THE STRIDE RITE CORPORATION
FORM 10-K FOR THE FISCAL YEAR ENDED NOVEMBER 28, 1997
Exhibit 10(vii)
Employment Agreement
This contract of employment (the "Agreement") is entered into as of this 4th day
of November, 1997 by and between The Stride Rite Corporation (the "Company") and
Xxxxxx X. Xxxxxx ("Executive").
The Company desires to employ Executive in the capacities of Chairman, Chief
Executive Officer and President of the Company, and
Executive desires to be employed by the Company in the capacities of Chairman,
Chief Executive Officer and President,
The Company and Executive agree as follows:
1. Employment. The Company hereby agrees to and does hereby employ Executive,
and Executive hereby agrees to and does hereby enter the employ of the Company
for the period set forth in Section 2 below in the positions and with the duties
and responsibilities set forth in Section 3 below, and upon the terms and
conditions set forth in this Agreement.
2. Employment Period. The Employment Period shall commence on December 1, 1997
and unless sooner terminated as expressly provided below, shall continue until
the close of business on December 15, 1998 (the "Employment Period").
3. Positions. It is contemplated that during the Employment Period, Executive
shall serve as a principal officer of the Company with the offices and titles of
Chairman, Chief Executive Officer and President, reporting directly to the Board
of Directors. With respect to those offices, Executive shall have powers and
duties as provided in the Company's Bylaws in effect as of the date of this
Agreement and as those may be amended from time to time during the Employment
Period.
4. Performance. Throughout the Employment Period, Executive agrees to devote his
full time and undivided attention to the business and affairs of the Company,
and in particular to the performance of all of the duties and responsibilities
of the Chairman, Chief Executive Officer and President of the Company, and as a
director of each of its subsidiaries, except for reasonable vacation and except
for temporary illness or incapacity. Executive shall be entitled to up to four
(4) weeks of vacation per year.
Executive shall serve the Company and each of its subsidiaries loyally,
diligently and effectively and at all times exert his best efforts to promote
the success of their respective activities. Executive shall discharge his duties
and responsibilities in an efficient, trustworthy and businesslike manner and
shall do nothing which will in any way impair or prejudice the name or
reputation of the Company or any of its subsidiaries.
Nothing in this Agreement shall preclude Executive from devoting reasonable
periods required for:
a. serving as director, trustee or member of a committee of any
organization involving no conflict of interest with the interests of the
Company;
b. engaging in charitable and community activities; and
c. managing his personal investments;
provided that such activities do not, individually or collectively, interfere
with the regular performance of Executive's duties and responsibilities under
this Agreement.
5. Salary and Incentive Compensation. During the Employment Period Executive
shall be entitled to compensation from the Company as follows:
a. For all services to be rendered by Executive to the Company during the
Employment Period, including, without limitation, services as an executive,
officer, director, employee or member of any committee of the Company or its
subsidiaries, divisions, business units or affiliates, Executive shall be paid
compensation in the form of a base or fixed salary, payable not less often than
once each month, at the annual rate of Six Hundred Fifty Thousand Dollars
($650,000) effective December 1, 1997, with the opportunity for periodic annual
reviews and increases in such rate as shall be determined in the sole discretion
of the Board of Directors.
b. Executive shall be paid additional compensation in the form of incentive
compensation as follows:
i. Executive shall be an "Eligible Employee" as that term is defined in
the Company's Annual Incentive Compensation Plan (the "Annual Incentive Plan")
and may receive incentive compensation as provided by its terms. Pursuant to the
Annual Incentive Plan, Executive's "Bonus Percentage" will be 50%. Executive's
participation in the Annual Incentive Plan is subject to the terms and
conditions of the Annual Incentive Plan, or any amended version of the Annual
Incentive Plan or any successor or other annual incentive compensation plan
which may be adopted and become legally effective during the Employment Period.
ii. For the 1997 Fiscal Year, the Company will pay the Executive
pursuant to the Annual Incentive Plan a Bonus of Eight Hundred Seventeen
Thousand Five Hundred Dollars ($817,500) on February 16, 1998, provided the
Corporation achieves 125% or greater of the Corporate Incentive Goal pursuant to
Section 4.4(b) of Annual Incentive Plan. If the Corporation achieves less than
125% of the Corporate Incentive Goal then the Bonus will be pro-rated per the
established matrix and the bonus award will be the maximum under the
performance/allocation matrix subject to the Board of Director's discretion.
iii. The Company acknowledges that in its agreement with Executive
dated October 21, 1993, in order to replace long term benefits forfeited by
Executive by leaving his prior employment and thereby to encourage Executive to
accept employment with the Company, it granted to Executive rights to purchase
60,000 shares of the Company's common stock at a purchase price of $.25 per
share subject to all the terms and conditions of the Company's 1975 Executive
Incentive Purchase Plan, as amended ("Incentive Stock Plan"), which rights have
fully vested in the Executive. The Company shall pay to Executive (or in the
case of death, to Executive's legal representative) on December 11, 1997 a cash
amount equal to the excess, if any, of Nine Hundred Fifty-One Thousand
($951,000) Dollars and the cost of purchasing the stock (twenty-five cents per
share or Fifteen Thousand ($15,000) Dollars), which total Nine Hundred Sixty-Six
Thousand ($966,000) Dollars over the aggregate fair market value on December 11,
1997, of 60,000 shares of the Company's common stock, whether or not the shares
have actually been acquired or disposed of by Executive, plus the aggregate
gain, if any, realized by Executive on any of the shares acquired and resold
after December 13, 1993 at a price exceeding $15.85 per share.
As used herein, "fair market value" shall mean the closing price for
the Company's common stock on the New York Stock Exchange - Composite Index on
December 11, 1997.
iv. At the Board of Directors Meeting on December 11, 1997, the Board
agrees to grant the Executive a grant of options to purchase 100,000 shares of
common stock of The Stride Rite Corporation at the fair market value of the
stock at the close of trading on December 11, 1997 pursuant to the terms of the
Company's 1998 Long-Term Growth Incentive Plan of which one-third of the shares
will vest one year from December 11, 1997, one-third of the shares will vest two
years from December 11, 1997, and one-third of the shares will vest three years
from December 11, 1997.
c. In the event of the death of Executive during the Employment Period, the
legal representative of Executive shall be entitled to the base or fixed salary
provided for in Section 5(a) above for the month in which the death shall have
occurred, at the rate being paid at the time of death, and the Employment Period
shall be deemed to have ended as of the close of business on the last day of the
month in which the death shall have occurred, but without prejudice to any
payments otherwise due in respect of Executive's death, including any payment
under Section 5(b)(ii), or to any rights that Executive's legal representative
may have to exercise stock purchase rights granted to Executive.
6. Perquisites. During the Employment Period, Executive shall be entitled to
perquisites as follows:
a. Executive shall be provided with an appropriate office and secretarial and
clerical staff.
b. Reimbursement of Executive's lease of an automobile (the "Vehicle"), shall be
provided by the Company pursuant to the Company's leased car policy as currently
in effect. Under the Company's leased car policy, an amount of up to $10,000 per
year will be paid by the Company to Executive to reimburse lease payments,
insurance and maintenance costs of the Vehicle. Should costs for the Vehicle
exceed that allowance, Executive will be responsible for payment of any
differential. Executive shall be responsible for the cost of fuel consumed in
the use of the Vehicle. Pursuant to the Company's current automobile policy, the
Company will pay Executive a mileage allowance as reimbursement for the use of
the Vehicle in conducting Company business.
c. The Company shall reimburse Executive for up to $5,000.00 per year for the
Executive's use of personal financial planning services.
7. Employment Benefits; Life Insurance. At the normal employee contribution rate
to Executive, the Company will provide Executive with medical coverage for
Executive and eligible members of Executive's family, insurance on his life
equal to One Million Dollars ($1,000,000) payable to a beneficiary designated by
Executive (in lieu of coverage available under the usual terms of the life
insurance policy which the Company offers) and long-term disability coverage.
Executive shall also be entitled to participate in all of the various employee
benefit plans which the Company maintains and/or adopts during the Employment
Period, including a defined benefit Retirement Plan and various elective
programs, including, without limitation, a dental insurance plan, Employee Stock
Purchase Plan, Deferred Compensation Plan and Employee Savings and Investment
Plan (pursuant to Section 401K of the Internal Revenue Code of 1986, as
amended), subject to their respective terms and requirements, including, without
limitation, their eligibility and vesting requirements.
Nothing in this Agreement shall preclude the Company from amending or
terminating any employee benefit plan or practice, but it is the intent of the
parties that Executive shall continue to be entitled during the Employment
Period to benefits at least equal in the aggregate to those attached to his
position as of the date of this Agreement.
8. Residence Requirement. Executive agrees that during his employment with the
Company his residence and that of his family will remain in the greater
Boston (Massachusetts) area.
9. Termination of Employment. Executive hereby acknowledges and agrees that the
Company by entering into this Agreement shall not be deemed to have waived any
of its rights during the Employment Period or thereafter, including, without
limitation, the right to terminate Executive's employment for any reason.
If by December 11, 1998 this Agreement is not further extended or replaced by a
new agreement regarding employment, the Employment Period will end and
Executive's employment as Chairman, Chief Executive Officer and President of the
Company and all of its subsidiaries deemed terminated on December 15, 1998
(provided that employment is not otherwise terminated for cause). Upon such
termination, or if the Company terminates Executive's employment during the
Employment Period for any reason other than for Cause (as defined below), the
Company shall pay Executive a monthly severance allowance payable at the end of
each month following termination of Executive's employment until the earliest of
(a) twelve months following the Company's termination of Executive's employment,
or (b) the date of Executive's death. Such monthly severance allowance shall be
an amount equal to the monthly fixed or base salary paid to Executive pursuant
to Section 5(a) of the Agreement at the time of the termination of his
employment. In addition, until the earlier of (i) the Executive's reemployment
(other than self-employment or employment by an entity which does not provide
comparable medical benefits to employees), or (ii) the end of the Employment
Period, the Executive shall continue to be entitled to participate (without cost
to the Executive) in the Company's medical and dental insurance programs and the
Executive's life insurance benefit as provided by this Agreement shall be
continued. In addition, the Executive shall be entitled to any cash payments
provided by Sections 5(b)(ii) and 5(b)(iii), any payments earned pursuant to the
terms of the Annual Incentive Plan and the Long-Term Plan, and any rights to
exercise the vested portion of stock options granted to the Executive.
If Executive's employment with the Company is terminated on account of
Executive's death or permanent disability, then except for (i) the cash payments
provided by Section 5(b)(ii) and (iii) and 5(c) of this Agreement, (ii) any
payments earned pursuant to the terms of the Annual Incentive Plan and the
Long-Term Plan and (iii) the rights of Executive or his legal representative to
exercise the vested portion of stock options granted to the Executive, payment
to Executive or Executive's estate will be made exclusively under the Company's
applicable death or disability plans or policies.
If Executive's employment is terminated during the Employment Period for Cause,
then the Executive shall not be entitled to receive any severance allowance or
compensation of any kind except (i) incentive compensation which may have been
fully earned pursuant to the terms and conditions of the Annual Incentive Plan
and/or the Long-Term Plan; (ii) any cash payments provided by Section 5(b)(ii)
and (iii); and (iv) any rights of the Executive not forfeited on account of such
termination to exercise the vested portion of the stock options granted to the
Executive. Also upon such termination, Executive will not be entitled to
continue any of the Company's employee benefits, including any benefits provided
in this Agreement or under the Company's medical, dental, health and life
insurance plans (except to the extent the same may be required by law), or to
perquisites of any kind, from and after the date upon which Executive's
employment is terminated. For the purposes of this section and any other
provision of this Agreement, termination of Executive's employment shall be
deemed to have been for Cause only if:
a. termination of his employment shall have been so deemed by the Board
of Directors of the Company by virtue of (i) an act or acts of dishonesty, (ii)
commission of a felony or act of moral turpitude, (iii) a wrongful act or acts
resulting or intended to result directly or indirectly in gain or personal
enrichment at the expense of the Company, (iv) a willful act or acts which
constitute a material violation or violations of the federal securities laws, or
(v) a willful act or acts which constitute material insubordination or a
material violation of the Company's Conflict of Interest policy or any of its
other policies communicated to Executive in writing; or
b. there has been a breach by Executive during the Employment Period of
any of the material provisions of this Agreement, and, with respect to any
alleged breach, that Executive shall have failed to remedy such alleged breach
within thirty (30) days from his receipt of written notice from the Clerk of the
Company pursuant to the resolution duly adopted by the Board of Directors of the
Company after notice to Executive and an opportunity to be heard demanding that
Executive remedy such alleged breach.
If Executive's employment is terminated by his voluntary resignation other than
"Good Reason" as defined in the Severance Agreement referred to in Section 14(c)
of this Agreement, Executive shall not be entitled to payment of any severance
allowance, or compensation of any kind except (i) incentive compensation which
may have been fully earned pursuant to the terms and conditions of the Annual
Incentive Plan and/or the Long-Term Plan; and (ii) any rights of Executive not
forfeited on account of such termination to exercise the vested portion of stock
options granted to the Executive. Also in the event of such termination
Executive will not be entitled to the continuance of any of the Company's
employee benefits or perquisites of any kind.
On termination of Executive's employment with the Company for any reason the
Executive will be required as a condition precedent for payment under the
arrangements provided for in this Section 9 to submit his resignation as a
director of the Company and all of its subsidiaries to the Company's Board of
Directors, which resignation as a director will only be effective upon
acceptance by the Board of Directors, to execute a release acknowledging full
and final settlement of all claims arising from his employment and to provide
reasonable cooperation to the Company.
10. Agreement Not to Compete. Executive hereby covenants and agrees that for a
period of one (1) year following termination of Executive's employment with the
Company for any reason, Executive will not, directly or indirectly, within the
United States (being the area in which the Company's business is conducted), in
any capacity, enter into or engage in the same or a substantially similar
business as that conducted and carried on by the Company and being directly
competitive with the Company or any of its business units or subsidiaries,
including, but not limited to, specialty retailing of infant's, toddler's and
children's footwear, the design, manufacture of footwear of any type on the
wholesale level, and any and all components of the foregoing, whether as an
individual for his own account, or as a partner, joint venture, employee, agent,
consultant, officer or director for or with any person or entity, or as a
shareholder (greater than one percent (1%) of any corporation), or otherwise.
11. Agreement of Confidentiality. With respect to any secret, proprietary or
confidential information obtained by Executive during his employment at the
Company, except with the prior written agreement of the Company, which consent
shall be granted or withheld in the sole discretion of the Company, Executive
will not, at any time, disclose or use for competitive purposes (other than the
Company's competitive purposes) any such information. For purposes hereof,
secret, proprietary or confidential information shall include, by way of example
but not by way of limitation, any information of a technical, financial,
commercial or other nature pertaining to the business of the Company or to that
of any of its clients, customers, consultants, licensees, business units,
subsidiaries or affiliates, including but not limited to, its and their
operations, plans, financial condition, product development, customers, sources
of supply, manufacturing techniques or procedures, marketing, sales, production
or other competitive information acquired by Executive during the course of his
employment by the Company and all other information that the Company itself does
not disclose to the public.
12. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by United
States registered or certified mail, return receipt requested, postage prepaid,
addressed to Executive at 00 Xxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000; and to
the Company at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (or at such
other address to which it may relocate its headquarters during the term of this
Agreement), directed to the Board of Directors with a copy of the Clerk of the
Company.
13. Heirs and Successors Bound. This Agreement shall be binding upon the
heirs, administrators and executors of Executive and upon the successors or
assigns of the Company.
14. Miscellaneous.
a. No provision of this Agreement may be modified, waived or discharged, unless
such waiver, modification or discharge is agreed to in writing and signed by
Executive and such officer as may be specifically designated by the Board of
Directors. No waiver by either party hereto at any time of any breach by the
other party hereto of, or in compliance with any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the time or at any prior or subsequent
time.
b. Executive agrees that the remedy at law for any breach by Executive of the
provisions of Sections 10 or 11 of this Agreement will be inadequate and that
the Company will also be entitled to injunctive relief without bond against any
such breach. Such injunctive relief will not be exclusive but will be in
addition to any other relief that the Company may have.
c. The Employment Agreements dated 21st October 1993 and December 11, 1996
between Executive and the Company are each superseded by this Agreement and of
no further force or effect. There are no agreements or understandings, oral or
written, between the parties hereto other than those set forth in this
Agreement, and there are no agreements or understandings which in any way alter,
modify, amend or otherwise change this Agreement, with the exception of a
certain Severance Agreement between Executive and the Company, dated as of
February 17, 1995, as such may be further modified, amended or replaced (the
"Severance Agreement"). If a "change in control" as defined in the Severance
Agreement occurs during the Employment Period which triggers the terms of the
Severance Agreement, the parties agree that the Severance Agreement shall
thenceforth be deemed to supersede this Agreement in all respects, except that
Executive shall retain all his rights under Section 5(b)(ii) and (iii).
d. The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the Commonwealth of Massachusetts applicable to
instruments under seal.
e. The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
f. This Agreement may be executed in two counterparts, each of which shall be
deemed an original but all of which together will constitute one and the same
instrument.
g. The section headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Agreed and accepted this 4th day of November, 1997.
THE STRIDE RITE CORPORATION EXECUTIVE
Signed: /s/ Xxxxx Xxxx Signed: /s/ Xxxxxx X. Xxxxxx
Xxxxx Xxxx, Chairman of the Compensation Xxxxxx X. Xxxxxx
Committee of the Board of Directors
