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EXHIBIT 10.6
XXXXXXXX'X, INC.
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
June 12, 1996
Xx. Xxxx Xxxxxxxx
President
Xxxxxxxx'x, Inc.
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Dear Xx. Xxxxxxxx:
In recognition of your contribution to the growth and success of
Xxxxxxxx'x, Inc. and its related companies (the "Company"), we are pleased to
offer to you ("Executive") continued employment with the Company as Chairman and
Chief Executive Officer, subject to the following terms of this letter agreement
(the "Agreement").
1. Term and Duties. Executive shall be employed for a term commencing
on the date hereof and expiring on the fourth anniversary of the date hereof
(the "Term"). During the Term, Executive shall devote his best efforts and
substantially all of his business time and services to the Company, subject to
the direction of and reporting to the Board of Directors of the Company (the
"Board").
2. Annual Salary. Executive hereby agrees to accept, as compensation
for all services rendered by Executive in any capacity hereunder and for the
Restrictive Covenants made by Executive in Section 6 hereof, an annual salary at
the rate of $987,500 (the "Annual Salary") commencing on the date hereof and
continuing until expiration or termination of the Term. The Annual Salary shall
be inclusive of all applicable income, social security and other taxes and
charges which are required by law to be withheld by the Company. The Annual
Salary will be paid in the following manner: (a) a minimum of $275,000 in 12
equal monthly installments in arrears and (b) $712,500 payable annually in
arrears on April 15 of each year. This minimum amount may be increased from time
to time by the approval of the Company's Board of Directors. The annual payment
to be made on April 15, 1997 shall be a prorated portion of $712,500 based on
the portion of a year which has elapsed from the Closing Date (as defined in the
Recapitalization Agreement, dated April 26, 1996 among the Company, Kirkland
Holdings L.L.C. and the Company's former
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majority shareholders, including Executive (the "Recapitalization Agreement")
through April 15, 1997. The annual payment to be made with respect to any period
during which the Term terminated prior to the applicable April 15 payment date
will be prorated based on the portion of a year which has elapsed from April 15
of the prior year until the termination or expiration of the Term.
3. Annual Bonus. Executive will be eligible to receive with respect
to each fiscal year of the Company during the Term (each, a "Fiscal Year")
commencing with the Fiscal Year ending December 31, 1996, a bonus ("Annual
Bonus") consisting of: (i) an annual performance bonus of either (A) $175,000.00
if the Company achieves at least ninety-five (95%) of its Performance Target (as
defined below), or (B) $175,000.00 multiplied by the product of (i) the actual
percentage of Performance Target achieved minus eighty-five (85%) percent, but
not less than zero, times (ii) ten (10); and (ii) up to an additional
$75,000.00, subject to the discretion of the Board, which may take performance
measures into consideration, including but not limited to team leadership, new
store openings, existing store performance and/or customer satisfaction. For
purposes of this Agreement, "Performance Target" means the Company's projected
annual operating profit, as established by the Board for each Fiscal Year during
the Term. The Annual Bonus shall be payable within 30 days after completion of
the audit of the Company's financial statements for the prior Fiscal Year.
4. Benefits. Executive shall be entitled to the benefits (the
"Benefits") set forth on Schedule A attached hereto.
5. Incentive Stock Options. Simultaneously with the execution of this
Agreement, the Company has granted stock options to Executive to purchase two
percent (2%) of the Company's common stock (determined on a fully diluted
basis), pursuant to and subject to the terms of the 1996 Incentive and
Non-Qualified Stock Option Plan of the Xxxxxxxx Companies adopted on the date
hereof by the Board of Directors of the Company, and further subject to the
terms and provisions contained in that certain Stock Option Agreement between
the Company and Executive.
6. Non-Compete; Confidentiality; Non-Solicitation.
6.1. Restrictive Covenants.
(a) Non-Compete. Executive shall not, during the Term and for
a period of three (3) years thereafter (the "Restricted Period"), in the United
States, Canada or any other place where the Company, its subsidiaries or
affiliates conduct business, directly or indirectly (except in Executive's
capacity as an officer of the Company or its subsidiaries or affiliates)
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do any of the following directly or indirectly without the prior written consent
of the Company:
(i) engage or participate in any business activity
competitive with the Company's business, or in any business activity which sells
to or supplies goods or products to a business that is competitive with the
Company's business, or in either case, the business of any of the Company's
subsidiaries or affiliates ("Competing Business"), as the same are conducted by
the Company or its subsidiaries or affiliates at any time during the Restricted
Period;
(ii) become interested in (as owner, stockholder, lender,
partner, co-venturer, director, officer, employee, agent, consultant or
otherwise) any person, firm, corporation, association or other entity engaged in
any Competing Business. Notwithstanding the foregoing, Executive may hold up to
one percent (1%) of the outstanding securities of any class of any
publicly-traded securities of any company;
(iii) solicit or call on, either directly or indirectly, (A)
for purposes of selling goods or products competitive with goods or products
sold by the Company, any customer with whom the Company shall have dealt at any
time during the two year period immediately preceding the termination of
Executive's employment hereunder; or (B) any supplier with whom the Company
shall have dealt at any time during the two year period immediately preceding
the termination of Executive's employment hereunder;
(iv) except by reason of and in his capacity as an officer
of the Company, and in the best interests of the Company, directly or
indirectly, influence or attempt to influence any supplier, customer or
potential customer of the Company to terminate or modify any written or oral
agreement or course of dealing with the Company; or
(v) except by reason of and in his capacity as an officer
of the Company, and in the best interests of the Company, influence or attempt
to influence any person to either (i) terminate or modify his employment,
consulting, agency, distributorship or other arrangement with the Company, or
(ii) employ or retain, or arrange to have any other person or entity employ or
retain, any person who has been employed or retained by the Company as an
employee, consultant, agent or distributor of the Company at any time during the
one year period immediately preceding the termination of Executive's employment
hereunder.
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7. Termination.
7.1. Change in Control. Upon the occurrence of a Change in
Control, Qualified Public Offering, Sale or Refinancing (such terms being used
herein as defined in the Recapitalization Agreement) during the Term (or any
renewal of the Term), this Agreement shall terminate and the Executive and the
Company shall enter into a new employment agreement which shall be coextensive
with the remaining Term hereunder and which shall provide for an annual salary
at the rate of $275,000, a bonus equivalent to that provided for in Section 3
hereof, and a non-competition provision equivalent to that provided for in
Section 6 hereof which continues until three years following the end of the
remaining Term hereunder.
7.2. Disability. In the event of the disability of the Executive
during the Term (or any renewal of the Term), such that Executive is unable to
perform his duties and responsibilities hereunder to the full extent required by
this Agreement by reasons of illness, injury or incapacity for a period of more
than sixty (60) consecutive days or more than ninety (90) days, in the
aggregate, during any one hundred twenty (120) day period ("Disability"), the
Term will terminate and the Company will cease to pay the Annual Salary and
Bonus and will, in recognition of Executive's past services to the Company, pay
to Executive: (i) the sum of $712,500 per annum (prorated for any partial year)
until the seventh anniversary of the date of this Agreement; provided that such
annual payments shall terminate upon the occurrence of a Change in Control,
Qualified Public Offering, Sale or Refinancing and (ii) a pro rata portion of
his Annual Bonus for the Fiscal Year in which such termination occurs, if the
Performance Targets applicable to that Fiscal Year are achieved.
7.3. Death. In the event that Executive dies during the Term (or
any renewal of the Term), the Term will terminate and the Company will cease to
pay the Annual Salary and Bonus and will, in recognition of Executive's past
services to the Company, pay Executive's executors, legal representatives or
administrators: (i) a death benefit of $712,500 per annum (prorated for any
partial year) until the seventh anniversary of the date of this Agreement;
provided that such payments shall terminate upon the occurrence of a Change in
Control, Qualified Public Offering, Sale or Refinancing and (ii) a pro rata
portion of Executive's Annual Bonus for the Fiscal Year in which the
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death occurs, if the Performance Targets applicable to that Fiscal Year are
achieved.
7.4. Continuing Obligation. The Company's obligation to pay the
compensation to Executive under this Agreement may be terminated only to the
extent provided in Sections 7 and 8 of this Agreement, and shall not be
terminated for any other reason.
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Please indicate your acceptance of employment and your agreement to
render services to the Company subject to the terms set forth above by executing
and returning the enclosed copy of this letter.
Sincerely,
ATTEST: XXXXXXXX'X, INC.
By: /s/ Illegible Signature By: /s/ Xxxxx Xxxxx
------------------------- ---------------------------
Title: VP/Sec Name:
Title: V.P.
Agreed to and Accepted:
/s/ Xxxx Xxxxxxxx
-----------------------------
Xxxx Xxxxxxxx
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SCHEDULE A
EMPLOYEE BENEFITS
1. Automobile. An allowance of $600 per month during the Term for an
automobile.
2. Life Insurance. The Company shall purchase term life insurance in the face
amount of $500,000.00 for Executive (with a person designated by Executive as
named beneficiary of such insurance) for the period of the Term. The policy for
the life insurance shall (i) contain a waiver of premium in the event of
Disability (to the extent available at commercially reasonable rates) and (ii)
provide for transfer to Executive in the event of Executive's termination under
the terms of the Agreement so that Executive may then continue coverage under
such policy after such termination.
3. Expense Reimbursement. Executive shall be entitled to receive reimbursement
from the Company for all reasonable out-of-pocket expenses incurred by Executive
in performing his duties under the Agreement, without regard to applicable
deductions available to the Company, upon presentation of expense statements or
vouchers and such other supporting information as may be required pursuant to
any expense reimbursement policy adopted by the Company and in force from time
to time.
4. Vacation. Executive shall be entitled to reasonable vacation time as
determined by the Board consistent with past practices of the Company.
5. Other Benefits. Executive shall be permitted, if and to the extent
eligible, to participate in any group life, hospitalization or disability
insurance plan, health program, pension plan, similar benefit plan or other
so-called "fringe benefits" of the Company, which may be no less favorable to
Executive than the terms offered to such other senior executives of the Company
during the Term.
6. Extended Benefits. Following the expiration or termination of the Term,
Executive and his immediate family members shall be permitted to continue to
participate, at his own expense, in the Company's health insurance programs, to
the extent permitted by the insurance company (if any) then providing such
programs for the Company's executives and their immediate family members.
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