Exhibit 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of November 10, 2003, by and between
Factory 2-U Stores, Inc. (the "Company"), a Delaware corporation, and X.X. Xxxx
("Executive").
W I T N E S S E T H
WHEREAS, the Company desires to employ Executive, and Executive desires to
accept such employment on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
Executive agree as follows:
1. Term of Employment. Except upon earlier termination as provided in
Section 9 hereof, Executive's employment under this Agreement shall be for a
one-year term commencing on the date of this Agreement (the "Effective Date")
and terminating on November 9, 2004; provided, however, that at the scheduled
end of the employment term, and on each anniversary of such date, the employment
term shall automatically be extended for a one-year period unless the Company or
the Executive gives notice to the other at least 90 days before an extension is
to take effect that they do not desire the employment term to be extended. The
term of employment, as so extended from time to time, is referred to in this
Agreement as the "Employment Term."
2. Positions.
(a) Executive shall serve as Executive Vice President-General
Merchandise Manager of the Company. Executive shall report to the Chief
Executive Officer of the Company ("CEO") and shall have such duties and
authority, consistent with his position as Executive Vice President-General
Merchandise Manager of the Company, as shall be assigned to him from time to
time by the CEO.
(b) During the -Employment Term, Executive shall, without additional
compensation, perform such executive and consulting services for, or on behalf
of, such subsidiaries or affiliates of the Company as the CEO may, from time to
time, request. The Company and such subsidiaries and affiliates are hereinafter
referred to, collectively, as the "Company" and, individually, as a "Constituent
Corporation." For purposes of this Agreement, the term "Affiliate" shall have
the meaning given in the Securities Exchange Act of 1934, as amended (the
"Act").
(c) During the Employment Term, Executive shall devote substantially
all of his business time and efforts to the performance of his duties hereunder;
provided, however, that Executive shall be permitted, to the extent that such
activities do not materially interfere with the performance of his duties and
responsibilities hereunder, to manage his personal financial and legal affairs
and to serve on not more than three corporate, civic or charitable boards or
committees. Notwithstanding the foregoing, the Executive shall not serve on any
corporate board of directors or similar body if such service would be
inconsistent with his fiduciary responsibilities to any Constituent Corporation
and in no event shall Executive serve on any such board or other body unless
approved by the CEO, which approval shall not be unreasonably withheld.
3. Base Salary. During the Employment Term, the Company shall pay to the
Executive a base salary at the annual rate of not less than Two Hundred Fifty
Thousand Dollars ($250,000). Base salary shall be payable in accordance with the
usual payroll practices of the Company. Executive's base salary shall be subject
to annual review by the CEO and may be increased, but not decreased, from time
to time at the discretion of the CEO. The base salary, as determined as
aforesaid from time to time, shall constitute "Base Salary" for purposes of this
Agreement.
4. Annual Bonus. At such time as requested by the Company's CEO, Executive
shall prepare and present to the CEO written financial, operational and other
objectives (the "Performance Objectives") for the Company's fiscal year ending
January 29, 2005 (i.e., fiscal year 2004). If such Performance Objectives are
approved and accepted by the CEO, Executive's target bonus for such fiscal year
shall be equal to 50% of Executive's annual Base Salary for such year. For each
fiscal year during the Employment Term thereafter, Executive shall prepare and
submit Performance Objectives to the CEO during the normal course of the
Company's planning cycle and before the commencement of the new fiscal year. If
such subsequent Performance Objectives are accepted and approved by the CEO,
Executive's target bonus for such fiscal years shall be based on 50% of
Executive's Base Salary in effect as of the start of such fiscal year. In the
event of any disagreement between the CEO and Executive concerning the
acceptance and approval of Performance Objectives, the CEO and Executive shall
negotiate in good faith to attempt to resolve such differences. Annual bonuses
shall be reduced pro rata for any fiscal year that is not a full year (based on
the actual number of days of such year included in the Employment Term). Each
annual bonus shall be paid no later than 30 days after the Company's audited
financial statements with respect to the year for which the annual bonus is
awarded are available. If the Performance Objectives accepted by the CEO are
exceeded in any year, the annual bonus shall be increased by 1% of Base Salary
for each 1% of excess, up to a maximum bonus of 100% of Base Salary for the
achievement of 150% of the Performance Objectives. If the Performance Objectives
accepted by the CEO are not met, the Executive shall not be entitled to any
bonus.
5. Equity Compensation.
(a) Non-Qualified Stock Options. The Company will grant to Executive,
pursuant to the Company's Second Amended and Restated 1997 Stock Option Plan, as
in effect as of the Effective Date (the "Plan"), nonqualified options entitling
Executive to acquire a total of 50,000 shares of the Company's common stock at
the closing market price of such common stock on the commencement date of the
Employment Term. Subject to Executive's continued employment under this
Agreement, such nonqualified stock options will vest in increments of 3,125
shares (each, a "Tranche") on each March, June, September and December 30 during
the first four years of the Employment Term. The non-qualified options in each
such Tranche shall be exercisable for a period of five years after the vesting
of such Tranche. During any period of time after one year from the date of this
Agreement that shares acquired upon exercise of such non-qualified options would
not be saleable by Executive pursuant to Rule 144 under the Act or pursuant to
an effective registration statement under the Act, the Company shall file with
the Securities and Exchange Commission and maintain the effectiveness of a
registration statement on Form S-8 (or such successor or replacement form as may
be applicable) to permit Executive to resell shares of common stock acquired
upon exercise of such non-qualified stock options. The terms of such
nonqualified stock options will be more specifically set forth in a Stock Option
Agreement substantially in the form attached as Exhibit A.
(b) Restricted Stock. The Company will grant to Executive, pursuant to
the Plan, as in effect as of the Effective Date, a total of 50,000 restricted
shares of the Company's common stock (the "Restricted Stock") at a cost to
Executive of Five Hundred Dollars ($500).
(c) Vesting. The Restricted Stock shall vest in installments as
follows: 16,666.7 shares of Restricted Stock shall vest at such time as the
closing market price of the Company's common stock equals or exceeds $10 per
share for 20 consecutive trading days in any three-month period; an additional
16,666.7 shares of restricted common stock shall vest at such time as the
closing market price of the Company's common stock equals or exceeds twenty
dollars ($20) per share for 20 consecutive trading days in any three-month
period; and the final 16,666.7 shares of the Company's common stock shall vest
at such time as the closing market price of the Company's common stock equals or
exceeds thirty dollars ($30) per share for 20 consecutive trading days in any
three-month period. Executive's right to receive any shares of Restricted Stock
that have not so vested prior to November 10, 2008 shall terminate and any such
Restricted Stock shall be retained by the Company. Notwithstanding the
foregoing, Executive shall not be entitled to sell any such vested shares of
Restricted Stock until the expiration of two years from the Effective Date (the
"Holding Period"). The terms of such Restricted Stock will be more specifically
set forth in a Restricted Stock Agreement substantially in the form attached as
Exhibit B.
(d) Restrictions on Restricted Stock. Until Restricted Stock has
vested and the Holding Period has expired, it may not be sold, transferred,
assigned or pledged. Shares of Restricted Stock shall be evidenced by stock
certificates bearing appropriate legends referring to the applicable terms,
conditions and restrictions. Stock certificates representing the Restricted
Stock will be registered in the name of Executive as of the date of this
Agreement, but such certificates will be held by the Company until the shares
vest and the Holding Period has expired, and Executive shall deliver to the
Company a stock power, endorsed in blank, relating to the shares of Restricted
Stock. At such time as Restricted Stock vests, and the expiration of the Holding
Period with regard to such vested shares of Restricted Stock, a certificate
representing such shares (less any shares retained by the Company to satisfy
Executive's tax withholding obligations) will be delivered to Executive as soon
as practicable.
(e) Dividends and Voting. From and after the date of issuance of the
Restricted Stock, Executive will have, with respect to the Restricted Stock, all
the rights of a holder of common stock, including the right to receive any
dividends or distributions paid on the common stock and the right to vote the
shares of Restricted Stock.
(f) Income Tax. Executive shall be required to make arrangements
satisfactory to the Company to satisfy any applicable federal, state or local
tax liability arising with respect to the Restricted Stock. Such arrangements
may be satisfied by either making a cash payment to the Company of the required
amount or by having the Company retain Restricted Stock having a value equal to
the amount of Executive's federal, state and local tax obligation from the
shares of Restricted Stock otherwise deliverable to Executive upon the vesting
of such Restricted Stock and expiration of the Holding Period. If Executive
fails to satisfy the obligations in a time and manner satisfactory to the
Company, the Company may withhold all required amounts from Executive's
compensation or other amounts payable under this Agreement to satisfy such
federal, state and local tax obligations. Executive shall be solely responsible
for determining whether to make, and for making, any election under Section
83(b) of the Internal Revenue Code of 1986 (as amended) with respect to the
Restricted Stock.
(g) Effect and Other Benefits. Income recognized by Executive as the
result of the grant or vesting of Restricted Stock, the expiration of the
Holding Period or the receipt of dividends, unrestricted stock will not be
included in any formula for calculating benefits under this Agreement or any
benefit plan of the Company.
6. Employment Benefits and Vacation.
(a) During the Employment Term, Executive shall also be entitled to
participate in all pension, retirement, savings, welfare and other pension and
welfare employee benefit plans and arrangements and fringe benefits and
perquisites generally maintained by the Company from time to time for the
benefit of senior executives of the Company, in accordance with their respective
terms as in effect from time to time (other than any special arrangement entered
into by contract with an executive).
(b) During the Employment Term, Executive shall be entitled to
vacation each year in accordance with the Company's policies in effect from time
to time, but in no event less than four (4) weeks paid vacation per calendar
year. Executive shall also be entitled to such sick leave as is customarily
provided by the Company for its senior executive employees.
7. Moving Expenses. The Company will reimburse Executive on an after-tax
basis for all reasonable expenses incurred by the Executive (i) for the
relocation of his family to San Diego, California for the purpose of commencing
Executive's employment pursuant to this Agreement, including one customary real
estate commission, (ii) for reasonable interim housing expenses in the San Diego
area for up to 180 days and (iii) for up to four trips to the San Diego area for
Executive and Executive's spouse for the purpose of locating a residence.
8. Business Expenses; Vehicle Allowance.
(a) Executive shall be reimbursed for the travel, entertainment and
other business expenses incurred in the performance of his duties hereunder, in
accordance with policies generally applicable to senior executives of the
Company as in effect from time to time.
(b) During the Employment Term, the Company shall provide a vehicle
allowance to Executive in the amount of $750.00 per month.
9. Termination.
(a) The employment of Executive under this Agreement shall terminate
on the expiration of the Employment Term and earlier upon the occurrence of any
of the following events:
(i) the death of Executive;
(ii) the termination by the Company of Executive's employment due
to Executive's Disability pursuant to Section 9(b) hereof;
(iii) the termination by Executive of Executive's employment for
Good Reason pursuant to Section 9(c) hereof;
(iv) the termination by the Company of Executive's employment
without Cause;
(v) the termination by Executive of Executive's employment
without Good Reason upon sixty (60) days prior written notice; or
(vi) the termination by the Company of Executive's employment for
Cause pursuant to Section 9(e) hereof.
(b) Disability. If, by reason of the same or related physical or
mental reasons, Executive is unable to carry out his material duties pursuant to
this Agreement for more than three (3) months in any twelve (12) consecutive
month period, the Company may terminate Executive's employment for Disability
upon thirty (30) days prior written notice.
(c) Termination for Good Reason. A Termination for Good Reason means a
termination by Executive by written notice given within ninety (90) days after
the occurrence of the Good Reason event. For purposes of this Agreement, "Good
Reason" shall mean the occurrence or failure to cause the occurrence, as the
case may be, without Executive's express written consent, of any of the
following circumstances, unless such circumstances are corrected prior to the
date of termination specified in the Notice of Termination for Good Reason (as
defined in Section 9(d) hereof): (i) the material breach by the Company of any
of its obligations to Executive under this Agreement; (ii) any material
diminution of Executive's positions, duties or responsibilities hereunder, as of
the Effective Date (except in each case in connection with the termination of
Executive's employment for Cause or Disability or as a result of Executive's
death, or temporarily as a result of Executive's illness or other absence and
provided that a reduction in the size or number of the units reporting to
Executive as a result of dispositions, shall not be a material diminution), or
the assignment to Executive of duties or responsibilities that are inconsistent
with Executive's position as the Executive Vice President-General Merchandise
Manager of the Company; (iii) removal of, or the nonreelection of, the Executive
from his position as the E.V.P.- General Merchandise Manager of the Company;
(iv) a relocation of the principal executive offices of the Company to a
location more than seventy-five (75) miles from its current location in San
Diego, California, or a relocation of Executive away from such principal
executive office; (v) failure by the CEO and Executive to agree on Performance
Objectives, after good faith negotiations, within 60 days after submission to
the CEO by Executive; or (vi) any change in the Company's Certificate of
Incorporation or Bylaws not approved by Executive that materially and adversely
diminish Executive's rights to indemnification in his capacity as an officer or
director of the Company.
(d) Notice of Termination of Good Reason. A Notice of Termination for
Good Reason shall mean a notice that shall indicate the specific termination
provision in Section 9(c) relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for Termination for Good
Reason. The Notice of Termination for Good Reason shall provide for a date of
termination not less than ten (10) nor more than sixty (60) days after the date
such Notice of Termination for Good Reason is given.
(e) Cause. Subject to the notification provisions of Section 9(f)
below, Executive's employment hereunder may be terminated by the Company for
Cause. For purposes of this Agreement, the term "Cause" shall be limited to (i)
willful misconduct by Executive with regard to the Company; (ii) the refusal of
Executive to follow the proper written direction of the Board; provided,
however, that the foregoing refusal shall not be "Cause" if Executive in good
faith believes that such direction is illegal, unethical or immoral and promptly
so notifies in writing the entity or person giving the direction; (iii)
Executive being convicted of a felony; (iv) the willful breach by Executive of
any fiduciary duty owed by Executive to any Constituent Corporation which has a
material adverse effect on the Company; or (v) Executive's material fraud with
regard to any Constituent Corporation.
(f) Notice of Termination for Cause. A Notice of Termination for Cause
shall mean a notice that shall indicate the specific termination provision in
Section 9(e) relied upon and shall set forth in reasonable detail the facts and
circumstances which provide a basis for Termination for Cause. The date of
termination for a Termination for Cause shall be the date indicated in the
Notice of Termination. Any purported Termination for Cause which is held by a
court not to have been based on the grounds set forth in this Agreement shall be
deemed a Termination without Cause.
10. Consequences of Termination of Employment.
(a) Death. If Executive's employment is terminated during the
Employment Term by reason of Executive's death, the employment period under this
Agreement shall terminate without further obligations to the Executive's legal
representatives under this Agreement except for (i) any compensation earned but
not yet paid, including and without limitation, any declared but unpaid bonus,
any amount of Base Salary or deferred compensation accrued or earned but unpaid,
any accrued vacation pay payable pursuant to the Company's policies and any
unreimbursed business expenses payable pursuant to Section 8, which amounts
shall be promptly paid in a lump sum to Executive's estate; (ii) the product of
(x) the target annual bonus for the fiscal year of Executive's death, multiplied
by (y) a fraction, the numerator of which is the number of days of the current
fiscal year during which Executive was employed by the Company, and the
denominator of which is 365, which bonus shall be paid if and when bonuses for
such period are paid to the other executive officers of the Company; (iii)
subject to Section 11 hereof, any other amounts or benefits owing to Executive
under the then applicable employee benefit plans or policies of the Company,
which shall be paid in accordance with such plans or policies; and (iv) payment
of the spouse's and dependent's COBRA coverage premiums to the extent, and as
long as, they remain eligible for COBRA coverage, but in no event more than
three (3) years.
(b) Disability. If Executive's employment is terminated by reason of
Executive's Disability, Executive shall be entitled to receive the payments and
benefits to which his representatives would be entitled in the event of a
termination of employment by reason of his death; provided that the payment of
Base Salary shall be reduced by the projected amount he would receive under any
long-term disability policy maintained by the Company or program maintained by
the Company during the twelve (12) month period during which Base Salary is
being paid.
(c) Termination by Executive for Good Reason or for Change in Control.
If (i) Executive terminates his employment hereunder for Good Reason during the
Employment Term; or (ii) a Change in Control occurs and within 180 days
thereafter Executive terminates his employment for any reason, Executive shall
be entitled to receive the payments and benefits to which his representatives
would be entitled in the event of a termination of employment by reason of his
death plus payment on a monthly basis of twelve (12) months of Base Salary in
effect as of the start of the fiscal year in which such termination occurs, in
accordance with usual Company payroll practices. In addition, in the event
Executive terminates his employment as a result of a Change of Control,
Executive's non-qualified stock options shall immediately vest and become
exercisable and Executive's Restricted Stock shall immediately vest.
(d) Termination With Cause or Voluntary Resignation Without Good
Reason. If Executive's employment hereunder is terminated (i) by the Company for
Cause; or (ii) by Executive without Good Reason except within 180 days following
a Change in Control, the Executive shall be entitled to receive only his Base
Salary through the date of termination, any earned but unpaid bonus for such
year, any unreimbursed business expenses payable pursuant to Section 8 and any
other benefits subject to Section 10(a)(iii) hereof to which he is entitled by
law. All other benefits (including, without limitation, rights to retain
Restricted Stock and rights to exercise options) due Executive shall terminate
upon such termination of employment.
(e) Non Renewal by the Company or Termination by the Company Without
Cause. If this Agreement is not renewed by the Company at the end of the
Employment Term or Executive's employment is terminated by the Company without
Cause, Executive shall be entitled to receive the payment and benefits to which
his representatives would be entitled in the event of a termination of
employment by reason of his death plus payment on a monthly basis of twelve (12)
months of Base Salary in effect as of the start of such fiscal year, in equal
shares all in accordance with usual Company payroll practices, subject to the
execution, delivery and non-revocation by the Executive of a general release of
claims in favor of the Company and its officers, directors, shareholders and
affiliates in a form reasonably acceptable to the Company and the Executive.
(f) Parachute Payments. Notwithstanding the foregoing, the benefits
provided to the Executive under Section 10(c) on account of a Change in Control
shall be reduced if and to the extent that a nationally recognized firm of
compensation consultants or auditors designated by the Company determines that
such reduction will result in a greater net after-tax benefit to the Executive
than the Executive would obtain in the absence of such reduction, taking into
account any excise tax payable by the Executive under Internal Revenue Code
Section 4999. The allocation of the reduction required hereby among the benefits
shall be determined by the Executive.
11. No Mitigation: No Set-Off. In the event of any termination of
employment under Section 9, Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due Executive under
this Agreement on account of any remuneration attributable to any subsequent
employment that Executive may obtain. Any amounts due under Section 10 are in
the nature of severance payments, or liquidated damages, or both, and are not in
the nature of a penalty. Such amounts are inclusive and in lieu of any amounts
payable under any other salary continuation or cash severance arrangement of the
Company or any affiliate thereof and to the extent paid or provided under any
other such arrangement shall be offset from the amount due hereunder.
12. Change in Control. Subject to the provisions of Section 12(b) hereof,
for purposes of this Agreement, the term "Change in Control" shall mean (a) any
"person" (as defined in the Act) not an affiliate of the Company on the
Effective Date becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power of the Company's then
outstanding securities; (b) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in this
paragraph) whose election by the Board of the Company or nomination for election
by the Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the beginning of
the two-year period or whose election or nomination for election was previously
so approved, cease for any reason to constitute at least a majority of the
Board; (c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; or (d) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets
other than the sale of all or substantially all of the assets of the Company to
a person or persons who beneficially own, directly or indirectly, at least fifty
percent (50%) or more of the combined voting power of the outstanding voting
securities of the Company at the time of the sale.
13. Confidential Information, Non-Competition and Non-Solicitation of the
Company.
(a) (i) Executive acknowledges that, as a result of his employment
hereunder, Executive will obtain secret and confidential information of the
Company and the Company will suffer substantial damage, which would be difficult
to ascertain and in an amount which would be difficult to compute, if Executive
should use any of such confidential information and that because of the nature
of the information that will be known to Executive, it is necessary for the
Company to be protected by the prohibition against Competition as set forth
herein, as well as the Confidentiality restrictions set forth herein.
(ii) Executive acknowledges that the retention of non-clerical
employees of the Company, in which the Company has invested training and on
which the Company depends for the operation of its business, is important to the
businesses of the Company; Executive will obtain unique information as to such
employees as an executive of the Company and will develop a unique relationship
with such persons as a result of being an executive of the Company; and,
therefore, it is necessary for the Company to be protected from Executive's
Solicitation of such employees as set forth below.
(iii) Executive acknowledges that the provisions of this
Agreement are reasonable and necessary for the protection of the business of the
Company and that part of the compensation paid under this Agreement and the
agreement to pay severance in certain instances is in consideration for the
agreements in this Section 13.
(b) As used herein, "Competition" shall mean: participating, directly
or indirectly, as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, consultant or in any
capacity whatsoever (within the United States of America, or in any other
country where any Constituent Corporation does business) in a business that owns
or operates off price apparel and housewares stores (or any other business in
which any Constituent Corporation is then engaged); provided, however, that such
participation shall not include (i) the ownership of not more than one percent
(1%) of the total outstanding stock of a publicly-held company; or (ii) any
activity engaged in with the prior written approval of the Board.
(c) As used herein, "Solicitation" shall mean recruiting, soliciting
or inducing any non-clerical employee of any Constituent Corporation to
terminate his or her employment with, or otherwise cease his or her relationship
with, such Constituent Corporation or hiring, or assisting another person or
entity to hire, any non-clerical employee of any Constituent Corporation or any
person who, within six (6) months before, had been a non-clerical employee of
any Constituent Corporation, unless the employment of such person by a
Constituent Corporation was terminated involuntarily and without cause.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or an arbitrator,
to be unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographical area, it shall be
interpreted to extend over the maximum period of time, range of activities or
geographic area as to which it may be enforceable. If any provision of this
Section 13 shall be declared to be invalid or enforceable, in whole or in part,
as a result of the foregoing, as a result of public policy or for any other
reason, such invalidity shall not affect the remaining provisions of this
Section, which shall remain in full force and effect.
(e) During and after the Employment Term, Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company and its business,
including any confidential information as to suppliers (i) obtained by Executive
during his employment by the Company and (ii) not otherwise in the public
domain. Executive shall not, without prior written consent of the Company,
unless compelled pursuant to the order of a court or other government or legal
body having jurisdiction over such matter, communicate or divulge any such
information, knowledge or data to anyone other than the Company, and those
designated by it. In the event Executive is compelled by order of a court or
other governmental or legal body to communicate or divulge any such information,
knowledge or data to anyone other than the foregoing, he shall promptly notify
the Company of any such order and he shall cooperate fully with the Company in
protecting such information to the full extent, possible under applicable law,
(f) Upon termination of his employment with the Company, or at any
time the Company may request, Executive will promptly deliver to the Company, as
requested, all documents (whether prepared by the Company, Executive or a third
party) relating to the Company or any of its business or property which he may
possess or have under his direction or control, other than his personal
employment and personnel records.
(g) During the Employment Term and for one (1) year thereafter,
Executive will not enter into Competition with the Company; provided, however,
that Executive's obligation under this sentence shall be suspended during any
time when the Company is in breach of any payment obligation under Section 10(c)
or 10(e) of this Agreement. Furthermore, in the event of any termination of
Executive's employment for any reason whatsoever, whether by the Company or by
the Executive and whether or not for Cause, Good Reason or expiration of the
Employment Tem, the Executive will not engage in Solicitation for one (1) year
thereafter.
(h) Executive acknowledges that in the event of a breach of this
Section 13, the Company will be caused irreparable injury and money damages may
not be an adequate remedy. Consequently, Executive agrees that the Company shall
be entitled to seek injunctive relief (in addition to its other remedies at law)
to have the provisions of this Section 13 enforced.
14. Indemnification.
(a) The Company agrees that if Executive is made a party to or
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director or officer of any Constituent Corporation or
is or was serving at the request of any Constituent Corporation as a director,
officer, member, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including, without
limitation, service with respect to employee benefit plans, whether or not the
basis of such Proceeding is alleged action in an official capacity as a
director, officer, member, employee, fiduciary or agent while serving as a
director, officer, member, employee, fiduciary or agent, he shall be indemnified
and held harmless by the applicable company to the fullest extent authorized by
applicable law against all Expenses incurred or suffered by Executive in
connection therewith, and such indemnification shall continue as to Executive
even if Executive has ceased to be an officer, director, member, fiduciary or
agent, or is no longer employed by such company, and shall inure to the benefit
of his heirs, executors and administrators.
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and costs, attorneys' fees, accountants' fees and
disbursements and costs of attachment or similar bonds, investigations and any
expenses of establishing a right to indemnification under this Agreement.
(c) To the extent permitted by applicable law, Expenses incurred by
Executive in connection with any Proceeding shall be paid in advance upon
request of Executive and the giving by the Executive of any undertakings
required by applicable law.
(d) Executive shall give the Company notice of any claim made against
him for which indemnity will or could be sought under this Agreement. In
addition, Executive shall give the Company such information and cooperation as
it may reasonably require and as shall be within Executive's power and at such
times and places as are reasonably convenient for Executive.
(e) With respect to any Proceeding involving Executive:
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Executive, in which case Executive also shall
have the right to participate and employ his own counsel in such action, suit or
proceeding, but only at his own cost and expense, provided that the Company
shall only be permitted to assume defense of a Proceeding if (l) the Proceeding
could not result in imposition of criminal penalties against Executive and (2)
the Company acknowledges that it is liable to indemnify Executive with respect
to all Expenses with respect to such Proceedings, except as provided earlier in
this sentence with regard to Executive's own counsel.
(f) The Company shall not be liable to indemnify Executive under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. The Company shall not settle any action or claim in
any manner which would impose any penalty on Executive (except a penalty in
respect of which Executive is fully indemnified hereunder) without Executive's
written consent. Neither the Company nor Executive will unreasonably withhold or
delay consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses incurred
in defending a Proceeding in advance of its final disposition conferred in this
Section 14 shall not be exclusive of any other right which Executive may have or
hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the Company, agreements, vote of stockholders or
disinterested directors or otherwise.
(h) The Company shall obtain officer and director liability insurance
policies covering Executive in the same aggregate amount and under the same
terms as are currently maintained by the Company for senior officers and
directors and use commercially reasonable efforts to maintain such policies or
replacement policies with substantially the same limits in effect during the
term of Executive's employment by the Company.
15. Miscellaneous.
(a) Entire Arrangement/Amendments. This Agreement and the instruments
contemplated herein, contain the entire understanding of the parties with
respect to the employment of Executive by the Company, and supersede all prior
understandings and agreements (written or oral) with respect thereto, subject to
the last sentence of this Section 15(a). There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with respect
to the subject matter hereof other than those expressly set forth herein and
therein. This Agreement may not be altered, modified or amended except by
written instrument signed by the parties hereto. Anything to the contrary
contained herein notwithstanding, all prior understandings and agreements
between the Company and Executive relating to stock options shall continue in
full force and effect, such options being in addition to (and not in lieu of)
the options to be granted hereunder.
(b) No Waiver. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
of such party's rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement. Any such
waiver must be in writing and signed by Executive or an authorized officer of
the Company, as the case may be.
(c) Assignment. This Agreement shall not be assignable by Executive.
This Agreement shall be assignable by the Company, but only to another
Constituent Corporation and only if such Constituent Corporation promptly
assumes all of the obligations hereunder of the Company in a writing delivered
to the Executive and otherwise complies with the provisions hereof with regard
to such assumption. Upon such assignment and assumption, all obligations of the
Company herein shall be the obligations of the assignee entity or acquiror, as
the case may be, but the Company shall remain secondarily liable for the
obligations hereunder.
(d) Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon the personal or legal representatives, executors,
administrators, successor, heirs, distributees, devisees legatees and permitted
assignees of the parties hereto.
(e) Communications. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given (i) when faxed or delivered in person;
or (ii) two business days after mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the signature page of this Agreement, provided that all
notices to the Company shall be directed to the CEO of the Company or to such
other address as any party may have furnished to the other in writing in
accordance herewith. Notice of change of address shall be effective only upon
receipt.
(f) Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement to Executive such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law or
regulation.
(g) Survival. The respective rights and obligations of theparties
hereunder shall survive any termination of Executive's employment to the extent
necessary to the agreed preservation of such rights and obligations.
(h) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(i) Headings. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provisions of this Agreement.
(j) Notwithstanding anything to the contrary in this Agreement, the
Company shall not be required to take any action or make any payment to the
extent such action or payment would be inconsistent with or violate the
provisions of the Xxxxxxxx-Xxxxx Act of 2002.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written,
FACTORY 2-U STORES, INC.
By:/s/ Xxxxxxx X. Xxxxxx
----------------------------
Xxxxxxx X. Xxxxxx, Chief Executive Officer
Address: 0000 Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
/s/ X.X. Xxxx
----------------------------
X. X. Xxxx
Address: 0000 Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
