Exhibit 10 (b)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), made in the City of
Plano and the State of Texas, dated as of the first day of August, 1999,
between X. X. Xxxxxx Company, Inc., a Delaware corporation (hereinafter
called the "Employer"), and Xxxxxxx Xxxxxxxx (hereinafter called the
"Employee").
1. Employment, Position and Duties
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1.1 The Employer hereby agrees to employ Employee and the Employee
hereby agrees to undertake employment with the Employer upon the terms
and conditions herein set forth.
1.2 During the Term (as hereafter defined), the Employee will
serve in the position of Executive Vice President and Chief Operating
Officer of JCPenney Stores, Catalog and Merchandising. Employee shall
faithfully and in conformity with the directions of the Board of
Directors of the Employer (the "Board") or its delegate perform the
duties of her employment and shall devote to the performance of such
duties her full time and attention.
2 Term of Employment. Employee's term of employment under this
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Agreement will commence on August 1, 1999 (the "Start Date") and,
subject to the provisions of this Agreement, will terminate on the
earlier of (i) the fifth anniversary of the Start Date or (ii)
termination of Employee's employment pursuant to Section 7 of this
Agreement (the "Termination Date"). Notwithstanding the termination
date provided in the previous sentence, the term of this Agreement may
be extended by agreement of the parties.
3 Compensation
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3.1 Salary. In consideration of her services during the Term,
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the Employer shall pay the Employee cash compensation at an annual
rate of $550,000 ("Base Salary"). Employee's Base Salary shall be
subject to such increases as may be approved by the Personnel and
Compensation Committee of the Board (the "Committee") or its delegate.
3.2 Annual Incentive Compensation. Employee shall be eligible
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to participate in the 1989 Management Incentive Compensation Plan (the
"Comp Plan"). Employee's annual target incentive shall be 48% of Base
Salary unless changed by the Committee; provided however that
Employee's annual incentive award for the 1999 and 2000 fiscal year
will be not less than 48% of Base Salary, which amount for 1999 shall
be prorated to reflect Employee's actual period of service during 1999
after the Start Date. If the Committee authorizes any annual cash
incentive program or approves any other annual management incentive
program or arrangement, Employee will be eligible to participate in
such plan, program, or arrangement on terms commensurate with
Employee's position and level of responsibility.
3.3 Long-Term Incentive Compensation. Employee shall be
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eligible to participate in the EVA Performance Plan (the "EVAPP").
Employee's annual target
participation will be at a level of 23.5% of
Employee's Base Salary plus annual incentive at 48% of Base Salary
("Total Earnings"), unless changed by the Committee; provided however,
that Employee's long term incentive award to be credited to her EVAPP
Bonus Bank for the 1999 and 2000 fiscal year will be not less than
23.5% of her Total Earnings, which amount for 1999 shall be prorated
to reflect Employee's actual period of service during 1999 (Total
Earnings plus EVAPP target at $1.00 per unit is defined as "Grand
Total Earnings"). If the Committee authorizes any long-term incentive
compensation plan, program, or arrangement, Employee will be eligible
to participate in such plan, program, or arrangement on terms
commensurate with her position and level of responsibility.
3.4 Supplemental Cash Payment Employee shall be entitled to
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receive a supplemental cash payment of $2,000,000. This supplemental
cash payment shall be payable in three installments as specified
below, provided that Employee remains employed on each date of payment
subject to Section 7. The supplemental cash payment shall be payable
as follows: $800,000 upon the completion of an initial period of
employment from Start Date to September 3, 1999, $600,000 on the first
anniversary of the Start Date, and $600,000 on the second anniversary
of the Start Date.
4 Expenses. During the Term the Employee shall be allowed
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reimbursement of reasonable expenses necessary for the performance of her
duties in accordance with the policies of the Employer.
5 Restricted Stock and Stock Options.
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5.1 The Employer will grant to the Employee on the Start Date
43,000 shares of the Employer's common stock (the "Restricted Stock").
The Restricted Stock will be held in escrow and will be subject to
forfeiture upon the termination of Employee's employment for any
reason (subject to Section 7); provided however, that on the third,
fifth, and tenth anniversary of the Start Date 14,333, 14,333, and
14,334 (respectively) shares of Restricted Stock will no longer be
subject to forfeiture and will be released from escrow.
5.2 The Employer will grant to Employee on the Start Date 1,000
restricted stock units. The units will vest three years after the
grant date provided the Employee remains employed by the Employer
(subject to Section 7) on that date. Upon vesting, distribution of
the stock units will be made in shares of X. X. Xxxxxx common stock
with no restrictions on the vested shares.
5.3 The Employer will grant to Employee, on the Start Date, an
option to purchase 57,000 shares of Employer's common stock. The
option will have a ten-year term and an exercise price equal to the
fair market value on the Start Date as defined in the 1997 Equity
Compensation Plan (mean of the high and low sales prices on July 30
and August 2). The option will be exercisable on the third
anniversary of the Start Date, provided the Employee remains employed
by the Employer (subject to Section 7) on that date.
5.4 The Employer will grant to the Employee, on the Start Date, an
option to purchase 150,000 shares of Employer's common stock. The
option will have a ten-year term and an exercise price equal to the
fair market value on the Start Date as defined in the 1997 Equity
Compensation Plan (mean of the high and low sales prices on July 30
and August 2). The option will vest at the rate of 20% per year;
beginning on the first anniversary of the Start Date, provided the
Employee remains employed by the Employer (subject to Section 7) on
each date. Vesting may be accelerated if the actual results for the
fiscal year immediately
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preceding the vesting date exceed Plan (as determined under the Comp
Plan for all elements of Employee's responsibility) according to the
following schedule:
Exceed plan up to 1% 30% vesting
Exceed Plan more than 1% up to 2% 40% vesting
Exceed Plan more than 2% 50% vesting
Total vesting percentage cannot exceed 100%
5.5 The grants of shares of Restricted Stock and Options will be
made pursuant to and subject to the terms, conditions, and
restrictions in the Employer's 1997 Equity Plan, as amended. The
definitive terms of the grants will be set forth in agreements to be
provided to Employee promptly after the Start Date.
6 Employee Benefits.
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6.1 During the Term, Employer will provide Employee and her eligible
dependents, subject to the terms and conditions of the applicable
plans, participation in all Employer sponsored employee benefit
plans. For 1999, the Employee is entitled to three weeks of
vacation. For the remainder of the Term, the Employee is
entitled to five weeks of vacation.
6.2 For the period from the Start Date until the Employee becomes
eligible for the Employer's Health Care Plan, the Employer will
reimburse the Employee for the difference between the COBRA
premium charged by her former employer and the premium amount she
paid while an active employee of her former employer.
6.3 Employee shall be eligible to participate in the Employer's
Mirror Plan III. She will be given an opportunity to elect to
defer compensation under that Plan during August, 1999 for
compensation to be paid September through December, 1999; and
during December, 1999, for compensation to be paid in 2000.
7 Termination of Employment
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The termination of the Employee's employment will be governed by the
following provisions:
7.1 Death. In the event of the Employee's death during
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the Term, the Employer will pay to the Employee's beneficiaries or
estate, as appropriate, as soon as practicable after the Executive's
death, (I) unpaid Base Salary to the date of death to which the
Employee is entitled and any unpaid vacation, (the "Compensation
Payments"), (ii) the target bonus (at $1.00 per unit) for the Comp
Plan and EVAPP for the fiscal year in which the Employee's death
occurs, prorated for the actual period of service for that fiscal
year, (the "Prorated Bonus"), (iii) any unpaid portion of the
Supplemental Cash Payment and (iv) any other death benefits payable
under any employee benefit or compensation plan that is maintained by
the Employer for the Employee's benefit. Any unvested Stock Options
will vest upon her death and her beneficiary will have the earlier of
five years or the original expiration date of the Option to exercise
all outstanding Options. All restrictions on Restricted Stock will be
removed upon her death. Unless otherwise stated in this Agreement,
this Section 7.1
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will not limit the entitlement of the Employee's
estate or beneficiaries to any death or other benefits then available
to the Employee under any life insurance, stock ownership, stock
options, or other benefit plan or policy that is maintained by the
Employer for the Employee's benefit.
7.2 Permanent Disability If the Employee becomes totally and
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permanently disabled (as defined in the Employer's Long-Term
Disability Plan) during the Term, the Employer or Employee may
terminate the Employee's employment on written notice thereof in
accordance with Section 12.5, and the Employer will provide to the
Employee as soon as practicable: (i) amounts payable pursuant to the
terms of any applicable disability plan or program, (ii) the Prorated
Bonus, (iii) the Compensation Payments, (iv) any unpaid portion of the
Supplemental Cash Payment, and (v) such payments under applicable
plans and programs, to which the Employee is entitled pursuant to the
terms of such plans or programs. Any unvested Stock Options will vest
upon her disability and she will have the earlier of five years or the
original expiration date of the Option to exercise all outstanding
Options. All restrictions on Restricted Stock will be removed upon
her disability.
7.3 Voluntary Termination by Employee; Discharge for Cause
_______________________________________________________
(i) In the event that during the Term the Employee's employment is
terminated:
* by the Employer for Cause (as defined below) or
* by the Employee unless for Good Reason (as defined in Section
7.4) or unless as a result of the Employee's death or disability,
The Company will pay the Compensation Payments as soon as practicable
to the Employee and the Employee will be entitled to no other
compensation, except as otherwise due her under applicable law or the
terms of any applicable plan or program. Employee will not be
entitled to the payment of any bonus in respect of all or any portion
of the fiscal year in which such termination occurs.
(ii) For purposes of this Agreement, the Employer will have "Cause" to
terminate the Employee's employment upon a finding that (a) the
Employee has been convicted by a court of competent jurisdiction of
the commission of a felony, (b) the Employee has committed a serious
breach of the Employer's Statement of Business Ethics, or (c) the
Employee materially breached any of the express covenants set forth in
Section 10.1 or 10.3.
7.4 Involuntary Termination
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(i) In any case of involuntary termination under this section,
Employee will be entitled to payment as described in Section
7.5.
(ii) During the Term, the Employee's employment may be terminated
by the Employer for any reason other than for Cause by
delivery in accordance with Section 12.5 to the Employee of
a notice of termination. The Employee will be treated for
the purposes of this Agreement as having been involuntarily
terminated other than for Cause if, during the Term the
Employee terminates her employment with the Employer prior
to termination for Cause for any of the following reasons
(each, a "Good
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Reason"): without the Employee's written
consent, (a) the Employer has breached any material
provision of this Agreement and within 30 days after notice
thereof from the Employee, the Employer fails to cure such
breach; or (b) a successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of
the Employer fails to assume liability under the Agreement.
7.5 Termination Payments and Benefits
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(i) Form and Amount. Upon the Employee's involuntary
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termination other than for Cause; (a) the Employer will pay
or provide as soon as practicable to the Employee (1) the
Prorated Bonus, (2) the Compensation Payments, (3) such
payments under applicable plans or programs to which the
Employee is entitled pursuant to the terms of such plans and
programs, (4) a payment equal to two times Grand Total
Earnings, (5) for 24 months (the "Continuation Period") the
continuation of employee welfare benefits set forth in
Section 6 except as offset by benefits paid or provided by
other sources as set forth in Section 8, or as prohibited by
law, and (6) outplacement services by a firm selected by the
Employee at the expense of the Employer, in an amount up to
$30,000, and (b) notwithstanding any provision to the
contrary in the applicable award agreement or in any plan,
(i) all restrictions pertaining to the shares of Restricted
Stock will lapse, (ii) all Options granted shall become
vested and fully exercisable, and (iii) any portion of the
Supplemental Cash Payment not yet paid will be paid. For
purposes of determining the period of continuation coverage
to which the Employee or any of her dependents is entitled
under section 4980B of the Internal Revenue Code of 1986, as
amended, (or any successor provision thereto), under any
group health plan maintained by the Employer or its
affiliates, the Employee will be deemed to have remained
employed until the end of the Continuation Period.
(ii) Time and Manner of Payment. The cash amounts due to the
__________________________
Employee pursuant to Section 7.5(i)(a) will be paid by the
Employer within 20 business days after the Employee's
Termination Date by check payable to the order of the
Employee or by wire transfer to an account specified by the
Employee; provided however, that any earned bonus included
in the Compensation Payment and any payment due under
Section 7.5(i)(a)(3) will be paid in accordance with the
terms of the applicable plan or program.
(iii) Maintenance of Benefits. During the Continuation
________________________
Period, the Employer will use its best efforts to
maintain in full force and effect for the continued
benefit of the Employee all benefits referenced in
Section 7.5(i)(a)(3) or will arrange to make available
to the Employee benefits substantially similar to those
that the Employee would otherwise have been entitled to
receive if her employment had not been terminated.
Such benefits will be provided on the same terms and
conditions
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(including employee contributions toward the
premium payments) under which the Employee was entitled
to participate immediately prior to her termination.
(iv) Forfeiture. Notwithstanding the foregoing provisions of
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Section 7.5, any right of the Employee to receive
termination payments and benefits under Section 7.5 will be
forfeited to the extent of any amounts payable or benefits
to be provided after a material breach of the covenants set
forth in Section 10.1, 10.2, or 10.3.
7.6 Nonduplication of Benefits. To the extent, and only to the
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extent, a payment or benefit that is paid or provided under
this Section 7 would also be paid or provided under the
terms of any applicable plan, program, or arrangement,
including, without limitation, any severance program, such
applicable plan, program, agreement or arrangement will be
deemed to have been satisfied by the payment made or benefit
provided under this Agreement.
8 Mitigation and Offset. The Employee is under no obligation to
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mitigate damages or the amount of any payment or benefit provided for
hereunder by seeking other employment or otherwise; no amounts earned
by the Employee after her termination date, whether from self-
employment, as common law employee, or otherwise, will reduce the
amount of any payment or benefit under any provision of this
Agreement; provided however, the Employee's coverage under the
Employer's welfare benefits as provided in Section 7.5(i)(a)(3) will
terminate as soon as the Employee becomes covered under any comparable
employee benefit plan made available by another employer and covering
the same type of benefits. The Employee will report to the Employer
any such benefits actually earned or received by her.
9 Change-In Control Provisions.
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9.1 The Employee will be offered any and all change in control
protections found in any plan, program or agreement
maintained by the Employer as of the Start Date or as
adopted at a subsequent date during the Term.
9.2 If the Employee becomes entitled to payments under Section
7.5 because of a change in control of the Employer and it is
determined that those payments would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue
Code, then the Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such
that, after payment of all taxes (including any interest or
penalties imposed with respect to such taxes), including any
excise tax imposed on the Gross-Up Payment, the Employee
retains an amount of the Gross-Up Payment equal to the
excise tax imposed on the payments.
9.3 The agreements evidencing the grants of the shares of
Restricted Stock and the Options will provide that upon the
occurrence of a Change in Control (as defined in the
agreements), all restrictions pertaining to the shares of
Restricted Stock will lapse and all of the Options will
become fully vested and exercisable.
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10 Covenants
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10.1 Confidentiality. During the Term, the Employer agrees that
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it will disclose to Employee its confidential or proprietary
information to the extent necessary for Employee to carry
out her obligations under this Agreement. The Employee
hereby covenants and agrees that she will not, without the
prior written consent of the Employer, during the Term or
thereafter disclose to any person not employed by the
Employer, or use in connection with engaging in competition
with the Employer, any confidential or proprietary
information of the Employer.
10.2 Nonsolicitation. The Employee hereby covenants and agrees
________________
that during the Term and for two years thereafter, she will
not, without the prior written consent of the Employer, on
her own behalf or on the behalf of any person, firm or
company, directly or indirectly, attempt to influence,
persuade or induce, or assist any other person in so
persuading or inducing, any employee of Employer or its
affiliates to give up, or to not commence, employment or a
business relationship with the Employer.
10.3 Noncompetition. It is recognized by the Employee and
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Employer that the Employee's duties hereunder will entail
the receipt of trade secrets and confidential information,
which include not only information concerning the Employer's
current operations, procedures, suppliers, and other
contacts, but also its short-range and long-range plans, and
that such trade secrets and confidential information has
been developed by the Employer and its affiliates at
substantial cost and constitute valuable and unique property
of the Employer. Accordingly, the Employee acknowledges
that the foregoing makes it reasonably necessary for the
protection of the Employer's business interests that the
Employee not compete with the Employer or any of its
affiliates during the Term and for a reasonable and limited
period thereafter. Therefor, during the Term and for a
period of one year thereafter, the Employee shall not
acquire an additional direct investment of $100,000 or more
in a Competing Business (as hereinafter defined) and shall
not render personal services to any such Competing Business
in any manner, including, without limitation, as owner,
partner, director, trustee, officer, employee, consultant,
or advisor thereof.
If the Employee shall breach the covenants contained in this
Section 10, the Employer shall have no further obligation to
make any payment to the Employee pursuant to this Agreement
and may recover from the Employee all such damages as it may
be entitled to at law or in equity. In addition, the
Employee acknowledges that any such breach is likely to
result in immediate and irreparable harm to the Employer for
which money damages are likely to be inadequate.
Accordingly, the Employee consents to injunctive and other
appropriate equitable relief upon the institution of
proceedings therefor by the Employer in order to protect
Employer's rights hereunder.
As used in this Agreement, the term "Competing Business"
shall mean any business which:
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(a) at the time of the determination, is substantially
similar to the whole or a substantial part of the
business conducted by the Employer or any of its
divisions or affiliates;
(b) at the time of determination, is operating a store or
stores which, during its or their fiscal year preceding
the determination, had aggregate net sales, including
sales in leased and licensed departments, in excess of
$250,000,000, if such store or any of such stores is or
are located in a city or within a radius of 25 miles
from the outer limits of a city where the Employer, or
any of its division's or affiliates, is operating a
store or stores which, during its or their fiscal year
preceding the determination, had aggregate net sales,
including sales in leased and licensed departments, in
excess of $250,000,000; and
(c) had aggregate net sales at all its locations, including
sales in leased and licensed departments and sales by
its divisions and affiliates, during its fiscal year
preceding that in which the Employee made such an
investment therein, or first rendered personal services
thereto, in excess of $500,000,000.
11 Survival. The expiration or termination of the Term will not
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impair the rights or obligations of any party hereto that accrue
hereunder prior to such expiration or termination, except to the
extent specifically stated herein. In addition to the foregoing,
the Employee's covenants contained in Section 10 and 12.1 and the
Employer's obligations under Section 7 and 12.1 will survive the
expiration or termination of Employee's employment.
12 Miscellaneous Provisions.
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12.1 Dispute Resolution. Any dispute between the parties under
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this Agreement will be resolved (except as provided below)
through informal arbitration by an arbitrator selected under
the rules of the American Arbitration Association (located
in the city in which the Employer's principal executive
offices are based) and the arbitration will be conducted in
that location under the rules of said Association. Each
party will be entitled to present evidence and argument to
the arbitrator. The arbitrator will have the right only to
interpret and apply the provisions of this Agreement and may
not change any of its provisions. The arbitrator will
permit reasonable pre-hearing discovery of facts, to the
extent necessary to establish a claim or a defense to a
claim, subject to supervision by the arbitrator. The
determination of the arbitrator will be conclusive and
binding upon the parties and judgment upon the same may be
entered in any court having jurisdiction thereof. The
arbitrator will give written notice to the parties stating
his or their determination, and will furnish to each party a
signed copy of such determination. The expenses of
arbitration will be borne equally by the Employer and
Employee or as the arbitrator otherwise equitably
determines. Notwithstanding the foregoing, the Employer
will not be required to seek or participate in arbitration
regarding any breach of the Employee's covenants in Section
10, but may pursue its remedies for such breach in a court
of competent jurisdiction in the city in which the
Employer's principal executive offices are based. Any
arbitration or action pursuant to this Section 12.1 will be
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governed by and construed in accordance with the substantive
laws of the State of Texas, without giving effect to the
principles of conflict of laws of such State.
12.2 Binding on Successors; Assignment. This Agreement will be
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binding upon and inure to the benefit of the Employer,
Employee and each of their respective successors, assigns,
personal and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees,
as applicable; provided however, that neither this Agreement
nor any rights or obligations hereunder will be assignable
or otherwise subject to hypothecation by Employee (except by
will or by operation of the laws of intestate succession) or
by the Employer, except that the Employer may assign this
Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock, assets
or businesses of the Employer, if such successor expressly
agrees to assume the obligations of the Employer hereunder.
12.3 Governing Law. This Agreement will be governed, construed,
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interpreted, and enforced in accordance with the substantive
law of the State of Texas, without regard to conflicts of
laws principles.
12.4 Severability. Any provision of this Agreement that is
____________
deemed invalid, illegal or unenforceable in any jurisdiction
will, as to that jurisdiction, be ineffective, to the extent
of such invalidity, illegality or unenforceability, without
effecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provisions of
this Agreement invalid, illegal or unenforceable in any
other jurisdiction. If any covenant should be deemed
invalid, illegal or unenforceable because its scope is
considered excessive, such covenant will be modified so that
the scope of the covenant is reduced only to the minimum
extent necessary to render the modified covenant valid,
legal and enforceable.
12.5 Notices. For all purposes of this Agreement, all
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communications required or permitted to be given hereunder
will be in writing and will be deemed to have been duly
given when hand delivered or dispatched by electronic
facsimile transmission (with receipt thereof confirmed), or
five business days after having been mailed by United States
registered or certified mail, return receipt requested,
postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service,
addressed to the Employer at its principal executive office
and to the Employee at her principal residence, or to such
other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices
of change of address will be effective only upon receipt.
12.6 Entire Agreement. The terms of this Agreement are intended
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by the parties to be the final expression of their Agreement
with respect to the Employee's employment and may not be
contradicted by evidence of any prior or contemporaneous
agreement. The parties further intend that this Agreement
will constitute the complete and exclusive statement of its
terms and that no extrinsic evidence whatsoever may be
introduced in any judicial, administrative, or other legal
proceedings to vary the terms of this Agreement.
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12.7 Amendments; Waivers. This Agreement may not be modified,
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amended, or terminated except by an instrument in writing,
approved by the Employer and signed by the Employee and the
Employer. Failure on the part of either party to complain
of any action or omission, breach or default on the part of
the other party, no matter how long the same may continue,
will never be deemed to be a waiver of any rights or
remedies hereunder, at law or in equity. The Employee or
Employer may waive compliance by the other party with any
provision of this Agreement that such other party was or is
obligated to comply with or perform only through an executed
writing; provided however, that such waiver will not operate
as a waiver of, or estoppel with respect to, any other or
subsequent failure.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
/s/ Xxxxx X. Xxxxxxxxxxxxx
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X. X. Penney Co., Inc.
By Xxxxx X. Xxxxxxxxxxxxx
Its Chairman and Chief Executive Officer
/s/ Xxxxxxx Xxxxxxxx
________________________________
Xxxxxxx Xxxxxxxx
