Exhibit 10(j)
Circuit City Stores, Inc.
Employment Agreement for Xxxxx X. Xxxx
This EMPLOYMENT AGREEMENT is made, entered into, and is effective as of the
4th day of December, 2003 (the "Effective Date"), by and between Circuit City
Stores, Inc. (the "Company") and Xxxxx X. Xxxx (the "Executive").
WHEREAS, the Company desires to employ the Executive as Senior Vice
President of Circuit City Stores, Inc.;
WHEREAS, the Company recognizes the Executive's intimate knowledge and
experience in the business of the Company, and desires to secure the employment
of the Executive in the role of Senior Vice President of the Company;
WHEREAS, the Executive will develop and/or come in contact with the
Company's proprietary and confidential information which is not readily
available to the public, and which is of great importance to the Company and is
treated by the Company as secret and confidential information; and
WHEREAS, the Company desires to modify certain terms of Executive's
employment agreement.
NOW, THEREFORE, in consideration of the Executive's continued employment
and of the mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
Article 1. Term of Employment
The Company hereby agrees to employ the Executive and the Executive hereby
accepts employment as Senior Vice President of the Company, in accordance with
the terms and conditions set forth herein, for an initial period of one (1)
year, commencing as of the Effective Date of this Agreement as indicated above
(the "Initial Term"); subject, however, to earlier termination as expressly
provided herein.
The Initial Term shall automatically be renewed for additional periods of
one (1) year each at the end of the Initial Term, and then again after each
successive year thereafter (collectively, the "Renewal Periods," which, together
with the Initial Term, constitute the "Term" of this Agreement). However, either
party may terminate this Agreement at the end of the Initial Term, or at the end
of any Renewal Period, by giving the other party written notice of intent not to
renew, delivered at least forty-five (45) days prior to the end of the Initial
Term or any Renewal Period. For purposes of this Agreement, an "Employment Year"
shall mean any twelve (12) month period during the Term of this Agreement
beginning on the Effective Date or on any anniversary thereof.
Article 2. Position and Responsibilities
During the Term of this Agreement, the Executive agrees to serve as Senior
Vice President of the Company. In his/her capacity as Senior Vice President of
the Company, the Executive shall report directly to the Executive's immediate
manager and shall have the duties and responsibilities of Senior Vice President
of the Company and such other duties and responsibilities not inconsistent with
the performance of his/her duties as Senior Vice President of the Company.
Article 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote
substantially his/her full-time attention and energies to the Company's
business. The Executive covenants, warrants, and represents that he/she shall:
(a) Devote his/her full and best efforts and talents full time to
the performance of his/her employment obligations and duties
for the Company;
(b) Exercise the highest degree of loyalty and the highest
standards of conduct in the performance of his/her duties;
(c) Comply with all rules, regulations, and policies established
or issued by the Company; and
(d) Refrain from taking advantage, for himself/herself or others,
of any corporate opportunities of the Company.
Article 4. Other Employment.
The Executive shall not, during the term hereof, be interested directly or
indirectly, in any manner, as partner, officer, director, investor, stockholder,
advisor, employee, or in any other capacity, in any other business similar to
Company's business for the Executive's personal advantage or benefit or that of
others. Any other employment or position which might reasonably be deemed
contrary to the best interests of the Company is prohibited. During the term of
employment hereunder, the Executive agrees to obtain the Company's written
consent prior to entering into any other occupation, even if dissimilar to that
of the Company. Such consent may be granted or withheld, in the Company's
absolute discretion. Nothing herein contained shall be deemed to prevent or
limit the right of the Executive to invest in the capital stock or other
securities of any corporation whose stock or securities are regularly traded on
any public exchange, nor shall anything herein contained be deemed to prevent
the Executive from investing in real estate for his/her own benefit (so long as
such investment (a) is not related to or in support of any entity engaged in a
business similar to that of the Company or (b) does not detract from the
Executive's performance of his/her duties and obligations hereunder).
Article 5. Compensation and Benefits
As remuneration for all services to be rendered by the Executive during the
Employment Period, and as consideration for complying with the covenants herein,
the Company shall pay and provide to the Executive the following:
5.1. Base Salary. During the Term of this Agreement, the Company shall pay
the Executive a Base Salary in an amount which shall be established and approved
by the Compensation Committee of the Board of Directors; provided, however, that
such Base Salary shall be established at a rate of not less than $375,000 per
year. This Base Salary shall be subject to all appropriate federal and state
withholding taxes and payable in accordance with the normal payroll practices of
the Company. The Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while the Term of this Agreement is in force,
to ascertain whether, in the judgment of the Compensation Committee, such Base
Salary should be changed. If changed, the Base Salary as stated above shall,
likewise, be changed for all purposes of this Agreement.
5.2. Annual Bonus. In addition to his/her Base Salary, the Executive shall
be entitled to participate in the Company's short-term incentive program, as
such program may exist from time to time during the Term of this Agreement.
Under the Company's short-term incentive plan, the Executive has the
opportunity to earn an annual bonus with respect to any fiscal year of the
Company ("Annual Bonus"). The Annual Bonus, if earned with respect to a
particular fiscal year, will generally be in an amount that is not less than
forty percent (40%) of the Executive's Base Salary for the fiscal year with
respect to which the Annual Bonus is being paid (the "Minimum Bonus Rate") and
is commensurate with the position of Senior Vice President of the Company.
The award and amount of any Annual Bonus shall be determined under the
Company's short-term incentive plan, at the sole discretion of the Company's
Compensation Committee. If the Minimum Bonus Rate is changed, it shall,
likewise, be changed for all purposes of this Agreement.
5.3. Long-Term Incentives. During the Term of this Agreement, the Executive
shall be eligible to participate in the Company's long-term incentive plan, to
the extent that the Board of Directors of the Company or the Compensation
Committee, in their discretion, determines is appropriate. The Board of
Directors will make its determination consistent with the methodology used by
the Company for compensating its comparably situated employees.
5.4. Retirement Benefits. During the Term of this Agreement, the Company
shall provide to the Executive the opportunity for participation in all Company
pension, insurance, fringe benefit, and executive compensation plans and
programs, subject to the eligibility and participation requirements of such
plans.
5.5. Employee Benefits. During the Term of this Agreement, the Company
shall provide the Executive all benefits, as commensurate with the position of
Senior Vice President of the Company, but at a minimum not less than those
provided by the Company to other comparably situated employees subject to the
eligibility requirements and other provisions of such arrangements. Such
benefits may include group term life insurance, comprehensive health and major
medical insurance, dental and life insurance, and short-term and long-term
disability.
5.6. Perquisites. During the Term of this Agreement, the Company shall
provide to the Executive, at the Company's cost, all perquisites, which are
commensurate with the position of Senior Vice President of the Company.
5.7. Right to Change Plans. By reason of Articles 5.5 and 5.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan or perquisite, so long as such
changes are similarly applicable to comparably situated employees.
Article 6. Expenses
During the Term of this Agreement, the Company shall pay or reimburse the
Executive for all ordinary and necessary expenses, in a reasonable amount, which
the Executive incurs in performing his/her duties under this Agreement
including, but not limited to, travel, entertainment, professional dues and
subscriptions, and all dues, fees, and expenses associated with membership in
various professional, business, and civic associations and societies in which
the Company finds that the Executive's participation is in the best interests of
the Company. The payment of reimbursement of expenses shall be subject to such
rules concerning documentation of expenses and the type or magnitude of such
expenses as the Compensation Committee of the Board of Directors may establish
from time to time.
Article 7. Employment Termination
7.1. Termination Due to Retirement or Death. In the event the Executive's
employment ends by reason of Retirement (defined as voluntary "Normal
Retirement" under the then established definitions and rules of the Company's
tax-qualified retirement plan) or the Executive's death during the term of this
Agreement, the Executive's benefits shall be determined in accordance with the
Company's retirement, survivor's benefits, insurance, and/or other applicable
programs of the Company then in effect. In addition, all stock grants, except
performance-based grants in the case of Retirement, will become immediately
vested and may be exercised by the Executive, the Executive's personal
representatives, distributees, legatees, or estate at any time before the
expiration date of the grant.
The Effective Date of Termination due to Retirement or death shall be (a)
ninety (90) days following the date the Executive provides the Company with
written notice that the Executive is ending employment by reason of Retirement
or (b) on the Executive's date of death, as the case may be. Upon the Effective
Date of Termination, the Company shall be obligated to pay the Executive or, if
applicable, the Executive's estate; (a) any Base Salary or Annual Bonus that was
accrued but not yet paid as of the Effective Date of Termination; plus (b) a pro
rata share of the Annual Bonus for the Employment Year in which the Effective
Date of Termination occurs (calculated by multiplying (i) the Base Salary in
effect on the Effective Date of Termination by (ii) the Minimum Bonus Rate in
effect on the Effective Date of Termination and by (iii) a fraction, the
numerator of which is the number of full completed days in the Employment Year
through the Effective Date of Termination, and the denominator of which is three
hundred sixty-five (365)); and (c) all other rights and benefits that the
Executive is vested in, pursuant to other plans and programs of the Company.
7.2. Termination Due to Disability. The Company shall have the right to
terminate the Executive's employment for disability. For the purposes of this
Agreement, disability shall mean any physical or mental illness or injury that
causes the Executive to be unable to substantially perform the Executive's
normal duties; provided however that the Executive shall not be considered
disabled until: (i) the Executive has been so disabled for 180 days during any
period of twelve (12) consecutive months; (ii) the Executive's attending
physician shall have furnished to the Company certification that the return of
the Executive to his/her normal duties is impossible or improbable; or (iii) the
Executive is determined to be totally disabled by the disability insurer then
insuring the Executive, if any.
The Effective Date of Termination due to Disability shall be specified, in
a written notice, by the Executive's immediate manager, and such written notice
shall be delivered to the Executive, but shall be no less than thirty (30)
calendar days after the delivery of such written notice to the Executive. Upon
the Effective Date of Termination, the Company shall be obligated to pay the
Executive [or, if applicable, the Executive's estate]: (a) any salary that was
accrued but not yet paid as of the Effective Date of Termination; (b) the unpaid
Annual Bonus, if any, with respect to the fiscal year preceding the Effective
Date of Termination (such Annual Bonus, if any, to be determined in the manner
it would have been determined and payable at the time it would have been payable
under Article 5.2 had there been no termination of the Employment Period); (c) a
pro rata share of target Annual Bonus for the fiscal year in which the Effective
Date of Termination occurs (the calculation of which the Annual Bonus is
multiplied by a fraction, the numerator of which is the number of full completed
days in the bonus plan year through the Effective Date of Termination, and the
denominator of which is three hundred sixty-five (365)); and (d) all other
rights and benefits that the Executive is vested in, pursuant to other plans and
programs of the Company.
It is expressly understood that the Disability of the Executive for a
period of one hundred eighty (180) calendar days or less in the aggregate during
any period of twelve (12) consecutive months, in the absence of any reasonable
expectation that his/her Disability will exist for more than such a period of
time, shall not constitute a failure by him/her to perform his/her duties
hereunder and shall not be deemed a breach or default, and the Executive shall
receive full compensation for any such period of Disability or for any other
temporary illness or incapacity during the term of this Agreement.
If the employment of the Executive terminates because of disability, all of
the Executive's outstanding stock grants, excluding restricted stock grants
issued under a performance based plan, will become immediately vested, effective
as of the date of the Executive's disability. Then, the Executive, the
Executive's personal representatives, distributees, or legatees may exercise the
Executive's grants at any time before the expiration date of the grant.
7.3. Voluntary Termination by the Executive. The Executive may terminate
his/her employment and this Agreement at any time by giving the Company at least
forty-five (45) days written notice. The Company reserves the right to require
the Executive not to work during the notice period but shall pay the Executive
his/her full Base Salary, at the rate then in effect as provided in Article 5.1
herein, [through the notice period] or [through the last day of the Executive's
employment] plus all other benefits to which the Executive has a vested right on
the last day of employment (for purposes of this paragraph, the Executive shall
not be paid any Annual Bonus with respect to the fiscal year in which voluntary
termination under this Article 7.3 occurs). The Company thereafter shall have no
further obligations under this Agreement.
7.4. Involuntary Termination by the Company Without Cause. The Company may
terminate the Executive's employment, at any time, for any reason other than
death, Disability, Retirement, or for Cause ("involuntary termination without
Cause"), by providing the Executive with at least forty-five (45) days written
notice.
(a) The Company's decision not to renew this Agreement at the
Expiration Date of the Initial Term or any Renewal Period
shall be deemed an involuntary termination without cause;
provided, however, that for purposes of this Article 7.4(a),
no variation, alteration, modification, cancellation, change
or amendment made to this Agreement pursuant to Article 12.3
or 12.4 at a time other than the Expiration Date of the
Initial Term or any Renewal Period, shall be deemed an
involuntary termination without Cause.
(b) Upon the Effective Date of Termination specified by the
Company for termination by the Company without cause, the
Company shall pay to the Executive, in equal monthly
installments over the following twenty-four (24) month period
an amount equal to the product of two (2) times both the
Executive's Base Salary and the Executive's target Annual
Bonus established for the fiscal year in which the Executive's
Effective Date of Termination occurs. The Company shall also
pay to the Executive the amount equal to a pro rata share of
the Executive's target Annual Bonus for the fiscal year in
which the Effective Date of Termination occurs (the
calculation of which the Annual Bonus is multiplied by a
fraction, the numerator of which is the number of full
completed days in the bonus plan year through the Effective
Date of Termination, and the denominator of which is three
hundred sixty-five (365)). In addition, the Company shall
continue, at the same cost to the Executive as existed as of
the Effective Date of Termination, all health and welfare
benefit plan participation for two (2) full years following
the Executive's termination of employment; provided, however,
that the applicable COBRA "period of coverage" under any plan
subject to Section 4980B of the Internal Revenue Code of 1986,
as amended (the "Code"), or Sections 601 through 609 of the
Employee Retirement Income Security Act of 1974 (ERISA) shall
begin as of the Effective Date of Termination.
(c) The Company shall also provide the Executive with outplacement
services not to exceed a cost of fifty thousand dollars
($50,000).
(d) Any unvested stock options or any outstanding restricted
stock, excluding restricted stock grants issued under a
performance based plan, that would become vested (that is,
transferable and non-forfeitable) if the Executive remained an
employee through the Initial Term or the then current Renewal
Period of this Agreement will become vested as of the date of
the Executive's termination of employment. The Executive must
satisfy the tax withholding requirements.
(e) The Executive will be credited with age and service credit
through the end of the Initial Term or current Renewal Period
of this Agreement for purposes of computing benefits under the
Company's pension, medical and other benefit plans, and the
Company will continue the Executive's coverage under the
Company's benefit plans as if the Executive remained employed
through the end of the term of this Agreement. Notwithstanding
the foregoing, if crediting such age and service credit or
continued coverage could adversely affect the tax
qualification or tax treatment of a benefit plan, or otherwise
have adverse legal ramifications to either the plan or the
Company, the Company may pay the Executive a lump sum cash
amount that reasonably approximates the after-tax value to the
Executive of such age and service credit and continued
coverage through the end of the term of this Agreement, in
lieu of giving such credit and continued coverage.
The Company thereafter shall have no further obligations under this
Agreement.
7.5. Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Company from terminating the Executive's employment under this
Agreement, without notice or liability for doing so, for "Cause."
For purposes of this Agreement, "Cause" means:
(a) The Executive's material breach of this Agreement, which
breach is not cured within ten (10) days of receipt by the
Executive of written notice from the Company specifying the
breach;
(b) The Executive's gross negligence in the performance of his/her
material duties hereunder, intentional nonperformance or
intentional misperformance of such duties, misconduct or
refusal to abide by or comply with the directives of the
Board, his/her superior officers, or the Company's policies
and procedures, which actions continue for a period of ten
(10) days after receipt by the Executive of written notice of
the need to cure or cease;
(c) Conviction of a felony or other crime involving moral
turpitude;
(d) The Executive engaging in illegal conduct, dishonesty or fraud
with respect to the business or affairs of the Company that in
the reasonable judgment of the Company materially and
adversely affects the operations or reputation of the Company;
(e) Failure of the Executive to disclose to the Executive's
manager a conflict of interest, of which the Executive knew
or, with reasonable diligence, would have known, in connection
with any transaction entered into on behalf of the Company; or
(f) Failure of the Executive to agree to a modification of this
Agreement, pursuant to paragraph 12.3 below, when the purpose
of the modification is to comply with applicable federal,
state and/or local laws or regulations, or when such
modification is designed to further define the restrictions of
Article 8 or otherwise enhance the enforcement of Article 8
without increasing the scope of the Article 8 restrictions.
In the event this Agreement is terminated for Cause, the Company shall pay
the Executive his/her Base Salary through the Effective Date of Termination for
cause and the Executive shall immediately thereafter forfeit all rights and
benefits (other than vested benefits) he would otherwise have been entitled to
receive under this Agreement. The Company thereafter shall have no further
obligations under this Agreement.
7.6. Termination for Good Reason. At any time during the term of this
Agreement, the Executive may terminate this Agreement for Good Reason (as
defined below) by giving the Company forty-five (45) days written notice, which
notice sets forth in detail the facts and circumstances claimed to provide a
basis for such termination. However, Company shall, at its option, have thirty
(30) days from receipt of such written notice to cure any event or circumstance
that could constitute Good Reason.
If Company chooses not to cure, the Effective Date of Termination for Good
Reason shall occur upon the expiration of the forty-five (45) days prior notice
period that is specified by the Executive in the written notice, and the Company
shall pay and provide to the Executive the benefits set forth in this Article
7.6.
For purposes of this Agreement, Good Reason shall mean, without the
Executive's express written consent, the occurrence of any one (1) or more of
the following:
(a) Failing to maintain the Executive's participation in the
Company's annual bonus and long-term incentive plan in a
manner that is consistent with other similarly situated
Executive employees of the Company;
(b) Failing to maintain the Executive's benefits under, or
relative level of participation in, the Company's employee
benefit or retirement plans, perquisites, policies, practices,
or arrangements in which the Executive participates as of the
Effective Date of this Agreement at a level consistent with
other similarly situated Executive employees of the Company;
(c) Reducing the Executive's Base Salary;
(d) Terminating the Executive's employment otherwise than as
expressly permitted by this Agreement; or
(e) Failing to comply with and satisfy Article 10.1 by requiring
any successor to the Company to assume and agree to perform
the Company's obligations hereunder.
Upon the Effective Date of Termination, the Executive shall be entitled to
receive the same payments and benefits as he/she is entitled to receive
following an involuntary termination of his/her employment by the Company
without Cause, as specified in Article 7.4 herein. Said payment shall commence
within forty-five (45) calendar days following the Effective Date of
Termination.
The Executive's right to terminate employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness.
Article 8. Noncompetition and Confidentiality
8.1. Noncompetition.
(a) During the Executive's employment and for a period of two (2)
years following the last day of the Executive's employment,
the Executive shall not directly or indirectly compete with
the Company by engaging, in a competitive capacity, in any
business that is engaged in the same or similar business of
the Company in one or more Metropolitan Statistical Areas
("MSAs") in which the Company is doing business on the last
day of the Executive's employment. A business will not be
considered to be in competition with the Company for purposes
of this paragraph 8.1(a) or paragraph 8.1(b) below if:
(i) The business or the operating unit of the business in
which the Executive is employed or with which the
Executive is associated (collectively the "Business
Unit") is not engaged in the retail sales of consumer
electronics;
(ii) If sales of the Business Unit's products or services
in the retail sales and service of consumer
electronics constitute less than ten percent (10%) of
such Business Unit's sales; or
(iii) If the sales of the Business Unit in the retail sales
and service of consumer electronics do constitute
more than ten percent (10%) of the sales of the
Business Unit, but there is no geographic overlap
between such Business Unit's and the Company's
business locations.
Notwithstanding the foregoing, nothing herein shall be deemed to prevent or
limit the right of the Executive to invest in the capital stock or other
securities of any corporation whose stock or securities are regularly traded on
any public exchange, nor shall anything herein contained be deemed to prevent
Employee from investing in real estate for his/her own benefit (as long as such
investment is not related to or in support of any entity engaged in the same or
similar business as the Company in competition with the Company in one or more
MSA's in which the Company is doing business during the Executive's employment).
(b) During the Executive's employment and for a period of two (2)
years following the last day of the Executive's employment,
the Executive shall not directly or indirectly compete with
the Company by engaging, in a competitive capacity, in any
business engaged in the same or similar business of the
Company in one or more MSAs where, on the last day of the
Executive's employment, the Company is engaged in real estate
site selection or has taken further steps toward the
commencement of operations in the future, of which the
Executive is aware.
(c) The Executive agrees that competition, as set forth in Article
8.1(a) above, shall include, but not be limited to, engaging
in competitive activity, as an individual, as a partner, as a
joint venturer with any other person or entity, or as an
employee, agent, or representative of any other person or
entity.
(d) It is the specific intent of the parties that the Executive
shall be restricted from competing directly or indirectly with
any segment of the Company's business in which the Executive
engaged prior to the last day of his/her employment and from
any segment of the Company's business about which the
Executive acquired proprietary or confidential information
during the course of his/her employment.
(e) If any provision of this Article 8.1 relating to the time
period, geographic area or scope of restricted activities
shall be declared by a court of competent jurisdiction to
exceed the maximum time period, geographic area or scope of
activities, as applicable, that such court deems reasonable
and enforceable, said time period, geographic area or scope of
activities shall be deemed to be, and thereafter shall become,
the maximum time period, scope of activities or largest
geographic area that such court deems reasonable and
enforceable and this Agreement shall automatically be
considered to have been amended and revised to reflect such
determination.
(f) The Executive and the Company have examined in detail this
Covenant Not to Compete and agree that the restraint imposed
upon the Executive is reasonable in light of the legitimate
interests of the Company, and it is not unduly harsh upon the
Executive's ability to earn a livelihood.
8.2. Non-Solicitation of Employees. The Executive agrees that during the
Executive's employment with the Company and for a period of two (2) years
following the last day of the Executive's employment, the Executive shall not,
directly or indirectly, solicit or induce, or attempt to solicit or induce, any
employee of the Company to leave the Company for any reason whatsoever or hire
any individual employed by the Company. For purposes of this Article 8.2,
employee shall mean any individual employed by the Company on the last day of
the Executive's employment or within the three-month period prior to the last
day of the Executive's employment.
8.3. Confidentiality. The Company has advised the Executive and the
Executive acknowledges that it is the policy of the Company to maintain as
secret and confidential all Protected Information (as defined below), and that
Protected Information has been and will be developed at substantial cost and
effort to the Company. The Executive agrees to hold in strict confidence and
safeguard any information of or about the Company gained by the Executive in any
manner or from any source during the Executive's employment. The Executive shall
not, without the prior written consent of the Company, at any time, directly or
indirectly, divulge, furnish, use, disclose or make accessible to any person,
firm, corporation, association, or other entity (otherwise than as may be
required in the regular course of the Executive's employment), either during the
Executive's employment with the Company or subsequent to the last day of the
Executive's employment, any Protected Information, or cause any such information
of the Company to enter the public domain.
The Executive understands and agrees that any information, data and/or
trade secrets about Company or its suppliers and/or distributors is the property
of the Company and is essential to the protection of the Company's goodwill and
to the maintenance of the Company's competitive position and accordingly should
be kept secret. For purposes of this Agreement, "Protected Information" means
trade secrets, confidential and proprietary business information of or about the
Company, and any other information of the Company, including, customer lists
(including potential customers), sources of supply, processes, plans, materials,
pricing information, internal memoranda, marketing plans, promotional plans,
internal policies, research, purchasing, accounting and financial information,
computer programs, hardware, software, and products and services which may be
developed from time to time by the Company and its agents or employees,
including the Executive; provided, however, that information that is in the
public domain (other than as a result of a breach of this Agreement), approved
for release by the Company or lawfully obtained from third parties who are not
bound by a confidentiality agreement with the Company, is not Protected
Information.
Nothing contained in this Article is intended to reduce in any way
protection available to the Company pursuant to the Uniform Trade Secrets Act as
adopted in Virginia or any other state or other applicable laws which prohibit
the misuse or disclosure of confidential or proprietary information.
8.4. Acknowledgement of Covenants. The parties hereto acknowledge that the
Executive's services are of a special, extraordinary, and intellectual character
which gives him/her unique value, and that the business of the Company and its
subsidiaries is highly competitive, and that violation of any of the covenants
provided in this Article 8 would cause immediate, immeasurable, and irreparable
harm, loss, and damage to the Company not adequately compensable by a monetary
award. The Executive acknowledges that the time, scope of activities and
geographical area restrained by the provisions of this Article 8 are reasonable
and do not impose a greater restraint than is necessary to protect the goodwill
of the Company's business. The Executive further acknowledges that he/she and
the Company have negotiated and bargained for the terms of this Agreement and
that the Executive has received adequate consideration for entering into this
Agreement. In the event of any such breach or threatened breach by the Executive
of any one or more of such covenants, the Company shall be entitled to such
equitable and injunctive relief as may be available to restrain the Executive
from violating the provisions hereof. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available at law or in
equity for such breach or threatened breach, including the recovery of damages
and the immediate termination of the employment of the Executive hereunder for
cause.
Article 9. Change in Control
9.1. Change in Control. This Article 9 shall not become effective, and the
Company shall have no obligation hereunder, if the employment of the Executive
with the Company shall terminate prior to a Change in Control (as defined in
Article 9.2 below) of the Company.
9.2. Definition of Change in Control. Change in Control of the Company
means, and shall be deemed to have occurred, upon the first to occur of any of
the following events:
(a) The acquisition by any individual, entity, or group (a
"Person"), including a "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), but excluding an Affiliate
(as defined below) of the Company, of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of thirty-five percent (35%) or more of either:
(i) the then outstanding shares of common stock of the Circuit
City Group (the "Outstanding Common Stock"); or (ii) the
combined voting power of the then outstanding securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Voting Securities"); excluding,
however, the following: (A) any acquisition directly from the
Company (excluding an acquisition resulting from the exercise
of an option, conversion right, or exchange privilege unless
the security being so exercised, converted or exchanged was
acquired directly from the Company); (B) any acquisition by
the Company; (C) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company; or (D) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii), and (iii) of subsection (c)
of this Article 9.2;
(b) Individuals who, as of the Effective Date, constitute the
Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board;
provided that any individual who becomes a director of the
Company subsequent to the Effective Date, whose election, or
nomination for election by the Company's stockholders, was
approved by the vote of at least a majority of the directors
then comprising the Incumbent Board shall be deemed a member
of the Incumbent Board; and provided further, that any
individual who was initially elected as a director of the
Company as a result of an actual or threatened election
contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf
of any Person other than the Board shall not be deemed a
member of the Incumbent Board;
(c) The consummation of a reorganization, merger or consolidation
of the Company or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate
Transaction"); excluding, however, a Corporate Transaction
pursuant to which: (i) all or substantially all of the
individuals or entities who are the beneficial owners,
respectively, of the Outstanding Common Stock and the
Outstanding Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or
indirectly, more than sixty percent (60%) of, respectively,
the outstanding shares of common stock, and the combined
voting power of the outstanding securities of such corporation
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a
corporation, which as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or indirectly) in substantially the same
proportions relative to each other as their ownership,
immediately prior to such Corporate Transaction, of the
Outstanding Common Stock and the Outstanding Voting
Securities, as the case may be; (ii) no Person (other than:
the Company; any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company; the corporation resulting from such
Corporate Transaction; and any Person which beneficially
owned, immediately prior to such Corporate Transaction,
directly or indirectly, twenty-five percent (25%) or more of
the Outstanding Common Stock or the Outstanding Voting
Securities, as the case may be) will beneficially own,
directly or indirectly, twenty-five percent (25%)or more of,
respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of
directors; and (iii) individuals who were members of the
Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation resulting
from such Corporate Transaction; or
(d) The consummation of a plan of complete liquidation,
dissolution, or sale of substantially all the assets of the
Company.
For purposes of this Article 9, "Affiliate" shall mean with reference to a
specified Person, any Person that directly or indirectly through one (1) or more
intermediaries controls or is controlled by or is under common control with the
specified Person. For purposes of this definition, "control" (including, with
correlative meaning, the terms "controlled by" and "under common control with"),
as used in respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of such Person, whether through ownership of voting securities or by
contract or otherwise.
9.3. Change-in-Control Severance Benefits. If at any time during the Term
of this Agreement there is a Change in Control of the Company and the
Executive's employment is terminated for any reason other than death,
Disability, Retirement, Voluntary Termination other than Good Reason or Cause
within the two (2) year period following the Change in Control or the Executive
voluntarily terminates for any reason in the thirteenth month following a Change
in Control of the Company, the Company shall provide to the Executive the
following:
(a) Base Salary and all other benefits due him/her as if he/she
had remained an employee pursuant to Article 5 through the
remainder of the month in which the termination occurs, less
applicable withholding taxes and other authorized payroll
deductions;
(b) The amount equal to a pro rata share of target Annual Bonus
for the fiscal year in which the Effective Date of Termination
occurs (the calculation of which the Annual Bonus is
multiplied by a fraction, the numerator of which is the number
of full completed days in the bonus plan year through the
Effective Date of Termination, and the denominator of which is
three hundred sixty-five (365));
(c) A lump-sum severance allowance in an amount that is equal to
the product of three (3) times both the Executive's Base
Salary at the rate in effect immediately prior to the
termination and the Executive's target Annual Bonus
established for the fiscal year in which the Executive's
termination of employment occurs;
(d) Continuation at the same cost to the Executive as existed as
of the Effective Date of Termination of Agreement of all
health, welfare, and benefit plan participation for three (3)
full years following employment termination;
(e) Provision of outplacement services for the Executive not to
exceed a cost of fifty thousand dollars ($50,000);
(f) A lump-sum payment equal to the three (3) year costs of
perquisites outlined in Article 5.6 above; and
(g) Any unvested stock options or any outstanding restricted
stock, excluding restricted stock grants issued under a
performance based plan, that would become vested (that is,
transferable and non-forfeitable) if the Executive remained an
employee through the Initial Term or the then current Renewal
Period of this Agreement will become vested as of the date of
the Executive's termination of employment. The Executive must
satisfy the tax withholding requirements.
9.4. Excise Tax Equalization Payment. In the event that the Executive
becomes entitled to severance benefits under this Agreement or any other
agreement with or plan of the Company (in the aggregate, the "Total Payments"),
if any of the Total Payments will [be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code] or any similar excise tax that may
hereafter be imposed), the Company shall pay to the Executive in cash an
additional amount (the "Gross-Up Payment"), such that the net amount retained by
the Executive after deduction of any Excise Tax upon the Total Payments and any
federal, state, and local income tax and Excise Tax upon the Gross-Up Payment
provided for by this Article 9.4 (including FICA and FUTA), shall be equal to
the Total Payments. The Company shall make such payment to the Executive as soon
as practicable following the Effective Date of Termination, but in no event
beyond thirty (30) days from such date.
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made, and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's residence on the
Effective Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes.
The Company's Compensation Committee shall determine, based upon the advice
of the Company's independent certified public accountants, whether any payments
or benefits hereunder are subject to the Excise Tax.
9.5. Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Article 9.4 herein so that the
Executive did not receive the greatest net benefit, the Company shall reimburse
the Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Compensation Committee.
Article 10. Assignment
10.1. Assignment by Company, This Agreement may and shall be assigned or
transferred to, and shall be binding upon and shall inure to the benefit of, any
successor of the Company, and any such successor shall be deemed substituted for
all purposes of the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm, corporation, or
business entity which, at any time, whether by merger, purchase, or otherwise,
acquires all or substantially all of the assets or the business of the Company.
In addition, the obligations of the Executive under Articles 8 and 12 of this
Agreement shall continue after the termination of the Executive's employment and
shall be binding on the Executive's heirs, executors, legal representatives and
assigns.
Failure of the Company to obtain the agreement of any successor to be bound
by the terms of this Agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement, and shall immediately entitle the Executive
to compensation from the Company in the same amount and on the same terms as the
Executive would be entitled in the event of a Termination of Employment for Good
Reason as provided by Article 7.6. Except as provided herein, the Company may
not otherwise assign this Agreement.
10.2. Assignment by Executive. The services to be provided by the Executive
to the Company hereunder are personal to the Executive, and the Executive's
duties may not be assigned by the Executive; provided, however, that this
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive dies while any
amounts payable to the Executive hereunder remain outstanding, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee, or other designee or, in the
absence of such designee, to the Executive's estate.
Article 11. Dispute Resolution and Notice
11.1. Issue Resolution. Except for actions initiated by the Company to
enjoin a breach by, and/or recover damages from the Executive related to
violation of any of the restrictive covenants in Article 8 of this Agreement,
which Company may bring in an appropriate court of law or equity, any
disagreement between the Executive and the Company concerning anything covered
by this Agreement or concerning other terms or conditions of the Executive's
employment or the termination of the Executive's employment will be settled by
final and binding arbitration pursuant to the Company's Associate Issue
Resolution Program. The Dispute Resolution Agreement and the Dispute Resolution
Rules and Procedures are incorporated herein by reference as if set forth in
full in this Agreement. The decision of the arbitrator will be final and binding
on both the Executive and the Company and may be enforced in a court of
appropriate jurisdiction.
11.2. Notice. Any notices, requests, demands, or other communications
provided for by this Agreement shall be sufficient if in writing, and if sent by
registered or certified mail to the Executive at the last address he/she has
filed in writing with the Company or, in the case of the Company, at its
principal offices.
Article 12. Miscellaneous
12.1. Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto, with respect to the
subject matter hereof, and constitutes the entire agreement of the parties with
respect thereto. Without limiting the generality of the foregoing sentence, this
Agreement completely supersedes any and all prior employment agreements entered
into by and between the Company, and the Executive, and all amendments thereto,
in their entirety.
12.2. Return of Materials. Upon the termination of the Executive's
employment with the Company, however such termination is effected, the Executive
shall promptly deliver to Company all property, records, materials, documents,
and copies of documents concerning the Executive's business and/or its customers
(hereinafter collectively "Company Materials") which the Executive has in
his/her possession or under his/her control at the time of termination of
his/her employment. The Executive further agrees not to take or extract any
portion of Company Materials in written, computer, electronic or any other
reproducible form without the prior written consent of the Executive's immediate
manager.
12.3. Modification. This Agreement shall not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their legal
representatives.
12.4. Severability. It is the intention of the parties that the provisions
of the restrictive covenants herein shall be enforceable to the fullest extent
permissible under the applicable law. If any clause or provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term hereof, then the remainder of this
Agreement shall not be affected thereby, and in lieu of each clause or provision
of this Agreement which is illegal, invalid or unenforceable, there shall be
added, as a part of this Agreement, a clause or provision as similar in terms to
such illegal, invalid or unenforceable clause or provision as may be possible
and as may be legal, valid, and enforceable.
12.5. Counterparts. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
12.6. Tax Withholding. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
12.7. Restrictive Covenants of the Essence. The restrictive covenants of
the Executive set forth herein are of the essence of this Agreement; they shall
be construed as independent of any other provision in this Agreement; and the
existence of any claim or cause of action of the Executive against the Company,
whether predicated on this Agreement or not, shall not constitute a defense to
the enforcement by the Company of the restrictive covenants contained herein.
The Company shall at all times maintain the right to seek enforcement of these
provisions whether or not the Company has previously refrained from seeking
enforcement of any such provision as to the Executive or any other individual
who has signed an agreement with similar provisions.
12.8 Beneficiaries. The Executive may designate one (1) or more persons
or entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement. Such designation must be in the form of a signed
writing acceptable to the Executive's immediate manager. The Executive may make
or change such designation at any time.
12.9. Payment Obligation Absolute. The Company's obligation to make the
payments and the arrangement provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against the Executive or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or demand.
Each and every payment made hereunder by the Company shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive or from whomsoever may be entitled thereto, for any reasons
whatsoever.
The Executive shall not be obligated to seek other employment in mitigation
of the amounts payable or arrangements made under any provision of this
Agreement, and the obtaining of any such other employment shall in no event
effect any reduction of the Company's obligations to make the payments and
arrangements required to be made under this Agreement; provided, however, that
continued health, welfare, and benefit plan participation pursuant to Article
7.4 or Article 9.3 herein shall be discontinued in the event the Executive
becomes eligible to receive substantially similar benefits from a successor
employer.
12.10. Contractual Rights to Benefits. This Agreement establishes and vests
in the Executive a contractual right to the benefits to which he is entitled
hereunder. However, nothing herein contained shall require or be deemed to
require, or prohibit or be deemed to prohibit, the Company to segregate,
earmark, or otherwise set aside any funds or other assets, in trust or
otherwise, to provide for any payments to be made or required hereunder.
Article 13. Governing Law
To the extent not preempted by federal law, the provisions of this
Agreement shall be construed and enforced in accordance with the laws of the
Commonwealth of Virginia, without reference to Virginia's choice of law statutes
or decisions.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the Effective Date.
CIRCUIT CITY STORES, INC.
By: /s/W. Xxxx XxXxxxxxxx
---------------------
W. Xxxx XxXxxxxxxx
Chairman, President and Chief Executive Officer
EXECUTIVE:
/s/Xxxxx X. Xxxx
-----------------
Xxxxx X. Xxxx
ATTEST:
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