Xxxxx X. Xxxxxxx
EMPLOYMENT AGREEMENT
AGREEMENT dated as of June 1, 1998 between Xxxxx X. Xxxxxxx of 0000
Xxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxxxxxx 00000 ("Executive") and HomeBase, Inc., a
Delaware corporation (the "Company"), whose principal office is in Irvine,
California.
RECITALS
The Company desires that Executive serve as President and Chief
Executive Officer of the Company and Executive is willing to serve in such
capacity.
The Company and Executive deem it desirable to enter into this
Agreement.
AGREEMENT
In consideration of the mutual agreements hereinafter contained, the
parties agree as follows:
1. EFFECTIVE DATE; TERM OF AGREEMENT; DEFINITIONS. This Agreement shall
become effective as of June 1, 1998 (the "Effective Date"). This Agreement shall
supersede any existing employment agreement between Executive and the Company or
any of its Subsidiaries. Notwithstanding the foregoing, the Change of Control
Severance Agreement between the Company and Executive, as it may be amended or
superseded (the "Change of Control Agreement"), shall remain in full force and
effect. The employment shall continue on the terms provided herein until May 30,
1999 and thereafter for an unspecified period until terminated by either
Executive or the Company, subject to earlier termination as provided herein
(such period of employment hereinafter called the "Employment Period"). The
terms defined in Exhibit A hereto are used as so defined.
2. SCOPE OF EMPLOYMENT.
(a) Nature of Services. Executive shall diligently perform the
duties and the responsibilities of President and Chief Executive Officer of the
Company and such additional executive duties and responsibilities as shall from
time to time be agreed by Executive and the Board of Directors.
(b) Extent of Services. Except for illnesses and vacation
periods, Executive shall devote substantially all his working time and attention
and his best efforts to the performance of his duties and responsibilities under
this Agreement. However, Executive may (a) make any passive investments where he
is not obligated or required to, and shall not in fact, devote any managerial
efforts, (b) participate in charitable or community activities or in trade or
professional organizations or (c) subject to approval of the Board, hold
directorships in public companies, except only that the Board shall have the
right to limit such services as a director or such participation whenever the
Board shall believe that the time spent on such activities infringes in any
material respect upon the time required by Executive for the performance of his
duties under this Agreement or is otherwise incompatible with those duties.
3. COMPENSATION AND BENEFITS.
(a) Base Salary. Executive shall be paid a base salary at the
annualized rate of not less than $556,000 per year, to be reviewed annually by
the Executive Compensation Committee of the Board (the "Base Salary"). Base
Salary shall be payable in such manner and at such times as the Company shall
pay base salary to other executive employees.
(b) MIP Awards. Executive shall be eligible to receive awards under the
Company's Management Incentive Plan ("MIP") applicable to Executive. In each
fiscal year, Executive shall be eligible to earn up to a specified percentage of
his Base Salary as a Target Award or as a Maximum Award, as the case may be. The
Target Award shall equal 50% of the Executive's Base Salary, and the Maximum
Award shall not exceed $1,000,000 or, if less, 100% of Executive's Base Salary
annualized as of the beginning of the applicable performance period.
(c) Policies and Fringe Benefits. Executive shall be subject to Company
policies applicable to its executives generally and Executive shall be entitled
to receive all such fringe benefits as the Company shall from time to time make
available to other executives generally (subject to the terms of the applicable
fringe benefits plan).
(d) Real Estate Assistance. In connection with Executive's relocation
in 1993 from Massachusetts to California, the Company agreed to extend to
Executive an interest-free loan of $700,000 for the purchase by Executive of a
residence in California. The current loan balance is $300,000 and the Company
shall forgive $100,000 principal outstanding amount of the loan on each of
January 25, 1999, 2000 and 2001, whether or not Executive shall then be employed
hereunder. In addition, the Company shall pay for Executive's benefit a total of
$186,000 of federal and state withholding taxes (the "Loan Cash Payment"). The
Loan Cash Payment shall be paid in installments on one or more dates of
forgiveness of principal in an amount proportionate to the amount of the Loan
which Executive recognizes as forgiven on his federal tax return for any year
(so that the Loan Cash Payment would be $62,000 in each of three years if such
tax recognition occurred in equal annual amounts over three years). The loan
shall automatically be accelerated and become due 60 days after termination in
the event Executive shall voluntarily terminate his employment hereunder or
shall be terminated by the Company for Cause. The loan and the Company's
obligation to make Loan Cash Payments shall remain in effect following
termination for any other reason, including but not limited to a Qualified
Termination pursuant to the Change of Control Agreement. The loan is secured by
a valid and perfected first mortgage on Executive's residence in California. The
net proceeds from any sale of such residence shall be applied to reduce or
eliminate the loan and such net proceeds shall be subsequently reloaned by the
Company to Executive on a similar secured basis by the Company at the closing of
Executive's subsequent purchase of another residence within or outside
California. Such reloan shall have the same terms and maturity date as the
original loan and shall be treated as constituting part of the original loan, if
any part of the original loan is then outstanding. Upon a reloan, Executive
shall receive credit for any debt forgiveness and Loan Cash Payments which would
have occurred had the loan been continuously outstanding. Such repayment and
relending provisions shall apply to all subsequent sales and purchases of
residences by Executive.
4. TERMINATION OF EMPLOYMENT; IN GENERAL.
(a) The Company shall have the right to end the Employment Period (and
thereby terminate Executive's employment) at any time, with or without notice,
and for any reason with or without Cause.
(b) Unless otherwise prohibited by law, the Employment Period shall
terminate when Executive becomes Disabled. In addition, if by reason of
Incapacity Executive is unable to perform his duties for at least six continuous
months, the Employment Period will be terminated for Incapacity upon written
notice by the Company to Executive.
(c) Whenever the Employment Period shall terminate, Executive shall
resign all offices or other positions he shall hold with the Company and any
affiliated corporations, including any position on the Board.
5. BENEFITS UPON TERMINATION OF EMPLOYMENT.
(a) Certain Terminations. If the Employment Period shall have
terminated prior to, on or after May 30, 1999 (i) by reason of death, Disability
or Incapacity of Executive, or (ii) by termination by the Company for any reason
other than Cause, then all compensation and benefits for Executive shall be as
follows:
(i) For 78 weeks after such termination, the Company will
continue to pay to Executive Base Salary at the rate in effect at
termination of employment. Base Salary shall be paid for the first
three months of the period without reduction for compensation earned
from other employment or self-employment, and shall thereafter be
reduced by such compensation earned from other employment or
self-employment.
(ii) Until the expiration of the period of Base Salary
payments described in (i) above, except to the extent that Executive
shall obtain the same from another employer or from self-employment,
the Company will provide such medical and hospital insurance and life
insurance for Executive and his family, comparable to the insurance
provided for executives generally, as the Company shall determine, and
upon the same terms and conditions as the same shall be provided for
other Company executives generally; provided, however, that in no event
shall such benefits or the terms and conditions thereof be less
favorable to Executive than those afforded to him as of the date of
termination.
(iii) The Company will pay to Executive, without offset for
compensation earned from other employment or self-employment, the
following amounts under the Company's MIP applicable to Executive:
First, if not already paid, any amounts to which Executive is
entitled under MIP for the fiscal year of the Company ended
immediately prior to Executive's termination of employment.
These amounts will be paid at the same time as other awards
for such prior year are paid.
Second, such amount as Executive would have earned under MIP
if Executive's employment had continued until the end of the
fiscal year in which termination of employment occurs
(prorated for Executive's period of service during such year
prior to termination). This amount will be paid at the same
time as other MIP awards for the year of termination are paid.
In addition, the Company will pay to Executive such amounts as
Executive shall have deferred (but not received) under the Company's
General Deferred Compensation Plan in accordance with the provisions of
that Plan.
(iv) Executive shall also be entitled to payments or benefits
under other plans of the Company to the extent that such plans provide
benefits following a termination of employment.
(v) If termination occurs by reason of Incapacity or
Disability, Executive shall be entitled to such compensation, if any,
as is payable pursuant to the Company's long-term disability plan or
any successor Company disability plan. Any payments made to Executive
under any long-term disability plan of the Company with respect to the
salary continuation period in clause (i) above shall be offset against
such salary continuation payments and to the extent not so offset,
Executive shall promptly make reimbursement payments to the Company of
such disability payments.
(b) Certain Voluntary Terminations; Termination for Cause; Violation of
Certain Agreements. If Executive should end his employment voluntarily at any
time or if the Company should at any time end Executive's employment for Cause,
or, notwithstanding (a) above, if Executive should at any time violate the
provisions of Section 6, all compensation and benefits otherwise payable
pursuant to this Agreement shall cease, other than (x) such amounts as Executive
shall have deferred (but not received) under the Company's General Deferred
Compensation Plan in accordance with the provisions of that Plan, and (y) any
payments or benefits under the Company's 401(k) Savings Plan to the extent that
such plan provides benefits following a termination of employment. The Company
does not waive any rights, including rights it may have for damages or for
injunctive relief.
(c) Benefits Upon Change of Control. Upon a Change of Control (as
defined in the Change of Control Agreement) any stock options then held by
Executive shall automatically become fully exercisable and all restrictions and
conditions, including vesting conditions, applicable to any shares of restricted
stock (including Performance-Accelerated Restricted Stock) then held by
Executive shall be deemed automatically waived. Following a Change of Control
(as defined in the Change of Control Agreement), any rights of Executive under
this Agreement or any other agreement or plan with respect to uncompleted MIP
periods or cycles shall be governed solely by the Change of Control Agreement.
Upon a Qualified Termination (as defined in the Change of Control Agreement),
all rights of Executive with respect to salary continuation, life insurance,
medical insurance and disability benefits and auto allowance or auto lease
benefits shall be governed solely by the Change of Control Agreement but Section
3(d) hereof shall remain in effect notwithstanding the occurrence of a Change of
Control or Qualified Termination.
6. AGREEMENT NOT TO SOLICIT OR COMPETE.
(a) Upon the termination of employment at any time for any reason, then
for a period of two years after the termination of the Employment Period,
Executive shall not under any circumstances employ, solicit the employment of,
or accept unsolicited the services of, any "protected person" or recommend the
employment of any "protected person" to any other business organization. A
"protected person" shall be a person known by Executive (i) to be employed by
the Company or its Subsidiaries or (ii) to have been employed by Company or its
Subsidiaries within six months prior to the commencement of conversations with
such person with respect to employment.
As to (i) each "protected person" to whom the foregoing applies (ii)
each limitation on (A) employment, (B) solicitation and (C) unsolicited
acceptance of services of each "protected person" and (iii) each month of the
period during which the provisions of this Subsection (a) apply to each of the
foregoing, the provisions set forth in this Subsection (a) are deemed to be
separate and independent agreements and in the event of unenforceability of any
such agreement, such unenforceable agreement shall be deemed automatically
deleted from the provisions hereof and such deletion shall not affect the
enforceability of any other provision of this Subsection (a) or any other term
of this Agreement.
(b) During the course of his employment, Executive will have learned
many trade secrets of the Company and will have had access to confidential
information and business plans of the Company. Therefore, if Executive should
end his employment voluntarily at any time, including by reason of retirement or
disability, or if the Company should end Executive's employment at any time for
Cause, then for a period of two years thereafter, Executive will not engage,
either as a principal, employee, partner, consultant or investor (other than a
less-than-1% stock interest in a corporation), in a business which is a
competitor of the Company (a "Competitive Business"). A business shall be deemed
a Competitive Business if it shall operate a chain of home improvement stores
(such as Home Depot, Lowe's, Eagle Hardware, Orchard Supply & Hardware, or
Builders Square) that includes a store located within 10 miles of any "then
existing" HomeBase warehouse store. The term "then existing" in the previous
sentence shall refer to any such store that is, at the time of termination of
the Employment Period, operated by the Company or any of its subsidiaries or
divisions or under lease for operation as aforesaid. Nothing herein shall
restrict the right of Executive to engage in a business that operates
exclusively a chain of membership warehouse clubs, conventional or full xxxx-up
department stores, general merchandise discount department stores, or apparel
stores. In addition, if during a period of salary continuation under Section
5(a)(i) following Executive's termination by the Company for any reason other
than Cause, Executive so engages in a Competitive Business, Executive's rights
to any further salary continuation or benefits continuation under Sections
5(a)(i) and 5(a)(ii) shall terminate. Executive agrees that if, at any time,
pursuant to action of any court or administrative or governmental body, the
operation of any part of this paragraph shall be determined to be unlawful or
otherwise unenforceable, then the coverage of this paragraph shall be deemed to
be restricted as to duration, geographical scope or otherwise, to the extent,
and only to the extent, necessary to make this paragraph lawful and enforceable
in the particular jurisdiction in which such determination is made.
(c) During the Employment Period and upon termination for any reason,
Executive shall keep confidential and not disclose Company plans or other
confidential or proprietary information of the Company to any unauthorized
person unless legally required to do so, in which case Executive will first
notify the Company and cooperate with the Company to obtain a judicial or
administrative order protecting such confidentiality. If the Employment Period
terminates, Executive agrees (i) to notify the Company promptly upon his
securing employment or becoming self-employed during any period when Executive's
compensation from the Company shall be subject to reduction or his benefits
provided by the Company shall be subject to termination as provided in Section 5
and (ii) to furnish to the Company written evidence of his compensation earned
from any such employment or self-employment as the Company shall from time to
time reasonably request. In addition, upon termination of the Employment Period
for any reason other than the death of Executive, Executive shall immediately
return all Company property and all written trade secrets, confidential
information and business plans of the Company and shall execute a certificate
certifying that he has returned all such items in his possession or under his
control. In the event of the death of Executive, Executive's estate shall comply
with this obligation.
7. ASSIGNMENT. The rights and obligations of the Company (including,
without limitation, the provisions of Section 3(d)) shall inure to the benefit
of and shall be binding upon the successors and assigns of the Company. The
rights and obligations of Executive are not assignable except only that payments
payable to him after his death shall be made by devise or descent.
8. NOTICES. All notices and other communications required hereunder
shall be in writing and shall be given by mailing the same by certified or
registered mail, return receipt requested, postage prepaid. If sent to the
Company, the same shall be mailed to the Company at 0000 Xxxxxxxxx Xxxxx,
Xxxxxx, XX 00000, Attention: Chairman of the Board, or such other address as the
Company may hereafter designate by notice to Executive; and if sent to
Executive, the same shall be mailed to Executive at 0000 Xxxx Xxxxx, Xxxxxx
Xxxxx, XX 00000 or at such other address as Executive may hereafter designate by
notice to the Company.
9. WITHHOLDING. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to Executive shall be subject to
the withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation.
10. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the
domestic substantive laws of the State of California without giving effect to
any choice or conflict of laws rule or provision that would cause the
application of the domestic substantive laws of any other jurisdiction.
11. CONSENT TO JURISDICTION, ETC. Each party hereto (i) irrevocably
submits to the nonexclusive jurisdiction of the state courts of the State of
California and to the nonexclusive jurisdiction of the United States District
Court for the Central District of California for the purpose of any suit,
action, or other proceeding arising out of or based upon this Agreement or the
subject matter hereof or in any way connected with or related or incidental to
the dealings of either party hereto in connection with any of the above; (ii)
agrees that any such proceeding shall be brought or maintained only in such
courts; (iii) waives to the extent not prohibited by applicable law, and agrees
not to assert (by way of motion, as a defense, or otherwise) in any such
proceeding, any claim that it or he is not subject personally to the
jurisdiction of the above-named courts, that it or he is immune from
extraterritorial injunctive relief or other injunctive relief, that its or his
property is exempt or immune from attachment or execution, that any such
proceeding may not be properly brought or maintained in one of the above-named
courts, that any such proceeding brought or maintained in one of the above-named
courts should be dismissed on grounds of forum non conveniens, should be
transferred to any court other than one of the above-named courts, or should be
stayed by reason of the pendency of some other proceeding in any court other
than one of the above-named courts, or that this Agreement or the subject matter
hereof may not be enforced in or by any of the above-named courts; (iv) agrees
that service of process in any such proceeding may be made in any manner
permitted by the law applicable in the court where any such proceeding is
brought or maintained or by registered or certified mail, return receipt
requested, at its or his principal place of business to its or his notice
address for purpose of this Agreement; (v) agrees that service of process made
in accordance with clause (iv) is reasonably calculated to give actual notice of
any such proceeding; and (vi) waives and agrees not to assert (by way of motion,
as a defense, or otherwise) in any such proceeding any claim that service of
process made in accordance with clause (iv) does not constitute good and
sufficient service of process.
12. SEVERABILITY. In the event that any provision of this Agreement
shall be determined to be invalid or unenforceable, such provision shall be
enforceable in any other jurisdiction in which valid and enforceable and in any
event the remaining provisions shall remain in full force and effect to the
fullest extent permitted by law.
13. AMENDMENT OF MODIFICATION, WAIVER. This Agreement may not be
amended unless agreed to in writing by Executive and the Company. No waiver by
either party of any breach of this Agreement shall be deemed a waiver of a
subsequent breach.
14. ENTIRE AGREEMENT. This Agreement, including Exhibit A incorporated
herein, supersedes all prior written or oral agreements between the Company and
Executive and represents the entire agreement between the parties relating to
the terms of the Executive's employment by the Company, except the Change of
Control Agreement.
Executive:
Xxxxx X. Xxxxxxx
HOMEBASE, INC.
By:
Xxxxxxx X. Xxxxxx
Chairman of the Board
EXHIBIT A
Certain Definitions
In this Agreement, the following terms shall have the following meanings:
(a) "Base Salary" means, for any period, the amount described in
Section 3(a).
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Executive Compensation Committee of the
Board.
(d) "Cause" means dishonesty of Executive in the performance of his
duties, conviction of a felony (other than a conviction arising
solely under a statutory provision imposing criminal liability
upon Executive on a per se basis due to the Company offices held
by Executive, so long as any act or omission of Executive with
respect to such matter was not taken or omitted in contravention
of any applicable policy or directive of the Board), gross
neglect of duties (other than as a result of Incapacity,
Disability or death), or conflict of interest which conflict
shall continue for 30 days after the Company gives written notice
to Executive requesting the cessation of such conflict.
(e) "Date of Termination" means the date on which Executive's
employment is terminated.
(f) "Disability" has the meaning given it in the Company's long-term
disability plan. Executive's employment shall be deemed to be
terminated for Disability on the date on which Executive is
entitled to receive long-term disability compensation pursuant to
such long-term disability plan.
(g) "Incapacity" means a disability (other than Disability within the
meaning of (f) above) or other impairment of health that renders
Executive unable to perform his duties to the reasonable
satisfaction of the Board.
(h) "Stock" means the common stock, $0.01 par value, of the Company.
(i) "Subsidiary" means any corporation in which the Company owns,
directly or indirectly, 50 percent or more of the total combined
voting power of all classes of stock.
