EXHIBIT 10.13
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of April 1, 2003,
between Frank's Nursery & Crafts, Inc., a Delaware corporation (the "Company"),
and Mr. Xxxxx Xxxx ("Employee").
RECITAL
A. The Company is engaged in the operation of retail stores that sell
lawn and garden products, Christmas trim-a-tree merchandise, artificial flowers
and arrangements, garden and floral crafts and home decorative products.
B. The Company wishes to employ Employee as its Chief Executive Officer
pursuant to the terms of this Agreement. Employee desires to be employed by the
Company in that position.
Therefore, the parties agree as follows:
1. DUTIES AND NATURE OF EMPLOYMENT.
1.1 Duties. During the Employment Term (as defined in Section 2.1
below), Employee shall, in accordance with this Agreement, be employed by the
Company as its Chief Executive Officer and devote his full working time,
attention and best efforts to the business of the Company. During the Employment
Term, Employee shall comply with all of the Company's corporate policies. The
Company agrees that it will use its best efforts to cause Employee to be
nominated to the Company's Board of Directors.
1.2 Relocation. Employee shall establish his primary residency in the
Troy, Michigan area as of the date of this Agreement, and Employee and his
family shall relocate to the Troy, Michigan area within four months of the date
of this Agreement (the "Transition Period").
1.3 Representations. Employee hereby represents, warrants and covenants
that he is not and shall not be, during the Employment Term, subject to any
employment or consulting agreement or other document with another employer or
with any business as to which Employee's employment by the Company and provision
of services in the capacity contemplated herein would be a breach. Employee
hereby represents, warrants, and covenants that he is not and shall not be
subject to any agreement which prohibits Employee during the Employment Term
from any of the following: (i) providing services for the Company in the
capacity contemplated by this Agreement; (ii) competing with, or in any way
participating in, a business which includes the Company's business; (iii)
soliciting personnel of any former employer or other business to leave such
former employer or to leave such other business; or (iv) soliciting customers of
any former employer or other business on behalf of another business. Further,
Employee is not aware of the existence of any circumstances that could
materially interfere with his duties under this Agreement, and Employee
represents and warrants that there is no pending or threatened litigation
against him.
2. TERM.
2.1 Employment Term. The term of Employee's employment under this
Agreement (the "Employment Term") begins on April 1, 2003 and shall continue for
three years or until earlier terminated in accordance with Section 2.2 of this
Agreement. Notwithstanding the termination of the Employment Term pursuant to
Section 2.2 below, the parties' obligations under Sections 5, 6, 7, 8 and 9
shall, according to their terms, survive any termination of Employee's
employment, and Employee and the Company shall in all events be bound by and
comply with the provisions of such applicable Sections at all times after such
termination.
2.2 Termination of Employment Term. The Employment Term shall terminate
prior to its expiration upon the earliest to occur of the following:
(a) the death of Employee, effective as of the date of death;
(b) the substantial disability of Employee, as determined by a
competent medical doctor selected by the Company, for a period of 90 days;
(c) without Cause (as defined below), other than as a result of the
death or disability of Employee, upon written notice to Employee by the Company,
effective as of the date of such notice;
(d) with "Cause" (defined as gross insubordination, intentional neglect
of principal duties, commission of a felony or breach of duty of loyalty in
connection with his activities relating to the Company), upon written notice to
Employee by the Company, effective as of the date of such notice; or
(e) upon 45 days prior written notice to the Company by Employee.
2.3 At Will Employment. While Employee shall have certain rights upon
the termination of his employment, Employee's employment hereunder shall be
terminable at will, with or without Cause, at any time, and Employee shall have
no right to continued employment hereunder.
3. COMPENSATION OF EMPLOYEE. As full compensation for the services to
be rendered by Employee pursuant to this Agreement, the Company shall pay
Employee, during the Employment Term, the following:
(a) An annual salary of $450,000 for the first twelve months of this
Agreement, $475,000 for the second twelve months of this Agreement and $500,000
for the third twelve months of this Agreement, payable in arrears, semi-monthly
or otherwise in accordance with the Company's regular payroll procedures;
(b) In the event that the Company's actual consolidated earnings before
interest, taxes, depreciation and amortization after deduction of any bonus
amount payable to Employee
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pursuant to this Section ("EBITDA") for any fiscal year of the Company during
the Employment Term equals or exceeds the EBITDA level established in the
Company's budget for such fiscal year as established by the Company's board of
directors, Employee will be entitled to a bonus with respect to such fiscal year
equal to the sum of (i) 50% of Employee's annual salary as specified in Section
3(a) above plus (ii) 5% of the amount by which the Company's actual EBITDA
exceeds such budgeted EBITDA. Notwithstanding the foregoing, the amount of the
bonus payable to Employee with respect to the Company's fiscal years 2003 and
2006 shall be equal to the amount of bonus which would otherwise be payable
pursuant to this Section 3(b) multiplied by the percentage of such fiscal year
which falls within the Employment Term; and
(c) As of the date of this Agreement, Employee will be granted options
to acquire an aggregate of 1,000,000 shares of the Company's common stock
pursuant to the Company's 2002 Stock Option Plan. Such options shall be granted
at the fair market value of the Company's common stock as of the date of this
Agreement and shall vest as follows: 333,333 shares on April 1, 2004, 333,333
shares on April 1, 2005, and 333,334 shares on April 1, 2006.
4. FRINGE BENEFITS. Employee shall be entitled, during the Employment
Term, to receive those benefits generally provided to other executive employees
of the Company from time to time. Employee shall also be entitled, during the
Employment Term, to receive the following benefits:
(a) reimbursement, upon presentation of appropriate documentation, of
all out-of-pocket expenses incurred by Employee with respect to (i) the sale of
Employee's home in Dallas, Texas, (ii) moving Employee's personal effects to the
Troy, Michigan area, and (iii) temporary housing for Employee and his family in
the Troy, Michigan area, not to exceed $3,000 per month, until the earlier of
Employee's purchase of a home in the Troy, Michigan area or the end of the
Transition Period;
(b) $1,500,000 of life insurance;
(c) health insurance for Employee and his family with no deductibles;
and
(d) use of a leased automobile and related insurance and maintenance
costs.
In addition, a deferred compensation plan will be established for Employee at
his request provided that there shall be no cost to the Company associated with
such plan.
5. PAYMENTS UPON CERTAIN TERMINATIONS.
5.1 Termination of Employment.
(a) If the Employment Term terminates for any reason whatsoever,
Employee (or, if applicable, his legal representative) shall be entitled to
receive (i) the pro rata portion of Employee's earned but unpaid salary under
Section 3(a) above through the date of termination and (ii) any unpaid bonus
earned under Section 3(b) above with respect to any fiscal year completed on or
prior to the date of termination.
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(b) If the Employment Term terminates pursuant to Section 2.2(a) or (b)
above, Employee (or, if applicable, his legal representative) shall be entitled
to receive, in addition to the amounts specified in Section 5.1(a) above, an
amount equal to (i) the bonus that Employee would have been entitled to receive
under Section 3(b) above for the fiscal year in which termination of employment
occurs, determined as if Employee's employment had not terminated, multiplied by
(ii) the percentage of such fiscal year which has elapsed through the date of
termination of Employee's employment, payable when such bonus would otherwise
have been payable had Employee's employment not terminated (the "Prorated
Bonus").
(c) If the Employment Term terminates pursuant to Section 2.2(c) above,
then Employee shall be entitled to receive, in addition to the amounts specified
in Section 5.1(a) above, (i) his annual base salary, as and when it would
otherwise have been payable to him, for the longer of (A) twelve months from the
date of termination of the Employment Term or (B) until March 31, 2006, and (ii)
the Prorated Bonus. Nothing in this Section 5.1(c) shall limit the Company's
right to terminate the Employment Term under any other subsection of Section
2.2, and discontinue its obligations under this Section 5.1(c), even after the
Company's termination of the Employment Term under Section 2.2(c), if the
Company learns of facts or circumstances that would make termination under a
Section other than Section 2.2(c) appropriate, including any breach by Employee
of the provisions of Section 6. Employee shall be entitled to purchase health
insurance through the Company in accordance with, and for as long as provided
by, COBRA. During the shorter of (I) or the term which Employee receives his
annual base salary pursuant to the first sentence of this Section 5.1(c) and
(II) the period during which Employee is entitled to purchase health insurance
through the Company under COBRA, the Company shall pay Employee an amount equal
to his cost of such health insurance at the same time Employee's payments for
such health insurance are due to the Company; provided, that if Employee obtains
employment with a third party during the period in which Employee is entitled to
be paid the cost of his health insurance pursuant to this Section, and Employee
is eligible to obtain health insurance through such third party, then the
Company shall no longer be obligated to pay Employee the cost of his health
insurance pursuant to this Section.
5.2 Limitation of Termination Payments and Withholding of Taxes. Except
as set forth in this Agreement, the termination payments described in this
Section 5 shall be in lieu of any termination or severance payments required by
Company policy or applicable law (including unemployment compensation) and shall
constitute Employee's exclusive rights and remedies with respect to termination
of his employment with the Company, other than rights or remedies that Employee
or his estate may have under the Company's employee benefit plans. The Company
may withhold from any payments under this Section 5 all applicable federal,
state, city or other taxes required by applicable law to be so withheld.
6. CONFIDENTIALITY AND NON-COMPETITION.
6.1 Confidential Information.
(a) Employee shall not, except as required by his duties to the
Company, as authorized by the Board of Directors of the Company or as required
by law, at any time during or
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after the termination of his employment with the Company, directly or indirectly
use, publish, disseminate, distribute or otherwise disclose any Confidential
Information (as defined below). Employee shall keep all Confidential Information
in trust for the use and benefit of the Company. Employee shall take all
reasonable steps necessary or reasonably requested by the Company to ensure that
all Confidential Information is kept confidential for the sole use and benefit
of the Company.
(b) Upon termination of his employment by the Company or at any other
time the Company may so request, Employee shall promptly deliver to the Company
all materials constituting Confidential Information (including all copies) that
are in his possession or under his control and Employee shall not make or retain
any copy of or extract from such materials.
(c) For purposes of this Section 6.1, "Confidential Information" means
any proprietary or confidential information of or relating to the Company that
is not generally known in any industry in which the Company is or may become
engaged and which is material to the Company. Employee acknowledges that the
Confidential Information of the Company is valuable, special and unique to the
business of the Company and on which such business depends, and is proprietary
to the Company, and that the Company wishes to protect such Confidential
Information by keeping it secret and confidential for the sole use and benefit
of the Company.
6.2 Non-Competition. During the longer of (i) the period through March
31, 2006, and (ii) the period through the date which is twelve months after the
termination of the Employment Term, Employee shall not, either directly or
indirectly, through any person or entity:
(a) Hire any person who is then employed by, is a consultant to or is
an agent of the Company or who was employed by, a consultant to or an agent of
the Company at any time during the three months prior to such date, or
encourage, induce or attempt to induce, or aid, assist or abet any other party
or person in encouraging, inducing or attempting to induce, any such employee,
consultant or agent to alter or terminate his or her employment, consultation or
agency with the Company.
(b) Take any action intended to, or which otherwise does, interfere
with the Company's relationship with any supplier, vendor, lender, shareholder
or other party.
(c) Be engaged by, consult with, or invest in, any person or entity
doing business in any state in which the Company does business, the principal
business of which is the sale of lawn and garden and/or Christmas merchandise,
except that Employee may own stock in a corporation which may be engaged
principally in the sale of lawn and garden and/or Christmas merchandise, whose
shares are listed for trading on a national or regional stock exchange or trade
on the over-the-counter market, provided that Employee owns, in the aggregate,
fewer than 2% of the issued and outstanding shares of such corporation.
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7. REMEDIES.
7.1 Injunctive Relief. The covenants and obligations contained in
Sections 6.1 and 6.2 above relate to matters which are of a special, unique and
extraordinary character and a violation of any of the terms of such Sections
shall cause irreparable injury to the Company, the amount of which shall be
difficult if not impossible to estimate or determine and which cannot be
adequately compensated. Therefore, the Company shall be entitled to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any violation or threatened violation of any
of such terms by Employee and such other persons as the court orders.
7.2 Cumulative Rights and Remedies. The rights and remedies provided by
Section 7.1 above are cumulative and are in addition to any other rights and
remedies the Company may have at law or equity.
8. MISCELLANEOUS.
8.1 Headings. The descriptive headings of the Sections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
8.2 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by certified or registered mail,
postage prepaid, addressed to the Company at its principal executive offices,
with a copy to Xxxxxx X. Xxxx, Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx LLP, 2290 First
National Building, 000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, or to Employee
at his address as shown in the Company's records. Any such notice or
communication shall be deemed to have been given as of the date so mailed.
8.3 Assignment. Employee may not assign, transfer or delegate his
rights or obligations under this Agreement and any attempt to do so shall be
void. Upon any assignment of this Agreement by the Company, the Company shall
obtain the written acknowledgement of the assignee or successor that such party
is bound by this Agreement. This Agreement is binding on and inures to the
benefit of the parties, their successors and assigns and the executors,
administrators and other legal representatives of Employee.
8.4 Counterparts. This Agreement may be signed in counterparts.
8.5 Governing Law. This Agreement and any dispute relating to or
arising out of the matters covered by this Agreement shall be governed by the
laws of the State of Michigan (regardless of the laws that might be applicable
under principles of conflicts of law) as to all matters (including validity,
construction, effect and performance). Each party hereto consents to, and shall
submit to, the jurisdiction of the courts of the State of Michigan and of any
Federal court whose district includes Troy, Michigan, which shall have exclusive
jurisdiction with respect to any action or proceeding, and process in any such
action or proceeding may be served in the manner provided by Michigan law for
service on foreign corporations or persons.
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8.6 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
8.7 Entire Agreement. This Agreement constitutes the entire Agreement,
and supersedes all prior agreements and understandings, written or oral, among
the parties with respect to the subject matter of this Agreement. This Agreement
may not be amended or modified except by agreement in writing, signed by the
party against whom enforcement of any waiver, amendment, modification or
discharge is sought.
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IN WITNESS WHEREOF, this Agreement has been signed on the date first
written above.
Frank's Nursery & Crafts, Inc.,
a Delaware corporation
By: /s/ Xxxx Xxxxxxxxx
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Its: President/C.O.O.
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/s/ Xxxxx Xxxx
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Xxxxx Xxxx
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