hills Stores Company merges or combines with another company
and, immediately after the merger or combination, the stock-
holders of the Company immediately prior to the combination
hold, directly or indirectly, (1) in the event Hills Stores
Company is the surviving corporation 50% or less of the
voting stock of the combined company or (2) in the event
Hills Stores Company is not the surviving corporation 50% or
less of the voting stock or other ownership interests of the
entity or entities, if any, that succeed to the business of
Hills Stores Company; or
(iv) the Company sells all or substantially all of its assets
determined on a consolidated basis.
For purposes of this Agreement, the term "Good Reason" shall mean:
any failure by the Company to timely pay the amounts or provide
the benefits prescribed by this Agreement, other than an isolated
failure not occurring in bad faith and which is remedied promptly
after receipt of written notice thereof given by Consultant.
(b) In the event of (i) termination of this Agreement by the Company
other than for Cause or (ii) termination of this Agreement by
Consultant for Good Reason after a Change in Control, the Company
shall continue to pay Consultant, the amounts described in Section
3 and in the manner set forth in Section 3 of this Agreement
throughout the term of the Agreement. In the event the Company's
performance bonus goals are met or exceeded for the year in which
such a termination occurs, Consultant shall be entitled to receive
a performance bonus which is prorated to reflect that portion of
the year prior to the termination date, consulting services were
provided to the Company.
SECTION 8. ACCELERATION AND EXPIRATION OF OPTIONS.
(a) Any options to purchase the Common Stock of the Company
("Options") granted by the Company to Consultant that have not yet
become exercisable shall become exercisable upon the earliest to
occur of(i) the termination of Consultant's engagement as a result
of Consultant's death or disability; (ii) the termination by
Consultant with Good Reason; after a Change in Control. Notwith-
standing the foregoing, all Options, whether currently exercisable
or not, shall expire and cease to be exercisable as follows:
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(i) if the Company terminates Consultant's engagement for Cause,
immediately upon the effective date of such termination;
(ii) if Consultant dies while engaged by the Company, six (6)
calendar months after Consultant's death; and
(iii) if Consultant's engagement is terminated as a result of
disability, six (6) calendar months after the effective date
of such termination.
(b) Notwithstanding the termination of this Consulting Agreement
(provided Consultant's stock options, as shown on Schedule A
hereto, have not been otherwise terminated pursuant to the terms
of this Consulting Agreement or the terms of the 1993 Incentive
and Nonqualified Stock Option Plan) as long as Consultant is
available, willing and able to provide the Consulting services
contemplated by this Agreement, the stock options shown on
Schedule A shall remain in effect and all vesting and exercise
rights of Consultant with respect to these options shall
continue.
SECTION 9. ACCELERATED VESTING OF RESTRICTED STOCK. Consultant has
received restricted stock grants from the Company which are subject to periodic
vesting. In the event Consultant's engagement with the Company is terminated
(a) as a result of Consultant's death or disability or (b) by Consultant with
good reason after a Change in Control, then all restricted stock held by
Consultant, not otherwise vested, shall become fully vested, subject to the
terms of the restricted stock agreement between the Company and Consultant.
SECTION 10. NO MITIGATION; NO OFFSET. Consultant shall be under no
obligation to mitigate damages or the amount of any payment provided for under
this Agreement by seeking another engagement or otherwise and there shall be no
offset against amounts due Consultant under this Agreement on account of any
remuneration attributable to any subsequent engagement that Consultant may
obtain.
SECTION 11. COVENANTS OF CONSULTANT.
(a) Consultant recognizes that the knowledge of, information
concerning and relationship with customers, suppliers and agents,
and the knowledge of the Company's business methods, systems,
plans and policies which Consultant will establish, receive or
obtain as a consultant to the Company, are valuable and unique
assets of the business of the Company. Consultant will not,
during or within two (2) years after the Term, disclose any such
knowledge or information pertaining to the Company, its customers,
suppliers, agents, policies or other aspects of the business, for
any reason or purpose, whatsoever except pursuant to Consultant's
duties hereunder or as otherwise authorized by the Company in
writing. The foregoing restriction shall not apply, following
termination of Consultant's engagement hereunder, to knowledge or
information which (i) is in or enters the public domain without
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violation of this Agreement or other obligations of
confidentiality by Consultant or his agents or representatives,
(ii) Consultant can demonstrate was in his possession on a
non-confidential basis prior to the commencement of his engagement
with the Company, or (iii) Consultant can demonstrate was received
or obtained by him on a non-confidential basis from a third party
who did not acquire it wrongfully or under an obligation of
confidentiality, subsequent to the termination of his engagement
hereunder.
(b) All memoranda, notes, records or other documents made or compiled
by Consultant or made available to Consultant while engaged
concerning customers, suppliers, agents or personnel of the
Company, or the Company's business methods, systems, plans and
policies, shall be the Company's property and shall be delivered
to the Company on termination of Consultant's engagement or at any
other time on request.
(c) During the term of the Consultant's engagement and for two (2)
years thereafter, Consultant shall not, except pursuant to and in
furtherance of his duties hereunder, directly or indirectly
solicit or initiate contact with any employee of the Company with
a view to inducing or encouraging such employee to leave the
employ of the Company for the purpose of being hired by
Consultant, an employer affiliated with him or any competitor of
the Company.
(d) Consultant acknowledges that the provisions of this section are
reasonable and necessary for the protection of the Company and
that the Company will be irrevocably damaged if such covenants are
not specifically enforced. Accordingly, Consultant agrees that,
in addition to any other relief to which the Company may be
entitled in the form of actual or punitive damages, the Company
shall be entitled to seek and obtain injunctive relief from a
court of competent jurisdiction for the purposes of restraining
Consultant from any actual or threatened breach of such covenants.
(e) In the event that, following the termination of this Agreement,
Consultant is entitled to receive any further payments other than
for compensation or other amounts accrued prior to termination or
expiration of this Agreement, such payments shall nonetheless
cease and the Company shall no longer be obligated to make such
payments if there is a material breach of any of the covenants in
this section and Consultant shall forthwith upon demand of the
Company repay any such amounts paid to Consultant subsequent to
the date such breach occurred.
SECTION 12. ENTIRE AGREEMENT. This Agreement contains the entire under-
standing of the parties with respect to the subject matter thereof, and, super-
sedes and replaces in its entirety any and all prior agreements and arrangements
of the parties with respect to the subject matter hereof.
SECTION 13. GOVERNING LAW. This Agreement and all matters and issues
collateral thereto shall be governed by the laws of The Commonwealth of
Massachusetts applicable to contracts performed entirely therein.
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SECTION 14. SEVERABILITY. If any of this Agreement, as applied to either
party or to any circumstance, shall be adjudged by a court to be void and
unenforceable, the same shall in no way affect any other provision of this
Agreement or the validity or enforceability thereof.
SECTION 15. NOTICES. All notices or other communications hereunder shall
be given in writing and shall be deemed given if served personally or mailed by
registered or certified mail, return receipt requested, to the parties at their
respective addresses indicated below, or at such other address or addresses as
they may hereafter designate in writing
To the Company c/o: Hills Stores Company
00 Xxx Xxxx
Xxxxxx, XX 00000-0000
ATTN: Vice President-Secretary
& Corporate Counsel
To the Consultant: At the address noted on Exhibit A.
IN WITNESS WHEREOF, the parties have executed this Agreement on
January 29, 1998.
/s/ Xxxxx Xxxxxxxxx
------------------------------
Xxxxx Xxxxxxxxx
HILLS DEPARTMENT STORE COMPANY
HILLS STORES COMPANY
BY: /s/ Xxxxxxx X. Xxxxx
------------------------------
President
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February 8, 1998
SCHEDULE A
TO
CONSULTING AGREEMENT
BETWEEN
HILLS DEPARTMENT STORE COMPANY
AND
CONSULTANT
NAME: Xxxxx X. Xxxxxxxxx
ADDRESS: 0000 Xxxx Xxxxxx - 00X
Xxx Xxxx, XX 00000
TITLE OF POSITION: Consultant
TERM OF ENGAGEMENT: February 8, 1998 through
February 7, 1999
ANNUAL CONSULTING FEE: $250,000 - payable in equal monthly
installments of $20,833
BONUS
If the Consultant provides or is available to
provide consulting services to the Company
throughout the term of this Agreement, then
Consultant shall be entitled to a performance
bonus in accordance with the schedule set forth
herein below, provided the Company's
performance goals for the year are achieved.
The Company's performance goals and the
bonus to be paid to Consultant upon attaining
these goals will be determined by the
HR/Compensation Committee at the same time
as the bonus goals are determined for
Company executives.
OPTIONS: An option to purchase 30,000 shares of Hills
Stores Company Common Stock was granted
on February 7, 1996. The purchase price was
$10.125. After elected repricing in 1997 and
an additional option grant in 1997 Consultant
has 19,370 shares at $5.00 per share purchase
price and 5,000 shares at $4.625 per share
purchase price.
RESTRICTED STOCK: 20,000 shares of restricted stock were granted
to Consultant pursuant to a Restricted Stock
Agreement between Hills Stores Company and
Consultant dated February 8, 1996.
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