DOLLAR EXPRESS, INC.
0000 XXXXXXXXX XXXX
Xxxxxxxxxxxx, XX 00000
February 5, 1999
Xx. Xxxxxxx Spain
c/o Dollar Express, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Dear Xxxxxxx:
In recognition of your contribution to the growth and success of Dollar
Express, Inc. and its related companies (the "Company") and in connection with
the transactions contemplated by that certain Securities Purchase & Contribution
Agreement dated as of February 3, 1999 among the Company, DE&S Holdings Co.
("DE&S") (the parent corporation of the Company), and certain shareholders of
DE&S, we are pleased to offer to you ("Executive") continued employment with the
Company as Chief Executive Officer, subject to the following terms of this
letter agreement (the "Agreement").
1. Term and Duties. Executive shall be employed for a term commencing
on the date hereof and expiring on the fourth anniversary of the date hereof,
unless earlier terminated pursuant to Section 6 hereof (the "Term"). Thereafter,
the Term shall continue for successive one (1) year periods unless either the
Company or Executive shall have given the other at least ninety (90) days notice
of a desire to terminate and not to renew at the expiration of the then current
period. During the Term, Executive shall devote his best efforts and
substantially all of his business time and services to the Company to perform
such duties as may be customarily incident to such position and as may
reasonably be assigned from time to time by the Board of Directors of DE&S (the
"Board").
2. Annual Salary. Executive hereby agrees to accept, as compensation
for all services rendered by Executive in any capacity hereunder and for the
Restrictive Covenants made by Executive in Section 5 hereof, an initial base
salary at an annual rate of $325,000 (as the same may hereafter be adjusted, the
"Annual Salary") commencing on the date hereof and continuing until expiration
or termination of the Term. The Annual Salary shall be reviewed by the Board and
considered for increase as of January 1, 2001 and annually thereafter. The
Annual Salary shall be inclusive of all applicable income, social security and
other taxes and charges which are required by law to be withheld by the Company,
and which shall be withheld and paid in accordance with the Company's normal
payroll practices from time to time in effect.
February ___, 1999
Page 2
3. Bonuses. With respect to each fiscal year of the Company that ends
within the Term, the Executive will be entitled to receive an annual bonus of
$75,000 if the Company performs in conformity with its Approved Budget. For
purposes of this Agreement, "Annual Budget" means the annual operating budget of
the Company and its related entities which is approved by the Board in
accordance with Article X of the Bylaws of DE&S. The Company may pay Executive
such other bonus or bonuses, if any, as the Board in its sole discretion, shall
determine.
4. Benefits.
4.1. Generally. Executive shall be entitled to the same benefits
(including as of the date hereof: medical insurance, 401(k) Plan participation
and a $250,000 term life insurance policy) as other senior salaried officers of
the Company, as determined by the Board, in its absolute discretion (the
"Benefits").
4.2. Expense Reimbursements. The Company shall reimburse Executive,
upon proper accounting, for reasonable expense and disbursements incurred by him
in the course of his performance of the duties hereunder.
4.3. Automobile Allowance. The Company shall make available to
Executive an automobile (with a fair market value consistent with past
practices, but in any case, not in excess of $59,999) for business related use.
5. Non-Compete; Confidentiality; Intellectual Property.
5.1. Restrictive Covenants. Executive and the Company agree that,
because Executive has had and will continue to have access to the Company's most
confidential business and technical information and has had and will continue to
have responsibility for developing and maintaining vendor relationships, the
following covenants by the Executive are reasonable and necessary for the
protection of the Company's legitimate business interests:
(a) Non-Compete. Executive shall not, during the Term and for a
period thereafter of three (3) years (the "Restricted Period"), in the United
States or any other place where the Company, its subsidiaries or affiliates
conduct business, directly or indirectly (except in Executive's capacity as an
officer or director of the Company or its subsidiaries or affiliates) do any of
the following, directly or indirectly, without the prior written consent of the
Company:
(i) engage or participate in any business activity which is
in any way competitive with the Company's business of operating large format
dollar stores or traditional card and gift shops (a "Competing Business");
February ___, 1999
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(ii) become interested in (as owner, stockholder, lender,
partner, co-venturer, director, officer, employee, agent or consultant) any
person, firm, corporation, association or other entity engaged in any Competing
Business. Notwithstanding the foregoing, Executive may hold up to one percent
(1%) of the outstanding securities of any class of any publicly-traded
securities of any company;
(iii) solicit or call on any supplier with whom the Company
shall have dealt at any time during the two (2) year period immediately
preceding the termination of Executive's employment hereunder if such
solicitation or call could in any way adversely impact the Company's (or any of
the Company's subsidiaries' or affiliates') relationship with that supplier;
(iv) influence or attempt to influence any supplier,
service provider, partner or any other person to terminate or modify any written
or oral agreement or course of dealing with the Company;
(v) influence or attempt to influence any person to
terminate or modify his employment, consulting, agency or other arrangement with
the Company; or
(vi) employ or retain, or arrange to have any other person
employ or retain, any person (other than members of Executive's family) who has
been employed or retained by the Company as an employee, consultant or agent of
the Company at any time during the two year period immediately preceding the
termination of Executive's employment hereunder.
For purposes of this Agreement, the term "person" refers to not only
individuals, but also to any corporation, partnership, association, trust,
proprietorship or any other entity or organization.
(b) Confidentiality. Employee recognizes and acknowledges that
the Propriety Information (as hereinafter defined) is a valuable, special and
unique asset of the Company's business. Accordingly, during and after the
Restricted Period, Executive shall keep secret and retain in strictest
confidence, and will not, for any reason divulge to any third-party or use for
his own benefit (without the prior written consent of the Company) any
confidential, proprietary, business or technical information or trade secrets of
the Company or of any subsidiary or affiliate of the Company ("Proprietary
Information"); provided, however, that this paragraph will not restrict
Executive's ability to make such disclosures during the course of his employment
as may be necessary for the effective and efficient discharge of the duties
hereunder or as such disclosures may be required by law. In the event that
Executive or any of its representatives becomes legally compelled to disclose
any of the Proprietary Information, Executive will provide the Company with
prompt written notice so that the Company may seek a protective order or other
appropriate remedy. Failure by the Company to mark any of the Proprietary
Information as confidential or proprietary shall not affect its status as
Proprietary Information under the terms of this Agreement.
February ___, 1999
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(c) Property.
(i) All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the Company.
During the Term, Executive shall not remove from the Company's offices or
premises any documents, records, notebooks, files, correspondence, reports,
memoranda or similar materials of or containing Proprietary Information, or
other materials or property of any kind belonging to the Company unless
necessary or appropriate in accordance with the duties and responsibilities
required by or appropriate for his position. If any such materials or property
are removed, they shall be returned to their proper files or places of
safekeeping as promptly as possible after the removal shall serve its specific
purpose. Executive shall not make, retain, remove and/or distribute copies of
such materials or property and shall not divulge to any third person the nature
of and/or contents of such materials or property, except as may be necessary or
appropriate in the performance of his duties. Upon the termination of
Executive's employment with the Company, Executive will return to the Company
all originals and copies of such materials and property then in his possession,
whether prepared by Executive or by others.
(ii) Executive agrees that all the Intellectual Property
(as defined below) will be considered "works made for hire" as that term is
defined in Sections 101 and 201 of the Copyright Act (17 U.S.C. xx.xx. 101 and
201) and that all right, title and interest in such Intellectual Property
(including, without limitation, any available patents or copyrights) will be the
sole and exclusive property of the Company. To the extent that any of the
Intellectual Property may not by law be considered a work made for hire, or to
the extent that, notwithstanding the foregoing, Employee retains any interest in
the Intellectual Property, Employee hereby irrevocably assigns and transfers to
the Company any and all right, title, or interest that Employee may have in the
Intellectual Property under patent, copyright, trade secret and trademark law,
in perpetuity or for the longest period otherwise permitted by law, without the
necessity of further consideration. The Company will be entitled to obtain and
hold in its own name all copyrights, patents, trade secrets, and trademarks with
respect to such Intellectual Property. Employee further agrees to execute any
and all documents and provide any further cooperation or assistance reasonably
required by the Company to perfect, maintain or otherwise protect its rights in
the Intellectual Property. If the Company is unable after reasonable efforts to
secure Employee's signature, cooperation or assistance in accordance with the
preceding sentence, whether because of Employee's incapacity or any other reason
whatsoever, Employee hereby designates and appoints the Company or its designee
as Employee's agent and attorney-in-fact, to act on his behalf, to execute and
file documents and to do all other lawfully permitted acts necessary or
desirable to perfect, maintain or otherwise protect the Company's rights in the
Intellectual Property. Employee acknowledges and agrees that such appointment is
coupled with an interest and is therefore irrevocable. For purposes of this
Agreement, "Intellectual Property" means any technical information, inventions,
developments, discoveries, improvements, software, methods, techniques,
formulae, data, processes, systems, documentation and work results
(collectively, the "Inventions") that are first discovered, developed, fixed in
a tangible medium or reduced to practice by Employee: (i) in the course and
within the scope of his employment, (ii) at any time and place while Employee is
employed by the Company, provided
February ___, 1999
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that such Invention is related to or used in connection with the business of the
Company, (iii) which is the result of tasks assigned to Employee by the Company,
or (iii) which results from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Company.
5.2. Rights and Remedies Upon Breach. If Executive breaches, or
threatens to commit a breach of, any of the provisions contained in Section 5.1
(the "Restrictive Covenants"), the Company will have the following rights and
remedies, each of which rights and remedies shall be independent of the others
and severally enforceable, and each of which is in addition to, and not in lieu
of, any other rights and remedies available to the Company under law or in
equity:
(a) Special Enforcement. The Company will have the right and
remedy to have the Restrictive Covenants enforced by injunction of any court of
competent jurisdiction.
(b) Accounting and Restitution. The Company will have the
right and remedy to require Executive to account for and pay over to the Company
all compensation, profits, monies, accruals, increments or other benefits
derived or received by Executive as the result of any breach of the Restrictive
Covenants.
(c) Extension of Restricted Period. If Executive breaches any
of the Restrictive Covenants, then the Restricted Period shall be extended for a
period of time equal to the period of time that Executive was in breach of such
restriction.
5.3. Acknowledgments. Executive acknowledges that the Restrictive
Covenants are included herein in order to induce the Company to continue to
employ Executive pursuant to the other terms of this Agreement and that the
Company would not have entered into this Agreement in the absence of such
restrictions. Executive also acknowledges that any breach or threatened breach
of the Restrictive Covenants would cause irreparable injury to the Company, that
money damages would not provide an adequate remedy to the Company and that the
Company would be entitled to a temporary restraining order, preliminary
injunction, and/or permanent injunction to prevent any breach or threatened
breach of the Restrictive Covenants. Executive agrees that he will not, in any
action or proceeding to enforce any of the provisions of this Agreement, assert
the claim or defense that such an adequate remedy at law exists. Executive
further acknowledges that the duration and geographic scope of Section 5.1 are
reasonable given the nature of this Agreement.
5.4. Judicial Modification. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, such court shall have the
power to modify such provision and, in its modified form, such provision shall
then be enforceable.
February ___, 1999
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5.5. Disclosure of Restrictive Covenants. Executive agrees to
disclose the existence and terms of the Restrictive Covenants to any employer
that Executive may work for after the termination of Executive's employment with
the Company.
6. Termination. Executive's employment hereunder may be terminated
during or at the end of the Term as described below. Upon termination, Executive
shall be entitled only to such compensation and benefits as described in this
Section 6.
6.1. Termination for Absenteeism.
(a) Regular attendance at work or conducting work is an
essential element of the job for which Executive has been hired. Without
limiting the Company's right to terminate Executive pursuant to Section 6.2 or
6.3 hereof, in the event that Executive is absent from work for 180 consecutive
days, Executive's employment hereunder may be terminated by the Company.
(b) In the event of a termination of Executive's employment
hereunder pursuant to Section 6.1(a), Executive will be entitled to receive all
accrued and unpaid Annual Salary and Benefits through the date of such
termination. Except as specifically set forth in this Section 6.1(b), subject to
the terms of any benefits or compensation plans then in force and applicable to
Executive, the Company shall have no liability or obligation to Executive for
compensation or benefits hereunder by reason of such termination.
6.2. Termination by Death. In the event that Executive dies during
the Term, Executive's employment hereunder shall be terminated thereby and the
Company shall pay to Executive's executors, legal representatives or
administrators an amount equal to all accrued and unpaid Annual Salary and
Benefits through the date of such termination. Except as specifically set forth
in this Section 6.2, the Company shall have no liability or obligation hereunder
to Executive's executors, legal representatives, administrators, heirs or
assigns or any other person claiming under or through him by reason of
Executive's death, except that Executive's executors, legal representatives or
administrators will be entitled to receive the payment prescribed under any
death or disability benefits plan(s) in which he is a participant as an employee
of the Company, and to exercise any rights afforded under any compensation or
benefit plan(s) then in effect.
6.3. Cause. The Company shall have the right to terminate
Executive's employment under this Agreement for "Cause." In the event of the
termination of employment for Cause, all rights, benefits and obligations of the
parties under this Agreement (except for Executive's obligations under Section
5) shall immediately terminate except for benefits accrued to the date of
termination. For purposes of this Agreement, "Cause" shall mean the occurrence
of any of the following material violations: (i) alcohol abuse or use of
controlled drugs (other than in accordance with a physician's prescription);
(ii) refusal, failure or inability to perform any material obligation or fulfill
any duty to the Company (other than due to disability), which failure, refusal
or inability is not cured within ten (10) days after delivery of notice thereof
from
February ___, 1999
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the Board; (iii) gross negligence or willful misconduct in the course of
employment; (iv) other conduct involving any type of disloyalty to the Company
or any of its affiliates or subsidiaries, including, without limitation, fraud,
embezzlement, theft or proven dishonesty; and (v) conviction of (or the entry of
a plea of guilty or nolo contendere to) a misdemeanor involving moral turpitude
or a felony.
6.4. Severance Event.
(a) For the purposes of this Agreement:
(i) "Severance Event" means the termination of Executive's
employment prior to the expiration of this Agreement: (A) by the Company other
than pursuant to Sections 6.1, 6.2 or 6.3, or (B) by Executive for Good Reason.
(ii) "Good Reason" means a material breach by the Company
or any material provision of this Agreement, which breach is not remedied within
thirty (30) days after receipt by the Company of written notice thereof from
Executive.
(b) Upon the occurrence of a Severance Event:
(i) the Company shall pay to Executive an amount equal to
his Annual Salary in the calendar year in which the Severance Event occurred,
which amount shall be paid (subject to required withholdings) in twelve (12)
equal consecutive monthly installments commencing one (1) month after the date
of the Severance Event; and
(ii) subject to the terms of any insurance policy funding
any group health plan(s) maintained by the Company and in which the Executive
participated immediately prior the Severance Event, the Company will provide
Executive with eighteen months of continuation coverage under such group health
plan(s) at a cost to Executive equal to the employee cost (if any) of such
coverage immediately prior to the Severance Event.
7. [Reserved]
8. Miscellaneous.
8.1. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Company and Executive and their respective
successors, executors, administrators, heirs and/or permitted assigns; provided,
however, that neither Executive nor the Company may make any assignments of this
Agreement or any interest herein, by operation of law or otherwise, without the
prior written consent of the other party, except that, without such consent, the
Company may assign this Agreement to any successor to all or substantially all
of its assets and business by means of liquidation, dissolution, merger,
consolidation, transfer of assets, or otherwise.
February ___, 1999
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8.2. Entire Agreement. This Agreement contains the entire agreement
and understanding of the parties hereto relating to the subject matter hereof,
and merges and supersedes all prior and contemporaneous discussions, agreements
and understandings of every nature between the parties hereto relating to the
employment of Executive with the Company.
8.3. Amendments. This Agreement may not be changed or modified,
except by an Agreement in writing signed by each of the parties hereto.
8.4. Waiver. Any waiver by either party of any breach of any term
or condition in this Agreement shall not operate as a waiver of any other breach
of such term or condition or of any other term or condition, not shall nay
failure to enforce any provision hereof operate as a waiver of such provision or
of any other provision hereof or constitute, or be deemed a waiver or release of
any other rights, in law or in equity.
8.5. Governing Law. This Agreement shall be governed by, and
enforced in accordance with, the laws of the Commonwealth of Pennsylvania
without regard to conflicts of laws principals.
8.6. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law; provided, however, that if any provision of this Agreement
is held to be invalid, illegal or unenforceable in any respect in a particular
jurisdiction; (i) this Agreement will be reformed, construed and enforced in
that jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein; and (ii) such invalidity, illegality or
unenforceability will not affect the effectiveness or validity of that provision
in any other jurisdiction.
9. Notice. Any notice or communication required or permitted under
this Agreement shall be made in writing and (i) sent by overnight courier, (ii)
mailed by certified or registered mail, return receipt requested or (iii) sent
by telecopier, addressed to the addresses of the parties set forth herein, or to
such other address as either party may from time to time specify by notice given
to the other party in the manner specified above.
10. Survival of Provisions. The provisions of this Agreement set forth
in Sections 5 and 8 hereof will survive the termination of Executive's
employment hereunder or the expiration of this Agreement.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
February ___, 1999
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Please indicate your acceptance of employment and your agreement to
render services to the Company subject to the terms set forth above by executing
and returning the enclosed copy of this letter.
Sincerely,
DOLLAR EXPRESS, INC.
By: /s/ Xxxxxx Spain
---------------------------
Name: Xxxxxx Spain
Title: President
Accepted and Agreed to on this 5th
day of February, 1999:
/s/ Xxxxxxx Xxxxx
-----------------------------
Xxxxxxx Xxxxx
