EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of November 1, 2002, by and between
VARSITY BRANDS, INC., a Delaware corporation (the "Company"), and XXXX X.
XXXXXXX (the "Executive").
WHEREAS, pursuant to an Employment Agreement dated as of September 1,
1999 (the "Former Agreement"), the Executive was employed as the Senior Vice
President and Chief Financial Officer of Varsity Spirit Corporation, a Tennessee
corporation ("Varsity Spirit") and, at the time, a wholly owned subsidiary of
Xxxxxxx Sports, Inc., a Delaware corporation, Varsity Spirit having merged with
and into a subsidiary of Xxxxxxx Sports, Inc. as of June 20, 1997 (the "Merger
Date");
WHEREAS, following such merger, the Executive also served as an executive
officer of Xxxxxxx Sports, Inc.;
WHEREAS, as of September 2001, the corporate name of Xxxxxxx Sports,
Inc., was changed to Varsity Brands, Inc. and the Company currently operates
under such corporate name; and
WHEREAS, the parties desire to enter into this Agreement setting forth
the terms and conditions of the employment relationship of the Executive with
the Company.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, upon the terms and subject
to the conditions set forth herein.
2. TERM. This Agreement is for a two-year period (the "Term")
commencing as of November 1, 2002 (the "Effective Date") and, unless terminated,
extended or renewed by the parties, shall expire on October 31, 2004 (the
"Expiration Date"). The Company shall notify Executive no later than April 30,
2004 whether it wishes to extend or renew this Agreement, either pursuant to the
same or different terms. In the event that the Company shall so notify Executive
(the "Extension Notification"), each of the Company and Executive shall seek to
renew or extend this Agreement prior to the Expiration Date, upon mutually
agreed to terms and conditions.
3. POSITION. During the Term, the Executive shall serve as Senior
Vice President and Chief Financial Officer of the Company.
4. DUTIES AND REPORTING RELATIONSHIP. During the Term, the Executive
shall, on a full-time basis, use his skills and render services to the best of
his abilities in supervising and conducting the financial operations of the
Company. As part of his duties the Executive shall be responsible for and have
supervisory control over the financial operations of the Company and
shall report to, and be subject to supervision by, the Company's Chief Executive
Officer. The Executive will also perform such other duties for the Company as
are consistent with his position as the Chief Executive Officer shall reasonably
assign. Nothing in this Agreement shall be deemed to prevent the Executive from
participating in, or serving on (a) the governing body of any civic, community
or charitable organization with which the Executive may currently be or
hereafter become involved, or (b) the board of directors or governing body of
another business entity; PROVIDED, HOWEVER, that such participation or service
may not interfere with Executive performing his duties hereunder.
5. PLACE OF PERFORMANCE. The Executive shall perform his duties and
conduct his business at the principal offices of the Company in Memphis,
Tennessee except for reasonably required travel on the Company's business.
6. INDUCEMENT FOR EMPLOYMENT.
(a) The Company has previously granted to the Executive options
(the "Options") pursuant to the Company's 1997 Stock Option Plan (the "Plan") to
purchase (i) up to 35,000 shares of common stock, $0.01 par value ("Common
Stock"), of the Company at an original exercise price of $5.42 per share, (ii)
up to 13,500 shares of Common Stock at an original exercise price of $5.375 per
share, (iii) up to 10,000 shares of Common Stock at an original exercise price
of $3.125 per share, and (iv) up to 10,000 shares of Common Stock at an original
exercise price of $4.81 per share, such exercise prices being subject to
adjustment as set forth in the respective Options and the Plan. Such Options
continue in effect as of the date hereof.
(b) The Options are hereby amended by the Company and Executive
to provide that such Options each expire on the earlier of the tenth anniversary
of the Grant Date or three (3) months following the date the Executive's
employment is terminated for any reason other than for Cause. The Options are
hereby amended by the Company and Executive to provide that each such Option may
be exercised (to the extent it has vested) at any time prior to such expiration;
PROVIDED, HOWEVER, that if, (i) prior to the expiration of the Term, the Company
terminates the Executive's employment in breach of this Agreement, or (ii)
subsequent to the expiration of the Term, the Company terminates the Executive's
employment in a manner that would have been a breach of this Agreement had the
Term not expired, then the Options shall become fully vested and exercisable and
shall remain exercisable for a period of six (6) months following such
termination of employment; and, provided further, that, if the Executive's
employment is terminated on account of his death or Disability (as defined
below), then upon such termination the Options shall become fully vested and
exercisable and shall remain exercisable for a period of six (6) months
following such termination of employment. The Options shall become fully vested
and exercisable upon the occurrence of a Change in Control (defined below) and
shall remain exercisable for a period of six (6) months following Executive's
termination of employment upon or after a Change of Control.
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7. SALARY AND ANNUAL BONUS.
(a) BASE SALARY. During the Term, the Executive's base salary
(the "Base Salary") hereunder shall be no less than Two Hundred Ten Thousand
Dollars ($210,000) per year, payable no less often than in monthly installments.
The Base Salary shall be subject to review and increase by an amount determined
by the Compensation Committee of the Company Board after taking into
consideration the Executive's performance, the Company's performance, increases
in the cost of living and such other factors as the Company Board or such
committee deems relevant, which review shall be conducted no less frequently
than once during any calendar year at the same time the Company conducts its
review of the compensation of the Company's other senior executive officers. In
addition, in the event and to the extent that the Company actually increases the
salary of any other executive employees of the Company to take into account an
increase in the Consumer Price Index-Urban Consumer as reprinted by the Bureau
of Labor Statistics of the U.S. Department of Labor ("CPI") or any superseding
index or report whether published by the U.S. Department of Labor or otherwise,
Executive's Base Salary shall automatically be similarly increased.
(b) ANNUAL BONUS. During the Term, the Executive will
participate in any bonus plan established by the Company at a target level of
thirty-five percent (35%) of his Base Salary. Such bonus shall be payable at
such time as bonuses are paid to other senior executive officers who participate
therein.
8. VACATION, HOLIDAYS AND SICK LEAVE. During the Term, the Executive
shall be entitled to paid vacation, paid holidays and sick leave in accordance
with the Company's standard policies for its senior executive officers, which
policies shall provide the Executive with (a) benefits no less favorable than
those provided to any other senior executive officer of the Company and (b) no
fewer than four (4) weeks of paid vacation per year, unless otherwise agreed
between the Executive and the Company.
9. BUSINESS EXPENSES. During the Term, the Executive will be
reimbursed for all ordinary and necessary business expenses incurred by him in
connection with his employment upon timely submission by the Executive of
receipts and other documentation as required by the Internal Revenue Code and in
conformance with the Company's normal procedure; the determination of such
reimbursement to also be consistent with the Company's past practices with
respect to the Executive.
10. PENSION AND WELFARE BENEFITS. During the Term, the Executive shall
be eligible to participate fully in all health benefits, insurance programs,
pension and retirement plans and other employee benefit and compensation
arrangements (collectively, the "Employee Benefits") available to officers of
the Company generally, which Employee Benefits shall provide the Executive with
benefits no less favorable than those provided to any other senior executive
officer of the Company. The Executive's service with Varsity Spirit prior to the
Merger Date shall be taken into account for the purpose of determining
eligibility for participation and vesting (but not benefit accrual) under any
such employee plan, program or policy to the same extent that service with the
Company is so taken into account for the executives of the Company.
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11. TERMINATION OF EMPLOYMENT.
(a) GENERAL. The Executive's employment hereunder may be
terminated without any breach of this Agreement only under the circumstances
provided in this paragraph 11(a).
(i) DEATH OR DISABILITY.
(A) The Executive's employment hereunder shall
automatically terminate upon the death of the Executive.
(B) If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall be "Disabled" for any six
(6) months (whether or not consecutive) during any twelve (12) month period, the
Executive's employment hereunder may thereafter be terminated by the Company for
"Disability." For purposes of this Agreement, the Executive shall be deemed to
be "Disabled" if, during the period referred to in the immediately preceding
sentence (i) his condition is such that it would have qualified him for
disability benefits under the Company's long-term disability plan, or (ii) he
had a physical or mental disability which rendered him incapable, after the
provision of reasonable accommodations, of performing substantially all of his
duties hereunder. In the event of a dispute as to whether the Executive is
Disabled, the Company may, at its expense, refer him to a licensed practicing
physician of the Company's choice and the Executive agrees to submit to such
tests and examination as such physician shall deem appropriate.
(ii) CAUSE. The Executive's employment hereunder may be
terminated for Cause. For purposes of this Agreement, "Cause" shall mean (A)
gross neglect by the Executive of the Executive's duties hereunder, (B)
conviction of the Executive of any felony, (C) gross or intentional misconduct
by the Executive in connection with the performance of any material portion of
the Executive's duties hereunder, or (D) breach by the Executive of any material
portion of this Agreement (including, but not limited to, Sections 15, 16 and 17
hereof) or of any other material agreement between the Executive and the
Company.
(iii) VOLUNTARY RESIGNATION. Should the Executive wish to
resign from his position provided for herein or terminate his employment other
than in connection with, or following, a Change in Control during the Term, the
Executive may do so by giving sixty (60) days' written notice to the Company
setting forth the reasons and specifying the date as of which his resignation is
to become effective.
(iv) CHANGE IN CONTROL. The Executive shall be entitled
to terminate his employment upon the occurrence of, or any time after, a Change
in Control. For purposes of this Agreement, a "Change in Control" shall mean the
occurrence of any of the following: (a) a majority of the members of the Company
Board are representatives or designees of any "Person" or "Group" (as such terms
are used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), excluding Xxxxxx X. Xxxxxxxxxxx, Xxxxxxx Xxxxxxxx
and Xxxx XxXxxxxxxxx, Xx. and/or entities controlled by such individuals
(collectively, the "Nederlander/Toboroff/XxXxxxxxxxx Group"), provided that any
such representatives or
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designees of the Nederlander/Toboroff/XxXxxxxxxxx Group shall be their good
faith, bona fide representatives and designees who are not otherwise nominated
in contemplation of or in connection with a transaction that would otherwise
constitute a Change in Control hereunder; it being understood that it shall not
be deemed to be a Change in Control if no Person or Group shall have designated
or nominated a majority of the members of the Company Board; (b) any "Person" or
"Group" is or becomes the "beneficial owner" (as defined in Rule 13D-3 under the
Exchange Act as in effect on the date hereof, except that a person shall be
deemed to be the "beneficial owner" of all shares that any such Person or Group
has the right to acquire pursuant to any agreement or arrangement or upon
exercise of conversion rights, warrants, options or otherwise, without regard to
the sixty (60) day period referred to in such Rule), directly or indirectly, of
securities representing more than fifty percent (50%) of the combined voting
power of the Company's then outstanding securities, (c) the Company shall
consolidate, merge or exchange securities with any other entity and the
stockholders of the Company immediately before the effective time of such
transaction do not beneficially own, immediately after the effective time of
such transaction, shares entitling such stockholders to a majority of all votes
(without consideration of the rights of any class of stock entitled to elect
directors by a separate class vote) to which all stockholders of the corporation
issuing cash or securities in the consolidation, merger or share exchange would
be entitled for the purpose of electing directors, or (d) any Person or Group
acquires more than fifty percent (50%) by value of the Company's assets.
Notwithstanding anything set forth herein to the contrary, in the event that
immediately subsequent to the occurrence of any of the events set forth in
Sections 11(a)(iv)(b) through (d), (i) the Company is an entity whose equity
securities are registered under Section 12(b) or 12(g) of the Exchange Act, or
the Company is a reporting entity under Section 15(d) of the Exchange Act as a
result of its outstanding equity securities, and (ii) no Person or Group owns
shares of the Company representing more than seventy-five percent (75%) of all
shares entitled to vote for the purpose of electing directors (without
consideration of the rights of any class of stock entitled to elect directors by
a separate class vote), then for purposes of this Agreement, no Change in
Control shall be deemed to have occurred.
(b) NOTICE OF TERMINATION. Any purported termination of the
Executive's employment by the Company or by the Executive shall be communicated
by written Notice of Termination to the other party hereto in accordance with
Section 21. "Notice of Termination" shall mean a notice that shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(c) DATE OF TERMINATION. "Date of Termination" shall mean (i)
if the Executive's employment is terminated because of death, the date of the
Executive's death, (ii) if the Executive's employment is terminated for
Disability, the date the Notice of Termination is given, (iii) if the
Executive's employment is terminated pursuant to Subsection 11(a)(ii), (iii) or
(iv) hereof or for any other reason (other than death or Disability), the date
specified in the Notice of Termination (which shall not be less than thirty (30)
days from the date such Notice of Termination is given in the case of a
termination under Section 11(a)(ii) hereof (other than Section 11 (a)(ii)(B), in
which event, notice shall not be less than five (5) days), sixty (60) days in
the case of a termination under Section 11(a)(iii) hereof, and ten (10) days in
the case of a
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termination under Section 11(a)(iv) hereof). The Agreement shall not be
terminated under Subsections 11(a)(ii)(A), (C) or (D) if the Executive cures
such breach prior to the effective date of termination set forth in the Notice
of Termination.
(d) OUTPLACEMENT SERVICES. If, (i) prior to the expiration of
the Term, the Company terminates the Executive's employment in breach of this
Agreement or the Executive terminates his employment upon or following a Change
in Control, or (ii) subsequent to the expiration of the Term, the Company
terminates the Executive's employment in a manner that would have been in breach
of this Agreement had the Term not expired or the Executive terminates his
employment upon or following a Change in Control had the Term not expired, then
the Executive shall be entitled to the services of an outplacement firm for a
period of six (6) months following such termination, which outplacement firm
shall be selected by the Executive and the reasonable fees and expenses for
which shall be paid by the Company.
12. COMPENSATION DURING DISABILITY, OR UPON DEATH OR OTHER
TERMINATION.
(a) During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
the Executive shall continue to receive (i) his full salary at the rate then in
effect until his employment is terminated pursuant to Section 11(a)(i)(B) hereof
and (ii) a pro rata portion of his bonus that would have been payable pursuant
to Section 7(b) above with respect to the calendar year in which the termination
pursuant to Section 11(a)(i)(B) occurs provided that such payments shall be
reduced by the sum of the amounts, if any, paid to the Executive with respect to
such period under disability benefit plans of the Company or under the Social
Security disability insurance program, and which amounts were not previously
applied to reduce any such payment.
(b) If the Executive's employment is terminated by his death or
Disability, the Company shall pay (i) any amounts due to the Executive under
Section 7 through the Date of Termination (including a pro rata portion of his
bonus, if any, that would have been payable pursuant to Section 7(b) above with
respect to the calendar year in which the termination occurs) and (ii) his Base
Salary that would have become due (and at the time such amounts would have
become due) to the Executive under Section 7 had the Executive's employment
hereunder continued for a period of one year after the Date of Termination.
(c) If the Executive's employment shall be terminated by the
Company for Cause, or by the Executive other than upon or following a Change in
Control, the Company shall pay the Executive his full Base Salary, under Section
7, and benefits through the Date of Termination as in effect at the time Notice
of Termination is given, and the Company shall have no further obligations to
the Executive under this Agreement, except as otherwise provided, including
Section 16.
(d) If the Company shall terminate the Executive's employment
in breach of this Agreement, then
(A) the Company shall pay the Executive (x) his
full salary, under Section 7, through the Date of Termination at the rate in
effect at the time Notice of
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Termination is given, (y) all other unpaid amounts, if any, to which the
Executive is entitled as of the Date of Termination under any compensation plan
or program of the Company, at the time such payments are due and (z) a pro rata
portion of the bonus that would have been payable to the Executive pursuant to
Section 7(b) above with respect to the calendar year in which the Date of
Termination occurs had the Executive's employment not terminated at the time
such bonus would otherwise have become payable; and
(B) the Company shall also (i) pay to Executive
on the Date of Termination a lump sum payment equal to fifty percent (50%) of
Executive's Base Salary then in effect plus fifty percent (50%) of his bonus, if
any, relating to the calendar year immediately preceding the Date of
Termination, and (ii) pay to Executive his Base Salary then effect plus his
bonus, if any, relating to the calendar year immediately preceding the Date of
Termination, in eighteen (18) equal monthly installments commencing on the Date
of Termination; and
(C) the Company shall, on terms no less favorable
to the Executive than if the Executive had continued in the employ of the
Company, (x) continue coverage for the Executive under the Company's life
insurance, medical, health, disability and similar welfare benefit plans (or, if
continued coverage is barred under such plans, the Company shall provide to the
Executive substantially similar benefits) for the period beginning on the Date
of Termination and continuing for eighteen (18) months thereafter (the
"Continuation Period"), and (y) provide the benefits which the Executive would
have been entitled to receive pursuant to any supplemental retirement plan
maintained by the Company had his employment continued at the rate of
compensation specified herein for the Continuation Period. Benefits otherwise
receivable by the Executive pursuant to clause (x) of this Subsection 12(d)(C)
shall be reduced to the extent comparable benefits are actually received by the
Executive from a subsequent employer (at such subsequent employer's expense)
during the Continuation Period, and the Executive shall report any such benefits
actually received to the Company.
(e) If (i) the Executive shall terminate his employment upon a
Change in Control, (ii) the Company shall terminate the Executive's employment
upon a Change in Control, (iii) the Company shall consummate a "Change in
Control Transaction" (as that term is defined in Section 12(e)(C) below) at any
time during or after the expiration of this Agreement, discussions with respect
to which commenced during the Term of this Agreement, and the Company had given
the Extension Notification, or (iv) the Company shall consummate a Change in
Control Transaction at any time during the Term of this Agreement or within six
(6) months after the expiration of this Agreement, discussions with respect to
which commenced during the Term of this Agreement, and the Company did not give
the Extension Notification; then
(A) the Company shall pay the Executive (x) his
full Base Salary, under Section 7, through the Date of Termination at the rate
in effect at the time Notice of Termination is given, (y) all other unpaid
amounts, if any, to which the Executive is entitled as of the Date of
Termination under any compensation plan or program of the Company, at the time
such payments are due and (z) a pro rata portion of the bonus that would have
been payable to the Executive pursuant to Section 7(b) above with respect to the
calendar year in which the Date of Termination occurs had the Executive's
employment not terminated at the time such bonus would otherwise have become
payable; and
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(B) the Company shall also pay to Executive (i)
in a lump sum due on the Date of Termination, an amount equal to the sum of the
Executive's annual Base Salary then in effect plus Executive's bonus, if any,
relating to the calendar year immediately preceding the Date of Termination;
(ii) an amount equal to forty percent (40%) of Executive's Base Salary as of the
Date of Termination plus forty percent (40%) of Executive's bonus, if any,
relating to the calendar year immediately preceding the Date of Termination in
twelve (12) equal monthly installments commencing as of the Date of Termination
and ending on the one (1) year anniversary thereof, and (iii) an amount equal to
ten percent (10%) of the Executive's Base Salary as of the Date of Termination
plus ten percent (10%) of Executive's bonus, if any, relating to the calendar
year immediately preceding the Date of Termination in twelve (12) equal monthly
installments commencing on the thirteenth (13th) month following the date of
Termination and ending on the twenty-fourth (24th) month thereafter.
(C) It is expressly understood and agreed that
notwithstanding anything set forth herein to the contrary, in the event that
Executive, upon a transaction that constitutes a Change in Control (the "Change
in Control Transaction"), continues to be employed by the Company (or its
successor-in-interest, if applicable), then Executive shall not be entitled to
receive any of the consideration referred to in Section 12(e)(A) or Section
12(e)(B) above solely with respect to such Change in Control Transaction;
PROVIDED, HOWEVER, that Executive shall be entitled to receive the consideration
referred to in Section 12(e)(A) and 12(e)(B) above, in accordance with the terms
and conditions thereof, pursuant to any subsequent, separate event that
constitutes a Change in Control following the consummation of the Change in
Control Transaction.
(D) the Company shall, on terms no less favorable
to the Executive than if the Executive had continued in the employ of the
Company, (x) continue coverage for the Executive under the Company's life
insurance, medical, health, disability and similar welfare benefit plans (or, if
continued coverage is barred under such plans, the Company shall provide to the
Executive substantially similar benefits) for the Continuation Period, and (y)
provide the benefits which the Executive would have been entitled to receive
pursuant to any supplemental retirement plan maintained by the Company had his
employment continued at the rate of compensation specified herein for the
Continuation Period. Benefits otherwise receivable by the Executive pursuant to
clause (x) of this Subsection 12(e)(D) shall be reduced to the extent comparable
benefits are actually received by the Executive from a subsequent employer (at
such subsequent employer's expense) during the Continuation Period, and the
Executive shall report any such benefits actually received to the Company; and
(E) the parties agree that any payments to
Executive under this Section 12(e) which are contingent upon a Change in Control
be limited to the maximum amount which would not result in the payment to
Executive of an "excess parachute payment" (within the meaning of Section
280G(b)(1) of the Internal Revenue Code of 1986, as amended (the "Code")), it
being the intent of the parties that all payments to Executive hereunder be
fully deductible by the Company and that Executive not be subject to any excise
tax under Code Section 4999. The Company and Executive agree that prior to the
payment to Executive of any amounts which are contingent upon a Change in
Control, the Company's regular outside auditor
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shall review the payments and advise the Company and the Executive as to the
amount of such payments, if any, which will constitute excess parachute
payments.
(f) In the event of the expiration of this Agreement, the
Company shall pay (i) any amounts due to the Executive under Section 7 through
the date of such expiration (including a pro rata portion of his bonus that
would have been payable pursuant to Section 7(b) above with respect to the
calendar year in which the expiration occurs) and (ii) all such amounts that
would have become due (and at the time such amounts would have become due) to
the Executive under Section 7 had the Executive's employment hereunder continued
for a period of one year after the date upon which such expiration of employment
occurred. In addition, the Company shall, on terms no less favorable to the
Executive than if the Executive had continued in the employ of the Company, (x)
continue coverage for the Executive under the Company's life insurance, medical,
health, disability and similar welfare benefit plans (or, if continued coverage
is barred under such plans, the Company shall provide to the Executive
substantially similar benefits) for the Continuation Period, and (y) provide the
benefits which the Executive would have been entitled to receive pursuant to any
supplemental retirement plan maintained by the Company had his employment
continued at the rate of compensation specified herein for the Continuation
Period. Benefits otherwise receivable by the Executive pursuant to clause (x) of
this Subsection 12(f) shall be reduced to the extent comparable benefits are
actually received by the Executive from a subsequent employer (at such
subsequent employer's expense) during the Continuation Period, and the Executive
shall report any such benefits actually received to the Company.
13. REPRESENTATIONS.
(a) The Company represents and warrants that this Agreement has
been authorized by all necessary corporate action and is a valid and binding
agreement of the Company enforceable against it in accordance with its terms.
(b) The Executive represents and warrants that he is not a
party to any agreement or instrument which would prevent him from entering into
or performing his duties in any way under this Agreement.
14. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets thereof to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place.
(b) This Agreement is a personal contract and the rights and
interests of the Executive hereunder may not be sold, transferred, assigned,
pledged, encumbered, or hypothecated by him, except as otherwise expressly
permitted by the provisions of this Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive and his personal or legal
representatives, executors, administrators, successors, heirs,
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distributees, devisees and legatees. If the Executive should die while any
amount would still be payable to him hereunder had the Executive continued to
live all such amounts shall be paid in accordance with the terms of this
Agreement to his devisee, legatee or other designee or, if there is no such
designee, to his estate.
15. CONFIDENTIALITY. The Executive covenants and agrees that he will
not at any time during and after the end of the Term, directly or indirectly,
use for his own account, or disclose to any person, firm or corporation, other
than authorized officers, directors and employees of the Company or its
subsidiaries, Confidential Information (as hereinafter defined) of the Company.
As used herein, "Confidential Information" of the Company means information of
any kind, nature or description which is disclosed to or otherwise known to the
Executive as a direct or indirect consequence of his association with the
Company or its subsidiaries, which information is not generally known to the
public or to the businesses in which the Company or its subsidiaries are engaged
or which information relates to specific investment opportunities within the
scope of the Company's business which were considered by the Executive or the
Company during the term of this Agreement.
16. NONCOMPETITION. During his employment with the Company or any of
its affiliates, and for the Continuation Period, which, in the event of a
termination or expiration of this Agreement as a result of a Change in Control
shall be deemed to be an additional six (6) months (the "Noncompete Period"),
the Executive shall not, directly or indirectly, enter the employ of, or render
any services to, any person, firm or corporation engaged in any business which
competes in the business conducted or engaged in by the Company (during the Term
or on the Date of Termination, as the case may be) (the "Business") including,
but not limited to, any business which provides products and services to the
school spirit industry (including but not limited to design, marketing or sales
of cheerleader, dance team and booster club uniforms and accessories and design,
operation or marketing of cheerleader and dance team camps, clinics,
competitions or tours); and the Executive shall not become interested in any
such business, directly or indirectly, as an individual, partner, shareholder,
director, officer, principal, agent, employee, trustee, consultant, or in any
other relationship or capacity; PROVIDED, HOWEVER, that (A) nothing contained in
this Section 16 shall be deemed to prohibit the Executive from acquiring, solely
as an investment, up to five percent (5%) of the outstanding shares of capital
stock of any public corporation; and (B) if any compensation due to the
Executive under Section 12 hereof is not paid, the Noncompete Period shall
terminate upon failure to cure such non-payment after fifteen (15) days' notice
(which termination shall not relieve the Company of its obligation to pay any
amounts due hereunder). Notwithstanding anything in this Section 16 and Section
12(c) to the contrary, the foregoing provisions of this Section 16 shall not
apply to the Executive after the termination of the Executive's employment
unless the Company shall have paid all compensation due to Executive as provided
in Section 12 hereof.
17. NONSOLICITATION. During the Noncompete Period, the Executive shall
not, directly or indirectly, for his benefit or for the benefit of any other
person, firm or entity, do any of the following:
(a) solicit from any known potential customer of the Company
business of the same or of a similar nature (with respect to the Business) to
that which has been the subject of a
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known written or oral bid, offer or proposal by the Company, or of substantial
preparation with a view to making such a bid, proposal or offer, within six (6)
months prior to the expiration or Date of Termination hereof;
(b) solicit the employment of services of, or hire, any person
who, upon the Date of Termination or expiration of the Executive's employment,
or within six (6) months prior thereto, was known to be (i) employed by the
Company or (ii) a consultant to the Company with respect to the Business; or
(c) otherwise directly or indirectly interfere with the
Business or accounts of the Company in a manner which directly results in
material harm (economic or otherwise) to the Company or any of its affiliates.
18. INDEMNIFICATION. The Company shall indemnify the Executive from
and against any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by, or in the right of, the Company), brought to impose a liability or penalty
on the Executive in his capacity of director, if applicable, officer, employee
or agent of the Company or of any other corporation or entity which he serves as
such at the request of the Company, against judgments, fines, amounts paid in
settlement and expenses, including attorneys' fees actually and reasonably
incurred as a result of such action, suit or proceeding, or any appeal thereof,
if he acted in good faith in the reasonable belief that such action was in the
best interests of this Company, and in criminal actions or proceedings without
reasonable ground for belief that such action was unlawful. The termination of
any such civil or criminal action, suit or proceeding by judgment, settlement,
conviction or upon a plea of nolo contendere shall not in itself create a
presumption that the Executive did not act in good faith in the reasonable
belief that such action was in the best interests of the Company or that he had
reasonable ground for belief that such action was unlawful. The foregoing rights
of indemnification shall apply to the heirs and personal representatives of the
Executive and shall not be exclusive of other rights to which he may be
entitled. The Company shall advance all costs and expenses of defense as well as
any amounts paid in settlement to any party. The Executive shall reimburse the
Company for any amounts advanced in his defense or paid on his behalf if it is
determined by a final judgment of a court of competent jurisdiction that the
Executive's actions were intentionally contrary to the best interests of the
Company or intentionally unlawful. It is intended that the indemnity provisions
contained in this section shall permit the Company to indemnify the Executive to
the fullest extent permitted by law. This indemnification shall survive
termination of this Agreement. In no event shall Company's indemnification
obligation to the Executive hereunder be less than that provided by the Company
to members of the Company Board and other officers of the Company with respect
to occurrences while Executive is or was a member of the Company Board or an
officer of the Company.
19. ENTIRE AGREEMENT. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into by them with respect thereto (except this Agreement does
not modify the terms of any options or benefit plans referenced in this
Agreement except as specifically set forth). The Executive represents that, in
executing this
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Agreement, he does not rely and has not relied upon any representation or
statement not set forth herein made by the Company with regard to the subject
matter, basis or effect of this Agreement or otherwise. The Executive further
agrees and represents that all promises, representations, understandings,
arrangements and prior agreements, including the Former Agreement, between the
Executive and the Company are merged into, and are superseded by, this Agreement
(except this Agreement does not modify the terms of any options or benefit plans
referenced in this Agreement except as specifically set forth).
20. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement
may be amended or waived unless such amendment or waiver is agreed to in
writing, signed by the Executive and by a duly authorized officer of the
Company. No waiver by any party hereto of any breach by another party hereto of
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
21. NOTICES. Any notice to be given hereunder shall be in writing and
shall be deemed given when delivered personally, sent by nationally recognized
courier service or registered or certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below or to
such other address as such party may subsequently give notice of hereunder in
writing:
To Executive at:
0000 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
To the Company at:
Varsity Brands, Inc.
0000 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
Any notice delivered personally or by courier under this Section 21 shall be
deemed given on the date delivered, any notice sent by nationally recognized
courier service shall be deemed given on the second day after being given to the
courier service and any notice sent by registered or certified mail, postage
prepaid, return receipt requested, shall be deemed given on the fifth day after
being given to the U.S. mail.
22. SEVERABILITY. If any provision of this Agreement (including
without limitation Section 16) or the application of any such provision to any
party or circumstances shall be determined by any court of competent
jurisdiction to be invalid and unenforceable to any extent, the remainder of
this Agreement or the application of such provision to such person or
circumstances other than those to which it is so determined to be invalid and
unenforceable, shall
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not be affected thereby, and each provision hereof shall be validated and shall
be enforceable to the fullest extent permitted by law.
23. SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
24. GOVERNING LAW; SPECIFIC PERFORMANCE; CERTAIN ACKNOWLEDGEMENTS.
(a) This Agreement will be governed by and construed in
accordance with the laws of the State of Tennessee, without regard to its
conflicts of laws principles.
(b) The Executive acknowledges that the services to be rendered
by him are of a special and unique character which gives this Agreement a
peculiar value to the Company, the loss of which may not be reasonably or
adequately compensated for by damages in an action at law, and that a material
breach or threatened breach by him of any of the provisions contained in
Sections 15, 16 and 17 hereof will cause the Company irreparable injury. The
Executive therefore agrees that the Company shall be entitled, in addition to
any other right or remedy, to a temporary, preliminary and permanent injunction,
without the necessity of proving the inadequacy of monetary damages or the
posting of any bond or security, enjoining or restraining the Executive from any
such violation or threatened violations.
(c) The Executive further acknowledges and agrees that due to
the uniqueness of his services and confidential nature of the information he
will possess, the covenants set forth in Sections 15, 16 and 17 are reasonable
and necessary for the protection of the business and goodwill of the Company.
25. NO SET-OFF; MITIGATION. The obligation of the Company to make the
payments provided in this Agreement and otherwise to perform its or their
obligations hereunder shall not be affected by any set-off, counterclaim,
defense, or other claim, right or action which the Company may have or may
allege to have against the Executive or others. The Executive shall have no duty
to mitigate the amount of any payment provided for in Section 12 herein by
seeking other employment, nor shall the amount of any payment provided for in
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the date of termination of the
Executive's employment with the Company, or otherwise.
26. ARBITRATION. Any dispute arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Memphis, Tennessee in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. All costs and expenses of any such arbitration (including all
legal fees and expenses incurred by the Executive) shall be borne by the
Company; PROVIDED, HOWEVER, that the legal fees and expenses incurred by the
Executive shall be borne by the Executive and not by the Company if such
arbitration results in a determination (a) in the case of a dispute with respect
to termination of the Executive's employment by the Company for Cause or upon
Disability, that a proper basis for such termination did exist and appropriate
procedures
13
were followed by the Company, or (b) in the case of any other dispute, that the
position taken by the Executive was incorrect.
27. LEGAL FEES. Subject to Section 26 hereof, the Company shall pay
the Executive all reasonable, documented legal and professional fees and
expenses incurred by the Executive in seeking to obtain or enforce any rights
provided for under this Agreement, provided that the Company shall not be
required to pay any such legal fees or expenses relating to obtaining or
enforcing any rights if the Company affords the Executive the rights under this
Agreement within ten days after notification from the Executive that the Company
is in breach under this Agreement. Any such notification shall set forth in
reasonable detail the rights to which the Executive believes he is entitled and
the provisions of this Agreement under which he believes afford such rights.
28. HEADINGS. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
29. WITHHOLDINGS. All payments to the Executive under this Agreement
shall be reduced by all applicable withholdings required by Federal, state or
local law.
30. COUNTERPARTS; FACSIMILE. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Executed copies of this
Agreement sent by facsimile shall have the same effect as originally executed
copies of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
VARSITY BRANDS, INC.
By: /s/ XXXXXXX X. XXXX
--------------------------------
Name: Xxxxxxx X. Xxxx
Title: Chief Executive Officer
/s/ XXXX XXXXXXX
------------------------------------
Xxxx X. Xxxxxxx
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