EMPLOYMENT AGREEMENT
This Agreement is made as of July 14, 1997 by and between PAPER
WAREHOUSE, INC., a Minnesota corporation (the "Company"), and XXXXXX X. XXXXXX
(the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to employ Executive in accordance with the
terms and conditions stated in this Agreement; and
WHEREAS, Executive desires to accept that employment pursuant to the
terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties hereto agree as follows:
I. EMPLOYMENT
1.1 EMPLOYMENT AS CHIEF FINANCIAL OFFICER. The Company hereby employs
Executive as Chief Financial Officer and Executive accepts such employment
pursuant to the terms of this Agreement. Executive shall report to the
Company's President and Chief Executive Officer. The Executive will perform
those duties which are usual and customary for a chief financial officer of a
party goods retailer. Executive shall be employed at the Company's corporate
offices. She shall perform her duties in a manner reasonably expected of a chief
financial officer of a party goods retailer.
1.2 TERM. Employment shall be for a term commencing not later than
August 1, 1997 and continuing until Executive's employment terminates pursuant
to Article III hereof.
II. COMPENSATION, BENEFITS AND PERQUISITES
2.1 BASE SALARY. During the term and effectiveness of this Agreement,
the Company shall pay Executive an annualized base salary ("Base Salary") at the
annual rate of One Hundred Fifteen Thousand Dollars ($115,000). The Base Salary
shall be payable in equal installments in the time and manner that other
employees of the Company are compensated. The Board of Directors of the Company
will review the Base Salary at least annually, and may, in its sole discretion
increase it to reflect performance, appropriate industry guideline data or other
factors.
2.2 BONUS COMPENSATION. In addition to Base Salary, Executive shall
have the opportunity to earn additional compensation based upon the Company and
Executive achieving certain results articulated in the Senior Management Group
Compensation Plan, which the parties intend to finalize within sixty (60) days
of the execution of this Agreement.
2.3 STOCK OPTION. In the event the company makes an initial public
offering of its stock, Executive shall receive, pursuant to the Company Employee
Stock Option Plan, incentive stock options equal to four hundred fifty (450)
shares of the Company's capital stock which is issued and outstanding as of the
date of this Agreement. The number of stock options shall be adjusted for all
stock splits and stock dividends. Stock options will have a strike price equal
to the initial public offering price per share.
2.4 EMPLOYEE BENEFITS. Executive shall be entitled to the vacation and
other benefits which the Company provides to its other executives under its
employee benefit plans for employees with ten (10) years of service.
Executive's participation in such benefit plans shall be on the same basis as
applies to other executives of the Company. Executive shall pay any
contributions which are generally required of executives to receive any such
benefits. Executive shall be reimbursed up to Two Hundred Forty Dollars ($240)
a month for Executive's membership in a private club of Executive's choice. The
Company shall further reimburse Executive for COBRA expenses incurred by
Executive, while such COBRA expenses are necessary to satisfy the pre-existing
conditions limitation under the Company's health insurance plan, up to a maximum
cumulative reimbursement of Three Thousand Dollars ($3,000) and for a maximum
duration of six (6) months following the effective date of employment.
III. TERMINATION OF EXECUTIVE'S EMPLOYMENT
3.1 TERMINATION OF EMPLOYMENT. Executive's employment under this
Agreement may be terminated by the Company or Executive at any time for any
reason; provided, however, that if Executive's employment is terminated by the
Company during the first eighteen months (18) of the term of this Agreement for
disability or a reason other than for cause as defined in Section 3.2 below, she
shall continue to receive her Base Salary under Section 2.1 for a period ending
on the earlier of (i) twelve months from the date of termination or (ii)
eighteen (18) months after execution of this Agreement. Executive's employment
under this Agreement may be terminated by Executive at any time for any reason.
The termination shall be effective as of the date specified by the party
initiating the termination in a written notice delivered to the other party,
which date shall not be earlier than the date such notice is delivered to the
other party. This Agreement shall terminate in its entirety immediately upon
the death of Executive. Except as expressly provided to the contrary in this
section or applicable law, Executive's rights to pay and benefits shall cease on
the date her employment under this Agreement terminates.
3.2 CAUSE. For purposes of this Article III, "cause" shall mean only
the following: (i) commission of a felony; (ii) theft or embezzlement of
Company property or commission of similar acts involving moral turpitude; or
(iii) the failure by Executive to substantially perform her material duties
under this Agreement (excluding nonperformance resulting from Executive's
disability) which willful failure is not cured within thirty (30) days after
written notice from the Board of Directors of the Company specifying the act of
willful nonperformance or within such longer period (but no longer than ninety
(90) days in any event) as is reasonably required to cure such willful
nonperformance. Notwithstanding the foregoing, Executive shall not be deemed to
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have been terminated for "cause" unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of the Board at a meeting of the Board called and held for this specific
purpose.
3.3 DISABILITY. If Executive has become disabled such that she cannot
perform the essential functions of her job with or without reasonable
accommodation, and the disability has continued for a period of more than ninety
(90) days, the Board of Directors of the Company may, in its discretion,
terminate her employment under this Agreement. Upon any such termination for
disability, Executive shall be entitled to such disability, medical, life
insurance, and other benefits as may be provided generally for disabled
employees of the Company during the period she remains disabled.
3.4 NOTICE. Executive must provide the Company with at least 30 days
written notice if Executive desires to terminate her employment under this
Agreement.
IV. CONFIDENTIALITY
4.1 PROHIBITIONS AGAINST USE. Both parties to this Agreement
acknowledge and agree that during the term of this Agreement they may have
access to various trade secrets and confidential business information
("Confidential Information") of each other. Each party agrees that it shall use
such Confidential Information solely in connection with Executive's obligations
under this Agreement and shall maintain in strictest confidence and shall not
disclose any such Confidential Information, directly or indirectly or use such
information in any other way during the term of this Agreement or for a period
of one (1) year after the termination of this Agreement. The parties further
agree to take all reasonable steps necessary to preserve and protect the
Confidential Information. The provisions of this Section shall be equally
applicable to each parties' officers, directors, agents or employees. The
provisions of this Section shall not apply to information which (i) was in
possession of a party prior to receipt from the other party, or (ii) is or
becomes generally available to the public other than as a result of a disclosure
by a party, its directors, officers, employees, agents or advisors, or (iii)
becomes available to a party from a third party having the right to make such
disclosure.
4.2 REMEDIES. Executive acknowledges that the Company's remedy at law
for any breach or threatened breach by Executive of Section 4.1 will be
inadequate. Therefore, the Company shall be entitled to injunctive and other
equitable relief restraining Executive from violating those requirements, in
addition to any other remedies that may be available to the Company under this
Agreement or applicable law.
V. NON-COMPETITION
5.1 AGREEMENT NOT TO COMPETE. Executive agrees that, on or before the
date which is two (2) years after the date Executive's employment under this
Agreement terminates, she will
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not, unless she receives the prior approval of the Board of Directors of the
Company, directly or indirectly engage in any of the following actions:
(a) Own an interest in (except as provided below), manage,
operate, join, control, lend money or render financial or other
assistance to, or participate in or be connected with, as an officer,
employee, partner, stockholder, consultant or otherwise, any entity whose
products or services could be considered part of the party goods
industry. However, nothing in this subsection (a) shall preclude
Executive from holding less than one percent of the outstanding capital
stock of any corporation required to file periodic reports with the
Securities and Exchange Commission under Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the securities of which are
listed on any securities exchange, quote on the National Association of
Securities Dealers Automated Quotation System or traded in the
over-the-counter market.
(b) Intentionally solicit, endeavor to entice away from the
Company, or otherwise interfere with the relationship of the Company, any
person who is employed by or otherwise engaged to perform services for
the Company (including, but not limited to, any independent sales
representatives or organizations), whether for Executive's own account or
for the account of any other individual, partnership, firm, corporation
or other business organization.
If the scope of the restrictions in this section are determined by a court of
competent jurisdiction to be too broad to permit enforcement of such
restrictions to their full extent, then such restrictions shall be construed or
rewritten (blue-lined) so as to be enforceable to the maximum extent permitted
by law, and Executive hereby consents, to the extent she may lawfully do so, to
the judicial modification of the scope of such restrictions in any proceeding
brought to enforce them.
VI. MISCELLANEOUS
6.1 AMENDMENT. This Agreement may be amended only in writing, signed
by both parties.
6.2 ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties with regard to all matters contained herein. There are no other
agreements, conditions or representations, oral or written, expressed or
implied, with regard thereto. This Agreement supersedes all prior agreements
relating to the employment of Executive by the Company.
6.3 ASSIGNMENT. This Agreement shall be binding upon, and shall inure
to the benefit of the parties and their respective successors, assigns, heirs
and personal representatives and any entity with which the Company may merge or
consolidate or to which the Company may sell substantially all of its assets.
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6.4 NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be delivered either in person or by certified or
registered mail, return receipt requested. Any notice by mail shall be
addressed as follows:
If to the Company, to:
Paper Warehouse, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Yale X. Xxxxxxxx
If to Executive, to:
Xxxxxx X. Xxxxxx
00000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
or to such other addresses as either party may designate in writing to the other
party from time to time.
6.6 WAIVER OF BREACH. Any waiver by either party of compliance with
any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any other provision of this Agreement, or of any
subsequent breach by such party of a provision of this Agreement.
6.7 SEVERABILITY. If any one or more of the provisions (or portions
thereof) of this Agreement shall for any reason be held by a final determination
of a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions (or portions of the provisions) of this Agreement, and the
invalid, illegal or unenforceable provisions shall be deemed replaced by a
provision that is valid, legal and enforceable and that comes closest to
expressing the intention of the parties hereto.
6.8 GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Minnesota, without giving effect to
conflict of law principles.
6.9 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement or the breach of this Agreement or the breach of any exhibits
attached to this Agreement shall be settled by arbitration in accordance with
the Employee Arbitration Rules of the American Arbitration Association, and a
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction. The arbitration award shall be subject to review
only in the manner provided in the Uniform Arbitration Act as adopted in Chapter
572, Minnesota Statutes, as the Act is amended at the time of submission of the
issue to arbitration.
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The arbitrator(s) shall have the authority to award the prevailing party its
costs and reasonable attorney's fees which shall be paid by the non-prevailing
party. In the event the parties hereto agree that it is necessary to litigate
any dispute hereunder in a court, the non-prevailing party shall pay the
prevailing party its costs and reasonable attorney's fees. Notwithstanding
anything in this Section 6.9 to the contrary, Executive shall be entitled to
seek specific performance of Executive's rights to be paid until the date of
termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement or exhibits attached to this Agreement.
Further, the Company shall be entitled to seek an injunction or restraining
order in a court of competent jurisdiction to enforce the provision of Article
IV and Article V.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date set forth above.
PAPER WAREHOUSE, INC.
BY s/ YALE X. XXXXXXXX
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YALE X. XXXXXXXX
PRESIDENT AND CHIEF EXECUTIVE OFFICER
s/ XXXXXX X. XXXXXX
--------------------------------------------
XXXXXX X. XXXXXX
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