EXHIBIT 10.21
SOURCE INTERLINK COMPANIES, INC.
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This EMPLOYMENT AND NON-COMPETITION AGREEMENT ("Agreement") is made as
of May 21, 2003 by and between SOURCE INTERLINK COMPANIES, INC., a Missouri
corporation (the "Corporation") and S. XXXXXX XXXXXX, a natural person presently
residing in the State of Florida ("Executive").
WITNESSETH:
WHEREAS, The Corporation and Executive have entered into an Employment
Agreement dated as of February 1, 2001 that provided the terms and conditions
under which Executive would be employed by the Company in the position of
Chairman and Chief Executive Officer for term ending on January 31, 2004 (the
"Prior Agreement").
WHEREAS, The Corporation desires to provide for the continued
employment of Executive and to provide and obtain assurances with respect to
such employment, and Executive desires that such employment be continued and
desires to obtain and provide such assurances, in each case on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises herein contained, the adequacy of which is hereby
acknowledged, the Corporation and Executive hereby agree as follows.
I. EMPLOYMENT
1.1 The Corporation hereby employs the Executive as Chairman and Chief Executive
Officer (the "Position"), upon the terms and conditions provided in this
Agreement. Executive hereby accepts such employment and agrees (a) to devote all
of his working time, attention and energy using his best efforts to the duties
of the Position, as well as to any other duties and responsibilities reasonably
related to the Position assigned to him from time to time by the Board of
Director's of the Corporation, (b) faithfully serve and further the interests of
the Corporation in every lawful and ethical way giving honest, diligent and
loyal and cooperative service to the Corporation, and (c) to comply with the
Articles of Incorporation, Bylaws and all rules and policies which, from time to
time may be adopted by the Corporation, including without limitation, those
rules and policies regarding disclosure of information concerning the
Corporation, its business, affairs, plans or customers.
1.2 Executive warrants and represents to the Corporation that he is not now
under any obligation to any person or entity nor does he have any other
interests which are inconsistent with or in conflict with this Agreement, or
which would prevent, limit or impair in any way the performance by him of any of
the covenants herein or any duties or responsibilities of the Position and he
agrees to and shall indemnify and hold the Corporation harmless from and against
any claim, loss, damage, liability, cost or expense including, without
limitation, reasonable attorneys' fees which may be asserted against the
Corporation or any of its executives arising out of or in connection with any
alleged breach or violation of this representation and warranty.
II. TERM OF EMPLOYMENT
2.1 The term of Executive's employment under this Agreement shall extend from
February 1, 2003 through January 31, 2006 (the "Expiration Date"), at which time
the obligation of the Corporation to pay further compensation or provide fringe
benefits to Executive shall cease; provided however that all other obligations
of the parties hereunder (including the obligation of the Corporation to pay to
Executive Base Compensation and Annual Bonus earned by Executive through the
date of such expiration) of either party to the other party at the time of such
expiration shall not be affected by such expiration. Such term of employment may
be terminated prior to expiration of such term at any time upon the earlier
occurrence of any of the following events:
(a) By mutual written consent of the Corporation and Executive, upon such
terms and conditions as the parties may agree in writing;
(b) Immediately upon Executive's death, in which case, the obligations of
the Corporation to pay further compensation or provide fringe benefits
to Executive shall cease as of the date of Executive's death; provided
however that all other obligations of the parties hereunder (including
the obligation of the Corporation to pay to Executive Base Compensation
and Annual Bonus earned by Executive through the date of Executive's
death) of either party to the other party at the time of Executive's
death shall not be affected by such termination;
(c) By the Corporation, upon the permanent total Disability (as hereinafter
defined) of Executive, in which case the Corporation shall continue to
pay (i) in accordance with the Corporation's then current payroll
policies one-half of Executive's Base Compensation in effect as of the
date of Executive's Disability for a period equal to the shorter of (A)
twenty-four (24) months following the date of such Disability, or (B)
the period from the date of such Disability through the Expiration
Date, (ii) any Annual Bonus Executive would have earned through the
date of such Disability if all criteria for the payment of the Annual
Bonus were achieved at maximum levels and (iii) those fringe benefits
to which Executive is entitled under Article IV of this Agreement;
(d) By the Corporation, immediately upon written notice to Executive, for
Cause (as hereinafter defined), in which case, the obligations of the
Corporation to pay further compensation or provide fringe benefits to
Executive shall cease as of the date of such notice; provided however
that all other obligations of the parties hereunder (including the
obligation of the Corporation to pay to Executive Base Compensation and
Annual Bonus earned by Executive through the date of such notice) of
either party to the other party at the time of such termination shall
not be affected by such termination;
(e) By Executive, immediately upon at least thirty days' written notice to
Corporation, as a result of the occurrence of any Employment Condition
(as hereinafter defined). In such event, (i) the Corporation shall pay
to Executive a sum equal to the greater of (A) the aggregate of
Executive's Base Compensation in effect as of the date of such
termination payable by the Corporation hereunder for the period from
the date of such termination through the Expiration Date plus any
Annual Bonus Executive would have earned during the period from the
date of such termination through the Expiration Date if all criteria
for the payment of the Annual Bonus were achieved at maximum levels for
each of the fiscal periods with such period and (B) Three Hundred
percent (300%) of Executive's Base Compensation in effect as of the
date of such termination, (ii) all options to purchase shares of the
common stock of the Corporation held by Executive pursuant to a stock
option or other incentive compensation plan of the Corporation ("Stock
Options") shall be fully vested and exercisable, (iii) all restrictions
on restricted stock of the Corporation
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held by Executive pursuant to a restricted stock or other incentive
compensation plan of the Corporation (the "Restricted Stock") that may
result in the forfeiture of such stock shall terminate, and (iv) all
agreements with the Corporation by Executive to refrain from selling
any securities of the Corporation shall terminate. In the event that
payment is made to Executive under clause (i)(A) above, the portion of
the payment calculated on the basis of the Executive's Base
Compensation shall be paid in twelve equal monthly installments on the
first day of each calendar month commencing on the first day of the
month immediately succeeding the date of termination and the portion of
the payment calculated on the basis of the Annual Bonus shall be paid
in a single lump sum not later than 30 days after the date an audit
report is issued by the Corporation's independent public accountants
with respect to the Corporation's financial statements for the fiscal
year for which the Annual Bonus is to be paid. In the event payment is
made to Executive under clause (i)(B) above, the payment shall be paid
in twelve equal monthly installments on the first day of each calendar
month commencing on the first day of the month immediately succeeding
the date of termination.
2.2 For purposes of this Agreement, the following terms have the meanings
ascribed thereto below:
(a) The term "Cause" as used in this Agreement shall mean (i) Executive's
conviction of a felony which results in the incarceration of Executive
for a period of more than thirty (30) days or conviction of a crime
involving moral turpitude which causes injury (monetary or otherwise)
to the Corporation's public image or reputation or involving fraud or
deceit, (ii) the Executive's disclosure to third parties of trade
secrets or other confidential and proprietary information related to
the business of the Corporation and its subsidiaries in violation of
this Agreement, or (iii) the Executive's failure to perform the
Executive's duties to the Corporation (other than any such failure
resulting from the Executive's incapacity due to Disability or any
actual or anticipated failure resulting from a resignation by the
Executive as a result of the occurrence of any Employment Condition)
after a written demand for Executive's performance of his duties is
delivered to the Executive by the Board of Directors of the
Corporation, which demand specifically identifies the manner in which
the Board of Directors believes that the Executive has not performed
his duties, and which performance is not substantially cured by the
Executive within ten (10) days of receipt of such demand.
(b) The term "Disability" shall mean Executive's inability through physical
or mental illness, to perform a majority of Executive's usual duties
for an uninterrupted period of one hundred eighty (180) days or more,
and shall be deemed to have occurred on the first anniversary of the
commencement of such 180-day period. The Corporation's option in this
regard shall be exercised in writing and mailed or delivered to
Executive or Executive's personal representative during the period of
such continuing Disability. In the event of a dispute as to whether the
Executive is Disabled, the decision of an independent health care
professional selected and paid by the Corporation shall be conclusive
and binding on the parties, and Executive agrees to submit to such
examinations as the health care professional shall deem appropriate and
to make the results of such examinations available to the Corporation.
(c) The term "Employment Condition" as used in this Agreement shall mean
any of the following (i) the withdrawal by Corporation from Executive
of any substantive part of Executive's responsibilities, duties or
authority as previously discharged or exercised for the benefit of the
Corporation without Executive's consent; (ii) the assignment by
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Corporation to Executive of substantive additional duties or
responsibilities which are inconsistent with the duties or
responsibilities previously discharged or exercised for the benefit of
the Corporation, without Executive's consent; (iii) the relocation of
Executive's principal place of employment without Executive's consent
to a place outside the Ft. Xxxxx-Naples, Florida area; (iv) the failure
of Executive to continue in the office of Chairman and Chief Executive
Officer of the Corporation without Executive's consent; (v) the
harassment of Executive intended, designed or which would have the
foreseeable effect of causing Executive to resign or abandon
Executive's employment with Corporation; or (vi) the material breach by
Corporation of this Agreement or any other agreement to which
Corporation and Executive are a party.
III. COMPENSATION
3.1 As compensation for Executive's services under the Agreement and subject to
adjustment as provided below, the Corporation shall pay to Executive, commencing
on the date hereof and continuing through January 31, 2004 by the Corporation,
an annual base rate of compensation (the "Base Compensation") of Five Hundred
Thirty-five Thousand Dollars ($535,000), which Base Compensation shall be
payable at such intervals as the Corporation pays its other executive employees,
but in any event, not less frequently than semi-monthly. Each fiscal year
(commencing after the conclusion of the fiscal year ending January 31, 2004),
the Compensation Committee of the Corporation will set the Executive's Base
Compensation for that fiscal year, taking into account the performance of the
Executive and such other factors they may deem relevant.
3.2 In addition to Executive's Base Compensation, Executive shall be entitled to
receive a bonus (the "Annual Bonus") each year in and amount of up to 100% of
Executive's Base Compensation for such year. The Annual Bonus shall be the sum
of two components and be calculated as follows:
(a) Fifty percent (50%) of the Annual Bonus (the "Business Plan Bonus")
will be based upon the Corporation's consolidated net income for the
fiscal year ("Actual Income") with respect to which the Annual Bonus is
to be paid as it relates to the Corporation's targeted consolidated net
income set forth in the Corporation's business plan as approved by the
Board of Directors of the Corporation for such fiscal year ("Plan
Income"). If the Corporation achieves Actual Income equal to not less
than the following percentages of Plan Income, Executive's Business
Plan Bonus with respect to such fiscal year shall be a percentage of
the maximum Business Plan Bonus (being 50% of Base Compensation) to be
agreed to by the Executive and the Compensation Committee of the Board
of Directors of the Corporation as soon as possible after the date of
this Agreement:
Actual Income Percentage of Maximum
To Plan Income Business Plan Income
-------------- ---------------------
100% or more 100%
90% 75%
80% 50%
75% 25%
less than 75% 0%
(b) The remaining 50% of the Annual Bonus shall be determined each year on
such basis as the Compensation Committee of the Board of Directors of
the Corporation shall determine to be reasonable and appropriate based
on such criteria as such Committee
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shall have established in consultation with Executive prior to or early
in the fiscal year with respect to which the Annual Bonus is to be
paid.
IV. EXPENSES, FRINGE BENEFITS, STOCK OPTIONS AND INDEMNIFICATION.
4.1 The Corporation will pay directly, or reimburse Executive, for such items of
reasonable and necessary expense as are incurred by Executive in the interest of
the business of the Corporation. All such expenses paid by Executive will be
reimbursed by the Corporation upon the presentation by Executive of an itemized
account of such expenditures, sufficient to support their deductibility to the
Corporation for federal income tax purposes (without regard to whether or not
the Corporation's deduction for such expenses is limited for federal income tax
purposes), within thirty (30) days after the date such expenses are incurred.
4.2 The Corporation will provide Executive with health and life insurance and
other fringe benefits on terms and conditions normally accorded the
Corporation's executive employees (which may entail employee contributions);
provided however, that the foregoing shall not obligate the Corporation to
continue any such benefits in force, or to maintain such benefits at their
present standards and levels, at any time as to any class of employees.
Executive shall also be entitled to participate in all other insurance and
retirement plans, retirement benefits, death benefits, salary continuation
benefits, stock based plans and other perquisites and fringe benefits generally
available for the executive employees of the Corporation.
4.3 The Corporation will provide paid vacation leave each year in accordance
with the Corporation's vacation policy for executive officers.
4.4 (a) The Corporation agrees to hold harmless and to indemnify and defend
Executive against any and all Expenses and Indemnifiable Amounts
actually and reasonably incurred by Executive in connection with any
threatened, pending or completed Proceeding (including any action by or
in the right of the Corporation) to which Executive is, was or at any
time becomes a party or is threatened to be made a party (other than a
party plaintiff suing on his or her own behalf or derivatively on
behalf of the Corporation) by reason of the Corporate Status of
Executive.
(b) The Corporation shall advance all reasonable Expenses incurred by or
on behalf of Executive in connection with any Proceeding within ten
(10) days after the receipt by the Corporation of a statement or
statements from Executive requesting such advance or advances from time
to time, whether prior to or after final disposition of such
Proceeding. Each such statement or statements shall describe in
reasonable detail the Expenses incurred by Executive. Executive hereby
undertakes: (i) to repay to the Corporation, within thirty (30) days of
any determination described in this clause (i), any Expenses previously
advanced under this Section if it is ultimately determined that
Executive is not entitled to be indemnified against such Expenses under
applicable law or this Agreement; and (ii) immediately to pay over to
the Corporation any amounts advanced by the Corporation for which
Executive subsequently receives funds under any insurance coverage in
effect from time to time.
(c) As used in this Section 4.4:
"Corporate Status" means that a person is or was: (i) a director, officer,
executive or agent of the Corporation; (ii) a director, officer, executive,
partner, trustee, or agent of any other corporation, partnership, joint venture,
trust, executive benefit plan or other enterprise which such person is or
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was serving at the request of the Corporation; or (iii) a guarantor of any debt
of the Corporation at the request of the Corporation;
"Expenses" means all reasonable attorneys' fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees, and all other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, or being or preparing to be a witness in a Proceeding;
"Indemnifiable Amounts" means fines and other amounts for which Executive is
liable pursuant to judgments or settlement agreements or otherwise as a result
of any Proceeding; and
"Proceeding" means any action, suit, arbitration, alternate dispute resolution
mechanism, investigation, administrative hearing or any other proceeding,
whether civil, criminal, administrative or investigative, except one that is or
was: (i) initiated by Executive to enforce his rights under this Agreement or
(ii) pending on or before the date of this Agreement.
V. CONFIDENTIAL INFORMATION
5.1 Executive will not, except as authorized by the Corporation, during or at
any time after the termination or expiration of Executive's employment with the
Corporation, directly or indirectly, use for himself or others, or disclose,
communicate, divulge, furnish to, or convey to any other person, firm, or
corporation, any secret, proprietary or confidential information, knowledge or
data of the Corporation, any of its subsidiaries or that of third parties
obtained by Executive during the period of his employment with the Corporation
and such information, knowledge or data includes, without limitation, the
following:
(a) Secret, proprietary or confidential matters of a technical nature such
as, but not limited to, methods, know-how, formulae, compositions,
processes, discoveries, manufacturing techniques, inventions, computer
programs, and similar items or research projects involving such items;
(b) Secret, proprietary or confidential matters of a business nature such
as, but not limited to, information about costs, purchasing, profits,
market, sales or lists of customers; or
(c) Secret, proprietary or confidential matters pertaining to future
developments such as, but not limited to, research and development or
future marketing or merchandising.
5.2 Executive, upon termination of his employment with the Corporation, or at
any other time upon the Corporation's written request, shall deliver promptly to
the Corporation all drawings, blueprints, manuals, letters, notes, notebooks,
reports, sketches, formulae, computer programs and similar items, memoranda,
lists of customers, and all other materials and copies thereof relating in any
way to the Corporation's business which contain confidential or proprietary
information and which were in any way obtained by Executive during the term of
his employment with the Corporation which are in his possession or under his
control; and Executive will not make or retain any copies of any of the
foregoing and will so represent to the Corporation upon termination of his
employment.
5.3 The Corporation may notify any person, firm, or corporation employing
Executive or evidencing an intention to employ Executive as to the existence and
provisions of this Agreement.
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5.4 Executive understands and acknowledges that such confidential or proprietary
information or other commercial ideas mentioned herein are unique and that the
disclosure or use of such matters or any other secret, proprietary or
confidential information other than in furtherance of the business of the
Corporation would reasonably be expected to result in irreparable harm to the
Corporation. In addition to whatever other remedies the non-breaching party
and/or its successors or assigns may have at law or in equity, each party
specifically covenants and agrees that, in the event of default under or breach
of this Agreement, the non-breaching party and/or its successors and assigns
shall be entitled to apply to any court of competent jurisdiction to enjoin any
breach, threatened or actual, by the breaching party, and/or to xxx to obtain
damages for default under or any breach of this Agreement. In the event of
default under or breach of this Agreement, each of the Corporation and Executive
hereby agrees to pay all costs of enforcement and collection of any and all
remedies and damages under this Agreement incurred by the non-breaching party,
including reasonable attorneys' fees as determined by a court of competent
jurisdiction.
VI. LIMITATION ON COMPETITION
In consideration of the Company's payment to Executive of an aggregate sum of
$250,000 in twelve equal monthly installments beginning on the first day of the
calendar month following the date on which Executive's employment shall have
expired or terminated, Executive shall not, during the period of employment and
for a period of one (1) year after expiration or termination of this Agreement:
6.1 within the United States of America, directly or indirectly as an
owner, employee, consultant or otherwise, individually or collectively, or
acquire an interest in a person or entity (a "Competitor") engaged in the
business of (i) designing, manufacturing, marketing or distributing front-end
fixtures, shelving or other display racks for use by retail stores or (ii) the
third party billing and collecting of rebates for magazines or other products
sold at the checkout of mass market retailers or (iii) providing an internet
data base or communications network for use by retailers and publishers or
manufacturers of confections or mass merchandise or (iv) magazine distribution
or (v) any other activity in which the Corporation is engaged prior to the
termination of this Agreement; provided however that nothing contained herein
shall prohibit Executive from acquiring an interest in any person or entity that
is not a Competitor. Executive agrees that the area, in light of the character
of the industry, and the duration of this limitation are reasonable under the
circumstances, considering Executive's position with the Corporation and other
relevant factors, and that in all likelihood this will not constitute a serious
handicap to Executive in securing future employment;
6.2 directly or indirectly, either for himself or for any other person
or entity, take any action or perform any services which are designed to or in
fact call upon, compete for, solicit, divert, or take away, or attempt to divert
or take away, any of the customers of Corporation or of any subsidiary of the
Corporation; this prohibition includes customers existing at the present time or
prospective or past customers solicited, sold to or served by Corporation or any
subsidiary of the Corporation during the five (5) years prior to termination or
expiration of this Agreement; or
6.3 directly or indirectly, either for himself or for any other person
or entity, induce, employ or attempt to employ any person who is at that time,
or has been within six (6) months immediately prior thereto, employed by the
Corporation or any subsidiary of the Corporation.
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6.4 It is further agreed that, if Executive shall violate the foregoing
prohibitions, the Corporation shall be entitled to seek specific performance of
these covenants, and Executive shall pay all costs and attorneys' fees, as
determined by a court of competent jurisdiction, incurred by the Corporation in
enforcing the aforesaid covenants if the Corporation is successful in so doing
after a final adjudication of the matter. If any of the foregoing covenants is
not enforceable to the full extent provided, it shall be and remain enforceable
to the extent permitted by law, and a court is authorized by the parties to
modify such covenant to make it reasonable and, as so modified, enforce it.
6.5 Notwithstanding the provisions hereof regarding termination of this
Agreement, the provisions of this Section shall remain in full force and effect
provided for hereunder.
VII. GENERAL PROVISIONS
7.1 The waiver by either party of a breach or violation of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any subsequent breach hereof.
7.2 Should any one or more sections of this Agreement be found to be
invalid, illegal, or unenforceable in any respect, the validity, legality and
enforceability of the remaining sections contained herein shall not in any way
be affected or impaired thereby. In addition, if any section hereof is found to
be partially enforceable, then it shall be enforced to that extent.
7.3 Any and all notices required or permitted to be given under this
Agreement shall be sufficient if furnished in writing and personally delivered
or sent by registered or certified mail to the last known residence address of
Executive or to Corporation, c/o Source Interlink Companies, Inc. 00000
Xxxxxxxxx Xxxxxx Xxxx., Xxxxx 000, Xxxxxx Xxxxxxx, Xxxxxxx 00000 or such other
place as it may subsequently designate in writing.
7.4 This Agreement shall be interpreted, construed and governed
according to the laws of the State of Florida.
7.5 The section headings contained in this Agreement are for
convenience only and shall in no manner be construed to limit or define the
terms of this Agreement.
7.6 This Agreement shall be executed in two or more counterparts, each
of which shall be deemed an original and together they shall constitute one and
the same Agreement, with at least one counterpart being delivered to each party
hereto.
7.7 The Corporation shall have the right to assign this Agreement to a
third party which purchases substantially all of the stock, or substantially all
of the assets of the Corporation, a subsidiary or affiliated entity of the
Corporation, or the surviving entity in a merger or similar corporate event. The
Agreement may not be assigned by Executive.
7.8 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, personal representatives,
successors and assigns.
7.9 This is the entire and only Agreement between the parties
respecting the subject matter hereof, and supercedes all prior agreements,
including the Prior Agreement. This Agreement may be modified only by a written
instrument executed by all parties hereto.
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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers, and Executive has executed this
Agreement as of the date first written above.
SOURCE INTERLINK COMPANIES, INC.
By: /s/Xxxx Xxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxx
Title: Chairman, Compensation
Committee of the Board of Directors of the
Source Interlink Companies, Inc.
EXECUTIVE
/s/ S. Xxxxxx Xxxxxx
--------------------------------------------
S. Xxxxxx Xxxxxx
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