Exhibit 10.14
EMPLOYMENT AGREEMENT
PARTIES
This Employment Agreement (this "Agreement") dated and effective
as of August 3, 1998 (the "Effective Date"), is entered into by and between
MSS-Delaware, Inc., a Delaware corporation (the "Company"), and Xxxx X. Xxxxx,
("Executive").
TERMS OF AGREEMENT
In consideration of the mutual covenants in this Agreement, the
parties agree as follows:
1. Definitions. For purposes of this Agreement, the terms listed
below shall be defined as indicated.
Acquisition Agreement: See definition of Management
Certificate.
Affiliate: A domestic or foreign business entity controlled
by, controlling, under common control with or in joint venture with, the
Company, including The Bear Steams Companies, Inc. and its Affiliates.
Annual Bonus: See Section 3.2.
Annual Bonus Pool: the "Annual Bonus Pool" for a period
shall be 10% of EBITDA in excess of the EBITDA Target for such period.
Base Salary: See Section 3.1.
Board: The Board of Directors of the Company.
Cause: See Section 5. 1.
Company Sale: A transaction, whether in a single
transaction or in a series of related transactions pursuant to which a person or
group of persons independent of the Sponsor (a) acquires, whether by merger,
stock purchase, recapitalization, reorganization, redemption, issuance of
capital stock or otherwise, more than 50% of the outstanding Common Stock (on a
fully diluted basis as of the date of the Company Sale) or (b) acquires assets
(whether by purchase, lease or otherwise) constituting all or substantially all
of the assets of the Company or its Subsidiaries.
Common Stock: The $.01 par value common stock of the
Company.
Confidential Information: All secret proprietary
information of the Company and its Subsidiaries, not otherwise publicly
disclosed (except if disclosed by the Executive in violation of this Agreement),
whether or not discovered or developed by Executive, known by Executive as a
consequence of Executive's employment with the Company at any time (including
prior to the commencement of this Agreement) as an employee or agent. Without
limiting the generality of the foregoing, such proprietary information shall
include (a) customer lists; (b) acquisition, expansion, marketing, financial and
other business information and plans; (c) research and development; (d) computer
programs; (e) sources of supply; (f) identity of specialized consultants and
contractors and confidential information developed by them for the Company and
its Subsidiaries; (g) purchasing, operating and other cost data; (h) special
customer needs, cost and pricing data; (i) manufacturing methods; (j) quality
control information, (k) inventory techniques; (l) employee information; any of
which information is not generally known in the industries in which the Company
and its Subsidiaries are conducting business or shall at any time during
Executive's Employment conduct business including (without limitation) the
apparel retailing industry. Confidential Information also include the overall
business, financial, expansion and acquisition plans of the Company and its
Subsidiaries, and includes information contained in manuals, memoranda,
projections, minutes, plans, drawings, designs, formula books, specifications,
computer programs and records, whether or not legended or otherwise identified
by the Company and its Subsidiaries as Confidential Information, as well as
information which is the subject of meetings and discussions and not so
recorded.
Cumulative EBITDA: As of the last day of the given period,
the total of EBITDA from the Effective Date to such last day.
Cumulative EBITDA Achievement Ratio: As of the last day of
a given period, the ratio of Cumulative EBITDA to the Cumulative EBITDA Target
as of such date, provided that (A) if such ratio is less than 0.95, the
Cumulative EBITDA Achievement Ratio for the period shall be 0 and (B) the
Cumulative EBITDA Achievement Ratio shall not exceed 1.0.
Cumulative EBITDA Target: As of the last day of a given
period, the total of EBITDA Targets from the Effective Date to such last day.
Cumulative Vested Options: As of the last day of a given
Vesting Period, the total Options which have vested as of such date pursuant to
Section 3.5.
Deemed Bonus: As of a given date during a Fiscal Year,
Deemed Bonus shall mean the product of
(a) the ratio of
(i) the sum of the Annual Bonuses paid or payable
to the Executive with respect to all prior Fiscal Years since the
Effective Date (but including the Gap Period), to
(ii) the sum of all the Base Salary amounts paid
or payable to the Executive with respect to all prior Fiscal Years
since the Effective Date (but including the Gap Period), and
(b) the sum of the Base Salary payments paid or payable
to the Executive for the then current Fiscal Year through such date.
Notwithstanding the foregoing, the Deemed Bonus for any termination of the
Employment, Period which occurs during the Gap Period shall be a pro-rated
(based upon the number of days
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of the Cap Period during which Executive was employed) portion of the Annual
Bonus that would otherwise have been payable for the Crap Period and shall be
calculated following the Gap Period.
Disability. The absence of the Executive from the
Executive's duties to the Company on a full-time basis for a total of 120 days
during any 12 month period as a result of incapacity due to mental or physical
illness which is determined to be permanent by a physician selected by the
Company and acceptable to the Executive or the Executive's legal representative
(such agreement as to acceptability not to be withhold unreasonably).
EBITDA: EBITDA for a given period shall mean the Company's
consolidated earnings before interest, taxes, depreciation and amortization and
other non-cash charges, before management fees payable for such period to
Sponsor (or its designees) pursuant to the management agreement between the
Company and Sponsor and before any and all payments for the Prior Period Bonus
for each member of the Executive Group (as provided in Section 3.3 hereof and in
Section 3.3 of the other Employment Agreements executed contemporaneously
herewith) or from any and all Annual Bonus Pools and for each payment to
employees of the Company based upon the accrual therefor on the Working Capital
Balance Sheet.
EBITDA Achievement Ratio: The EBITDA Achievement Ratio for
a given period shall be equal to the ratio of EBITDA for such period to the
EBITDA Target for such period, provided that (A) if such ratio for any period is
less than 0.95, the EBITDA Achievement Ratio for such period shall be 0 and (B)
for purposes of Section 3.5, the EBITDA Achievement Ratio for any such period
shall not exceed 1.0.
EBITDA Target: See Exhibit A.
Employment Period: Unless earlier terminated as provided in
Section 5 hereof, the Employment Period shall be the period commencing on the
Effective Date and terminating on the last day of the 2001 Fiscal Year, provided
that the Employment Period shall automatically be extended for successive one
yew periods unless either party hereto gives notice of non-extension to the
other no later than six months prior to the end of the otherwise applicable
Employment Period.
Executive Group: Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxxx and
Xxxx X. Xxxxx.
Fair Market Value: The "Fair Market Value" of a share of
Common Stock as of a given date shall be (a) if such stock has first become
publicly traded on such date, the mean between the final bid and asked prices on
the principal exchange (or NASDAQ if applicable) on which such shares are traded
on such date as reported in the Wall Street Journal, (b) if such stock was
publicly traded prior to such date, the average over the last 20 trading days
(or such smaller number of days as follow the day prior to the day on which such
stock was first publicly traded) prior to the date of determination of the mean
between the final bid and asked prices on the principal exchange (or NASDAQ if
applicable) on which such shares are traded, as reported in The Wall Street
Journal or (c) if such stock is not publicly traded, on the basis of an
enterprise value of the Company equal to 5 times trailing twelve month EBITDA.
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Fiscal Year: The 52 or 53 week period ending on the
Saturday closest to January 31 of each calendar year. Fiscal Years shall be
referred to herein on the basis of the calendar year which contains 11 months of
such Fiscal Year. (For example, "1998 Fiscal Year" means the twelve month period
ending January 30, 1999).
Gap Period. The period beginning on the Effective Date and
ending on January 30, 1999.
Internal Rate of Return. The internal rate of return
(taking into account of all dividends, distributions, fees and all other amounts
received by the Sponsor and its Affiliates with respect to its investment in the
equity of the Company) on the entirety of the Sponsor's investment in the equity
of the Company calculated by valuing the Common Stock at its Fair Market Value
and the Series B Preferred Stock at its stated liquidation value, plus
accumulated and accrued but unpaid dividends.
Inventions: Those discoveries, developments, concepts and
ideas, whether or not patentable, relating to the present, future and
prospective activities and Products and Services of the Company and its
Subsidiaries, which such activities and Products and Services are known to
Executive by virtue of Executive's employment with the Company and its
Subsidiaries.
IPO: shall mean the first public offering by the Company of
its Common Stock which brings the total amount raised by the Company and sold by
stockholders of the Company in such public offerings to at least $20 million.
Key Man Insurance: See Section 3.8.
Options. See Section 3.5.
Management Certificate: shall mean those certificates
delivered to Federated Specialty Stores ("FSS") pursuant to the Acquisition
Agreement dated July 22, 1998 among FSS, Federated Department Stores and
Specialty Acquisition Corp. (the "Acquisition Agreement').
Products and Services: All products or services sold,
rented, leased, rendered or otherwise made available to its customers by the
Company and its Subsidiaries, or otherwise the subject of the business of the
Company and its Subsidiaries.
Restricted Period: The period beginning on the Effective
Date and ending on the later of the termination of Executive's employment or the
date all payments to Executive under Section 6 have ceased.
Special Bonus: See Section 3.4.
Sponsor: MSS Acquisition Corp. II, a wholly owned
subsidiary of The Bear Xxxxxxx Companies Inc.
Stock Option Plan: The 1998 Stock Option Plan of MSS -
Delaware, Inc.
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Stockholders Agreement: shall mean that certain
"Stockholders Agreement" dated as of the date hereof to which the Company, MSS
Acquisition Corp. II, FSS and the Executive Group are parties.
Subsidiary: Any entity of which the Company owns, directly
or indirectly, 50% or more of the aggregate voting power of the voting
securities.
Voted Options: Options which become vested pursuant to
Sections 3.5(c) or (d).
Vesting Period: The twelve consecutive month periods
beginning, respectively, on the first day of the first fiscal Year following the
date of grant of Options and the first second and third anniversaries of such
first date.
Working Capital Balance Sheet: shall mean that "Closing
Date Balance Sheet" as such term as defined in the Acquisition Agreement.
2. Employment.
(a) Subject to the terms and conditions of this
Agreement, the Company hereby agrees to employ and the Executive hereby
accepts employment in the position of Executive Vice President and Chief
Operating Officer (with responsibility for Information Systems, Real
Estate (including new store construction), Aeropostale store operations,
warehousing, distribution and transportation and creative services) of
the Company and agrees during the Employment Period to perform to the
best of Executive's ability, experience and talent those acts and duties
and to finish those services to the Company and its Subsidiaries in
connection with and related to such positions as the Board shall from
time to time direct, provided such acts and directives are consistent
with the duties of Executive Vice President and Chief Operating Officer.
Executive shall, during the Employment Period, to perform to the best of
Executive's ability, experience and talent those acts and duties and to
furnish those services to the Company and its Subsidiaries in connection
with and related to such positions as the Board shall from time to time
direct, provided such acts and directives are consistent with the duties
of Executive Vice President and Chief Operating Officer. Executive shall,
during the Employment Period, use Executive's best efforts to promote the
interests of the Company and its Subsidiaries.
(b) During the Employment Period, subject to Section
5.2(c) hereof, Executive's principal place of employment shall be located
at one of the Company's principal places of business or principal
executive officer, wherever located as designated from time to time by
the Board. and Executive shall be provided with secretarial services, an
office and similar support services and facilitates as appropriate to
Executive's position and responsibilities and of at least substantially
the same quality as provided to Executive on the Effective Date.
(c) During the Employment Period, Executive shall devote
his full business time and best efforts to the business affairs of the
Company; however, the Executive may devote reasonable time and attention
to:
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(i) serving as a director of, or member of a
committee of the directors of, any not-for-profit organization or
engaging in other charitable or community activities; and
(ii) serving as a director of, or member of a
committee of the directors of, the corporations or organizations
for which the Executive presently serves in such capacity, and
such other corporations and organizations that the Board may from
time to time approve in the fixture;
(iii) from and after any date that the Company
gives Executive a notice of non-extension described in the
definition of "Employment Period," seeking alternative employment
so long as such time and attention do not unreasonably detract
from his duties hereunder,
provided that, except as specified above, the Executive may not accept
employment with any other individual or other entity, or engage in any
other venture which is indirectly or directly in conflict or competition
with the then existing business of the Company.
3. Compensation and Benefits; Disability.
3.1 Base Salary. During the Employment Period, the Company
shall pay Executive a Base Salary at the initial annual rate of $260,000.
Provided the Cumulative EBITDA Achievement Ratio through the end of the Gap
Period is at least 1.0, Executive's Base Salary shall be increased for the 1999
Fiscal Year to $265,000. Provided the Cumulative EBITDA Achievement Ratio
through the end of the 1999 Fiscal Year is at least 1.0, Executive's Base Salary
shall be increased for the 2000 Fiscal Year to $270,000. Provided the Cumulative
EBITDA Achievement Ratio through the end of the 2000 Fiscal Year is at least
1.0, Executive's Base Salary shall be increased for the 2001 Fiscal Year to
$280,000. Any such increase in Base Salary shall only be reflected in regular
salary payments after the applicable FBITDA has been calculated, based on the
audited financial statements for the applicable fiscal period. The amount of any
increased Base Salary which has not been paid pending completion of ouch audited
financial statements shall be paid in a single lump sum payment at the time of
such salary payment adjustment. Except as described in the prior sentence, the
Base Salary shall be payable in equal installments pursuant to the Company's
customary payroll policies in force at the time of payment (but in no event less
frequently than monthly), less required payroll deductions. The Base Salary
shall be subject to cost of living or other increases in the sole discretion of
the Board.
3.2 Annual Bonus. In addition to Executive's Base Salary during
the Employment Period the Company shall pay Executive, as soon as reasonably
practicable but in no event later than 30 days following the Company's receipt
of its audited financial statements for the applicable Fiscal Year, an Annual
Bonus in cash for each Fiscal Year which is
(a) For the 1998 Fiscal Year, the sum of
(i) the percentage of his Base Salary actually
paid for the Gap Period as indicated on Exhibit A with respect to
the EBITDA Achievement Ratio for such period; and
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(ii) the product of
(A) the Annual Bonus Pool for the Gap
Period, and
(B) the ratio of Executive's Base Salary
actually paid for the Gap Period to the total Base Salary
actually paid for the Gap Period to the Executive Group
(provided, however, that for purposes of this calculation
each member of the Executive Group shall be deemed to have
received no less than the Base Salary set forth for him in
the Employment Agreement executed by him contemporaneously
herewith).
(b) For the 1999 Fiscal Year and each Fiscal Year
thereafter the sum of
(i) the percentage of his Base Salary actually
paid for such Fiscal Year indicated on Exhibit A with respect to
the EBITDA Achievement Ratio for such period; and
(ii) the product of
(A) the Annual Bonus Pool, and
(B) the ratio of Executive's Base Salary
actually paid for such Fiscal Year to the total Base Salary
actually paid for such Fiscal Year to the Executive Group
(provided, however, that for purposes of this calculation
each member of the Executive Group shall be deemed to have
received no less than the Base Salary set forth in the
Employment Agreement executed by him contemporaneously
herewith).
An example of the operation of this Section 3.2 is set forth in Exhibit B.
3.3 Prior Period Bonus. Within five days following the
Effective Date, the Company shall pay to Executive in cash a bonus of $34,300.
3.4 Special Bonus. Whether or not Executive is employed by the
Company or its Subsidiaries, the Company shall pay to Executive, in cash upon
the first consummation of an IPO or Company Sale, a Special Bonus equal to Xxxxx
$58,857.
3.5 Stock Options. As of the Effective Date, Executive shall be
granted options (the "Options") to purchase 1,760 shares of Common Stock
pursuant to the Stock Option Plan. The Options shall be granted pursuant a
separate stock option agreement containing the following terms and other
customary terms:
(a) The Options shall be exercisable at the price of
$11.50 per share of Common Stock.
(b) (i) So long as Executive remains employed hereunder,
Vested Options shall be exercisable upon the earlier of
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(A) the fourth anniversary of the Effective
Date, or
(B) an IPO or Company Sale with respect to
which, in either case, the Internal Rate of Return on the
entirety of the Sponsor's investment in the equity of the
Company as of the Closing Date is at least equal to 35% per
annum.
and shall remain exercisable until the day following the eighth anniversary of
the Effective Date.
(ii) Options shall not be exercisable on or
following Executive's termination of employment pursuant to Section 5.1
and shall be exercisable following any other termination of employment
only as follows:
(A) if Executive's employment is terminated
on or prior to the fourth anniversary of the date of grant
of Options, Executive (or his estate) may exercise Vested
Options for the 60 day period following the fourth
anniversary of the date of grant of such Options.
(B) If Executive's employment is terminated
later than the fourth anniversary of the date of grant of
Options, Executive (or his estate) may exercise Vested
Options within 60 days of the date of termination.
(c) So long as Executive is employed hereunder, the
number of Options which shall vest as of the end of each Vesting Period
shall be the greater of
(i) the product of 586 2/3 and the EBITDA
Achievement Ratio for such year, and
(ii) the excess of
(A) the product of
(1) 586 2/3,
(2) the Cumulative EBITDA Achievement
Ratio as of the end of such Vesting Period and
(3) the number of Vesting Periods (up
to three) elapsed since the date of grant; over
(B) the Cumulative Vested Options as of the
end of the prior Vesting Period.
Notwithstanding the preceding sentence, at the end of the Gap Period a
number of Options equal to the product of 195 5/9 and the EBITDA
Achievement Ratio for the Gap Period shall also vest and the number of
Options that would have vested as of the end of
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the 1999 Fiscal Year pursuant to the preceding sentence shall bc reduced
by the number of Options that vest at the end of the Gap Period pursuant
to this sentence.
(d) Notwithstanding the foregoing, so long as Executive
remains employed hereunder, all Options shall become vested upon the
earlier of (i) the eighth anniversary of the date such Options were
granted, or (ii) an IPO or Company Sale with respect to which, in either
case, the Internal Rate of Return an the entirety of the Sponsor's
investment is at least equal to 35% per annum.
(e) Upon termination of Executive's employment all
unvested Options shall lapse. Upon the day following the last day upon
which any Vested Option may be exercised, such Option shall lapse. An
example of The operation of this Section 3.5 is set forth in Exhibit C.
3.6 Other Benefits. Executive shall be entitled, during the
Employment Period, to participate, on the same basis and to the same extent as
other executive employees of the Company, in any pension, life insurance, health
insurance, short-term disability or hospital plans or other fringe benefits or
benefit plans presently in effect and hereafter maintained or created by the
Company. In addition, Executive shall receive an automobile allowance in the
amount of $8,500 per year, which, at Executive's election, may be applied
towards the Company's expense on the lease of the car currently being driven by
Executive, for the duration of such lease, so long as Executive reimburses the
Company for any cost related thereto in excess of $10,000, payable monthly.
During the Employment Period, Company agrees not to reduce the benefits provided
to Executive except for a reduction that is part of a Company-wide reduction in
benefits. Service with the Company, any Subsidiary, or Federated Department
Stores, Inc. ("Federated") or any affiliate of Federated shall be recognized for
vesting purposes under any benefit plan of the Company (except for the Stock
Option Plan).
3.7 Vacation. Executive may take such vacation period or
periods during each year as shall be consonant with Executive's responsibilities
and (in the Company's judgment) with the Company's vacation schedule and
policies for senior officers, which vacation shall be at least four weeks per
calendar year.
3.8 Key Man Insurance; Put Option.
(a) During the Employment Period, the Company shall
maintain "Key Man" term life insurance with respect to the Executive with
a face amount equal to the lesser of (a) $3 million and (b) the amount of
such insurance which may be purchased for an annual premium of $6,200.
The Company shall be the beneficiary of such insurance and agrees not to
pledge or otherwise encumber the policies of the proceeds therefrom.
(b) By notice to the Company given within 90 days of
Executive's death, Executive's estate shall have the right to sell to the
Company, and the Company shall be obligated to so purchase, at Fair
Market Value (as of the date of Executive's death), all or such portion
of the Common Stock owned by Executive on the date of his death as may be
purchased with the proceeds of Executive's Key Man Insurance. The
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Company shall take any and all actions necessary promptly to collect the
proceeds of such insurance and comply with its purchase obligation
hereunder.
(c) At the time Executive is no longer employed by the
Company or any of its Subsidiaries, the Company shall use its
commercially reasonable best efforts to transfer such life insurance
policy to Executive at the sole cost of the Executive and to name
Executive as the beneficiary thereof.
3.9 Expenses. Pursuant to the Company's customary policies in
force at the time of payment, Executive shall be promptly reimbursed, against
presentation of vouchers or receipts therefor, for all authorized expenses
properly incurred by Executive on the Company's behalf in the performance of
Executive's duties hereunder. In addition, Company shall reimburse Executive for
all reasonable legal fees incurred by Executive and charged by Xxxxxxxx & Xxxxx
in connection with the negotiation and preparation of this Agreement.
3.10 Exclusive Compensation. In respect of services rendered to
the Company, Executive shall receive only the compensation set forth in this
Section 3 and Sections 5 and 6.
4. Termination of Employment Period. The Employment Period shall
continue as described in Section 1 unless earlier terminated by reason of (a)
Executive's discharge for Cause pursuant to Section 5.1, (b) Executive's
discharge without Cause pursuant to Section 5.4, (c) Executive's death or
Disability pursuant to Section 5.3 or (d) termination of this Agreement by
Executive pursuant to Section 5.2. In all events, the post employment provisions
of Section 7 shall survive termination of the Employment Period for the periods
provided therein.
5. Termination.
5.1 By Company for Cause. The Company may discharge Executive
and terminate the Employment Period for Cause. As used in this Section 5.1,
"Cause" shall mean any one or more than one of the following:
(a) Gross negligence or gross or willful misconduct of
Executive in the performance of his duties hereunder during (i) the
Employment Period, or (ii) to the extent determined to be relevant to the
ongoing operations of the Company by the Chief Executive Officer of the
Company, any such conduct which occurred at any time during Executive's
employment by any predecessor of the Company prior to the Effective Date
if not disclosed prior to that date;
(b) Executive's conviction of a fraud, felony or crime
of moral turpitude during the Employment Period;
(c) Willful failure to follow instructions of the Board,
or Chief Executive Officer, as applicable which instructions are
material, legal and not inconsistent with the duties assigned to
Executive hereunder and which failure is not cured within 3 days after
written notice of such is delivered to Executive by the Board, or Chief
Executive Officer. as applicable with respect to failures which are
curable; or
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(d) any breach of any of the material terms of this
Agreement by Executive which is not cured within 3 days after written
notice of breach is delivered to Executive by the Board, or Chief
Executive Officer, as applicable with respect to breaches which are
curable.
Upon discharge of Executive for Cause, the Company shall be relieved and
discharged of all obligations to make payments to Executive which would
otherwise be due under this Agreement except as to salary, benefits and bonuses
earned for actual services rendered prior to the date of termination, any
payment under Section 3.4 and otherwise reimbursable expenses under Section 3.9.
5.2 By Executive for Good Reason. Executive may terminate the
Employment Period upon the occurrence of any of the following:
(a) any breach of any of the material terms of this
Agreement by the Company;
(b) without the consent of Executive, a material
reduction in the authorities, powers, functions and/or duties
attached to Executive's position;
(c) without the consent of Executive, the Company
relocates the principal location of Executive's employment to a
location more than 25 miles from its current location, unless such
relocation is proposed by the Chief Executive Officer.
5.3 On Executive's Death or Disability. The Employment Period
shall terminate, and the Company shall be relieved and discharged of all
obligations to make further payment to Executive after the date of the death or
Disability of Executive, except as to salary earned for actual services rendered
prior to the date of the death or Disability of Executive, reimbursement of
expenses, payments under Section 3.4, and a pro-rata portion of Executive's
Annual Bonus for the full applicable Fiscal Year calculated following such year
and pro-rated for the number of days Executive was actually employed in such
Fiscal Year.
5.4 By Company Without Cause. The Company may, on 30 days'
written notice to Executive, terminate the Employment Period without Cause at
any time during the Employment Period.
5.5 By Executive Without Good Reason. The Executive may
terminate the Employment Period
(a) in connection with a Company Sale, or
(b) at any other time,
upon ten days prior written notice to the Company. In such event described in
Section 5.5(b), the Company shall be relieved and discharged of all obligations
to make further payment to Executive after the date as of which the Employment
Period terminates, except as to salary earned for actual services rendered prior
such date, reimbursement of expenses and payments under Section 3.4.
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6. Severance. Upon termination of employment pursuant to Sections
5.2, 5.4 or 5.5(a) (but not upon termination of the Employment Period pursuant
to Sections 5.1, 5.3, 5.5(b) or upon expiration of the Employment Period
pursuant to notice of non-extension (as described in the definition of
"Employment Period") or otherwise), and so long as the Executive executes a
release in the Company's customary form and the Executive has not breached any
of his representations set forth in Section 8, the Company shall, in accordance
with its regular payroll practices
(a) continue payment to Executive of his Base Salary until the
latest of (i) six months following the termination of Executive's
employment hereunder, (ii) other than for terminations pursuant to
Section 5.5(a), six months prior to the end of the otherwise applicable
Employment Period (i.e., January 26, 2002 in the case of the initial term
hereof and each anniversary thereafter, as applicable) , or (iii) if the
termination is in connection with a Company Sale, such time as the
Company elects which is not later than 19 months following such
termination of Executive's employment, and
(b) for the period of such Fiscal Year prior to the termination
of his employment, pay Executive a Deemed Bonus.
7. Inventions, Confidential Information and Related Matters.
7.1 Assignment of Inventions. All Inventions which are at any time
made by Executive, acting alone or in conjunction with others,
(a) during the Employment Period, or
(b) if based on or related to any Confidential Information,
made by Executive within one year after the termination of the Employment
Period,
shall be the property of the Company. Executive agrees that Executive shall, at
the cost and expense of the Company, execute formal application for U.S. and
other patents, and also do all other acts and things (including, among others,
the execution and delivery of instruments of further assurance or confirmation)
deemed by the Company to be necessary or desirable at any time to perfect the M
assignment to the Company of Executive's right and title (if any) to such
Inventions.
7.2 Restrictions on Use and Disclosure. Except as required by
Executive's duties hereunder, Executive shall never, directly or indirectly,
use, publish, disseminate or otherwise disclose any Confidential Information or
Inventions which are the subject of Section 7.1 without the prior written
consent of the Board, except as required by law. Nothing in this Section shall
prevent disclosure of information which has been completely disclosed in a
published patent or other integrated publication of general circulation, nor
shall this Section govern the right to use Inventions for which a patent may
have been issued.
7.3 Return of Documents and Materials. Upon termination of the
Employment Period, Executive shall forthwith deliver to the Company all
procedural manuals, guides, specifications, formulas, plans, drawing, designs
and similar materials, records, notebooks and similar repositories of or
containing Confidential Information and Inventions
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which are the subject of Section 7.1, including all copies, then in Executive's
possession or control, whether prepared by Executive or others, as well as all
other Company property in Executive's possession or control.
7.4 Competitive Activities. During the Restricted Period,
Executive shall not, without the prior written approval of the Board, directly
or indirectly, within the United States, become an employee or consultant or
otherwise render services to, lend funds to, serve on the board of, invest in
(other than as a 1% or less shareholder of a publicly-traded corporation) or
guarantee the debts of, any business organization that competes with the Company
in those businesses in which the Company and its Subsidiaries are engaged on the
date the Employment Period is terminated. The Company may in its sole discretion
give Executive approval to engage in such activities or render such services
after termination of the Employment Period if Executive and such prospective
firm or business organization gives the Company written assurances, satisfactory
to the Board in its sole discretion, that the integrity of the Confidential
Information, the Inventions and the good will of the Company and its
Subsidiaries will not be jeopardized by such employment. Executive shall, during
the Restricted Period, notify the Company of any change in address and identify
each subsequent employment or business activity in which Executive shall engage
during such Restricted Period, stating the name and address of the employer or
business organization and the nature of Executive's position.
7.5 Solicitation of Employee. During the Restricted Period and
for a period of 12 months thereafter, Executive shall not, without the prior
written approval of the Board, directly or indirectly, solicit, raid, entice or
induce any person who presently is or at any time during the term hereof shall
be an employee, of the Company or any of its Subsidiaries to become employed by
any other person, firm or corporation in any business in competition with the
Company.
8. No Other Contacts. Executive represents and warrants that
neither the execution and delivery of this Agreement by Executive nor the
performance by Executive of Executive's obligations hereunder, shall constitute
a default under or a breach of the terms of any other agreement, indenture or
contract to which Executive is a party or by which Executive is bound, nor shall
the execution and delivery of this Agreement by Executive or the performance of
Executive's duties and obligations hereunder give rise to any claim or charge
against either Executive or the Company based upon any other contract, indenture
or agreement to which Executive is a party or by which Executive is bound.
9. Notices. Any notices or communication given by any party
hereto to the other party shall be in writing and personally delivered or mailed
by registered or certified mail, return receipt requested, postage prepaid at
the following addresses:
If to the Company:
00 Xxxx Xxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
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If to the Executive:
Xxxx X. Xxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Mailed notices shall be deemed given when received. Any person entitled
to receive notice may designate in writing, by notice to the others, such other
address to which notices to such party shall thereafter be sent.
10. Indemnification and Insurance, Legal Expenses.
(a) The Company shall indemnify Executive to the fullest extent
permitted by the laws of the State of Delaware, as in effect at the time
of the subject act or omission, and shall advance to the Executive
reasonable attorney's fees and expenses as such fees and expenses are
incurred (subject to an undertaking from the Executive to repay such
advances if it shall be finally determined by a judicial decision which
is not subject to further appeal that the Executive was not entitled to
the reimbursement of such fees and expenses) and he will be entitled to
the protection of any insurance policies the Company may elect to
maintain generally for the benefit of its directors and officers
(Directors and Officers Insurance) against all costs, charges and
expenses incurred or sustained by him in connection with any action, suit
or proceeding to which he may be made a party by reason of his being or
having been a director, officer or employee of the Company or any of its
Subsidiaries or his serving or having served any other enterprise as a
director, officer or employee at the request of the Company (other than
any dispute, claim or controversy arising under or relating to this
Agreement or to the extent a result of a breach by Executive of his
representations in Section 8). The Company covenants to maintain during
the Employment Period for the benefit of the Executive (in his capacity
as an officer and director of the Company) Directors and Officers
Insurance providing customary benefits to the Executive; provided,
however, that the Board may elect to terminate Directors and Officers
Insurance for all officers and directors, including the Executive, if a
majority of the Board (excluding employee directors) determines in good
faith that such insurance is not available or is available only at
unreasonable expense.
(b) Company shall indemnify Executive for any claims brought
against Executive in respect of the Management Certificate and, subject
to the following sentence, shall, at the request of the Executive,
advance reasonable legal fees for Executive's defense thereof Company's
obligation shall be conditioned upon Executive's written agreement to
repay all of such fees if he should ultimately be found liable in
connection with any such claim and further conditioned upon Executive's
pledging his interest in the equity of the Company (pursuant to documents
containing customary terms) as security for such repayment obligation,
unless Executive demonstrates to the reasonable satisfaction of the Board
his ability to repay such amounts without such security interest.
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(c) After the Employment Period, each party to this Agreement
shall bear its own costs and expenses in connection with any claim or
action with respect to acts and omissions-
11. Miscellaneous.
11.1 Entire Agreement. This Agreement, together with the
Options, the Stock Option Plan, and the Stockholders Agreement contains the
entire understanding of the parties in respect of its subject matter and
supersedes all prior oral and written agreements and understandings between the
parties with respect to such subject matter.
11.2 Amendment; Waiver. This Agreement may not be amended,
supplemented, canceled or discharged, except by written instrument executed by
the Executive and the Company. No failure to exercise, and no delay in
exercising, any right, power or privilege hereunder shall operate as a waiver
thereof. No waiver of any preceding breach of this Agreement shall operate as a
waiver of a succeeding breach of this Agreement.
11.3 Binding Effect; Assignment. The rights and obligations of
this Agreement shall bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger or consolidation, or any
assignee of all or substantially all of the Company's business and properties;
Executive's rights or obligations under this Agreement may not be assigned by
Executive.
11.4 Headings. The headings contained in this Agreement (except
those in Section 1) are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
11.5 Governing Law; Interpretation. This Agreement shall be
construed in accordance with and governed for all purposes by the laws and
public policy of the State of New York applicable to contracts executed and to
be wholly performed within such State. Service of process in any dispute shall
be effective (a) upon the Company, if served on any senior officer of the
Company (other than Executive); (b) upon Executive, if served at Executive's
residence last known to the Company. Executive acknowledges that breach of
Sections 7.1 through 7.5 would entail irreparable injury and that, in addition
to the Company's other express and implied remedies, the Company shall be
entitled to injunctive and other equitable relief to prevent any actual,
intended or likely such breach.
11.6 Dispute Resolution. All controversies, claims and disputes
arising out of or relating to this Agreement, including without limitation any
alleged violation of its terms, shall be resolved by final and binding
arbitration before a single arbitrator in New York, New York in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
("AAA"). The arbitration shall be commenced by filing a demand for arbitration
with the AAA within sixty days after the filing party has given notice of such
breach to the other party. The subject matter of the arbitration shall be
limited to the conduct of the parties hereto and their employees. no arbitrator
shall award the prevailing party attorneys' fees, as well as the costs and
expenses of the arbitration. including expert fees, if any.
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11.7 Further Assurances. Each party agrees at any time, and from
time to time, to execute, acknowledge, deliver and perform, and/or cause to be
executed, acknowledged, delivered and performed, all such further acts, deeds;
assignments, transfers, conveyances, powers of attorney and/or assurances as may
be necessary, and/or proper to carry out the provisions and/or intent of this
Agreement.
11.8 Gender; Singular/Plural. In this Agreement, the use of one
genders (e.g., "he," "she" and "it") shall mean each other gender; and the
singular shall mean the plural, and vice versa, all as the context may require.
11.9 Severability. The parties acknowledge that the terms of
this Agreement are fair and reasonable at the date signed by them. However, in
light of the possibility of a change of conditions or differing interpretations
by a court of what is fair and reasonable, the parties stipulate as follows: if
any one or more of the terms, provisions, coven ants and restrictions of this
Agreement shall be determined by a court of competent jurisdiction to be
invalid, void or unenforceable, 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; further, if any
one or more of the provisions contained in this Agreement shall for any reason
be determined by a court of competent jurisdiction to be excessively broad as to
duration, geographical scope, activity or subject, it shall be construed, by
limiting or reducing it, so as to be enforceable to the extent compatible with
then applicable law.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
EXECUTION
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date and year above first written.
EXECUTIVE
/s/ Xxxx X. Xxxxx
---------------------------
Xxxx X. Xxxxx
MSS-DELAWARE, INC.
a Delaware Corporation
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Its: Chairman and Chief Executive Officer
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EXHIBIT A
EBITDA TARGETS
(IN '000'S)
Fiscal Year Target
----------- ------
Gap Period $10,993
1999 $ 8,842
2000 $13,952
2001 $20,726
2002 $26,486
2003 and thereafter, as determined by the Board.
ANNUAL BONUS
------------
EBITDA ACHIEVEMENT RATIO PERCENTAGE OF BASE SALARY
------------------------ -------------------------
0.95 10%
0.955 11%
0.96 12%
0.965 13%
0.97 14%
0.975 15%
0.98 16%
0.985 17%
0.99 18%
0.995 19%
1.0 20%
Exhibit A - Page 1
