Exhibit 10.1
InterTan Canada, Ltd. Employment Agreement for Xxxxx X. Xxxx
This EMPLOYMENT AGREEMENT is made, entered into, and is effective as of the
30th day of March, 2004 (the "Effective Date"), by and between InterTan Canada,
Ltd. , (the "Company"), Circuit City Stores, Inc., and Xxxxx X. Xxxx (the
"Executive").
WHEREAS, this Employment Agreement is valid only if the Tender Offer
Agreement date March 30, 2004 is accepted and approved for a minimum of 50.1%
shares.
WHEREAS, the Company desires to employ the Executive as President and Chief
Executive Officer of the Company and Chairman of Logitech Electronics, Inc. ;
WHEREAS, the Company recognizes the Executive's intimate knowledge and
experience in the business of the Company, and desires to secure the employment
of the Executive in the role of President and Chief Executive Officer of the
Company.
WHEREAS, the Executive will develop and/or come in contact with the
Company's proprietary and confidential information which is not readily
available to the public, and which is of great importance to the Company and is
treated by the Company as secret and confidential information.
WHEREAS, this Employment Agreement supercedes and fully replaces any other
Employment Agreement between the Company and the Executive.
NOW, THEREFORE, in consideration of the Executive's continued employment
and of the mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
Article 1. Term of Employment
The Company hereby agrees to employ the Executive and the Executive hereby
accepts employment as President and Chief Executive Officer of the Company, in
accordance with the terms and conditions set forth herein, for an initial period
of three (3) years, commencing as of the Effective Date of this Agreement as
indicated above (the "Initial Term"); subject, however, to earlier termination
as expressly provided herein.
The Initial Term shall automatically be renewed for additional periods of
one (1) year each at the end of the Initial Term, and then again after each
successive year thereafter (collectively, the "Renewal Periods," which, together
with the Initial Term, constitute the "Term" of this Agreement). However, either
party may terminate this Agreement at the end of the Initial Term, or at the end
of any Renewal Period, by giving the other party written notice of intent not to
renew, delivered at least forty-five (45) days prior to the end of the Initial
Term or any Renewal Period. For purposes of this Agreement, an "Employment Year"
shall mean any twelve (12) month period during the Term of this Agreement
beginning on the Effective Date or on any anniversary thereof.
Article 2. Position and Responsibilities
During the Term of this Agreement, the Executive agrees to serve as
President and Chief Executive Officer of the Company. In his capacity as
President and Chief Executive Officer of the Company, the Executive shall report
to the President and Chief Executive Officer of Circuit City Stores, Inc by the
Company and shall have the duties and responsibilities of President and Chief
Executive Officer of the Company and such other duties and responsibilities not
inconsistent with the performance of his duties as President and Chief Executive
Officer of the Company.
Article 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote
substantially his full-time attention and energies to the Company's business,
including the business of any related entity. The Executive covenants, warrants,
and represents that he shall:
(a) Devote his full and best efforts and talents full time to the
performance of his employment obligations and duties for the Company;
(b) Exercise the highest degree of loyalty and the highest standards of
conduct in the performance of his duties;
(c) Comply with all rules, regulations, and policies established or issued
by the Company; and
(d) Refrain from taking advantage, for himself or others, of any corporate
opportunities of the Company.
Article 4. Other Employment
The Executive shall not, during the term hereof, be interested directly or
indirectly, in any manner, as partner, officer, director, investor, stockholder,
advisor, employee, or in any other capacity, in any other business similar to
the Company's business for the Executive's personal advantage or benefit or that
of others. Any other employment or position which might reasonably be deemed
contrary to the best interests of the Company is prohibited. During the term of
employment hereunder, the Executive agrees to obtain the Company's written
consent prior to entering into any other occupation, even if dissimilar to that
of the Company. Such consent may be granted or withheld, in the Company's
absolute discretion. Nothing herein contained shall be deemed to prevent or
limit the right of the Executive to invest in the capital stock or other
securities of any corporation whose stock or securities are regularly traded on
any public exchange, nor shall anything herein contained be deemed to prevent
the Executive from investing in real estate for his own benefit (so long as such
investment (a) is not related to or in support of any entity engaged in a
business similar to that of the Company or (b) does not detract from the
Executive's performance of his duties and obligations hereunder).
Article 5. Compensation and Benefits
As remuneration for all services to be rendered by the Executive during the
Employment Period, and as consideration for complying with the covenants herein,
the Company shall pay and provide to the Executive the following:
5.1. Base Salary. During the Term of this Agreement, the Company shall pay
the Executive a Base Salary in an amount which shall be established and approved
by the Compensation Committee of the Board of Directors; provided, however, that
such Base Salary shall be established at a rate of not less than $530,000 (US$)
plus $15,000 (US$) annual car allowance including actual gasoline costs per
year. This Base Salary shall be subject to all applicable income and employment
taxes and payable in accordance with the normal payroll practices of the
Company. The Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while the Term of this Agreement is in force,
to ascertain whether, in the judgment of the Compensation Committee, such Base
Salary should be changed. If changed, the Base Salary as stated above shall,
likewise, be changed for all purposes of this Agreement.
5.2. Annual Bonus. In addition to his Base Salary, the Executive shall be
entitled to participate in the Company's short-term incentive program, as such
program may exist from time to time during the Term of this Agreement.
Under the Company's short-term incentive plan, the Executive has the
opportunity to earn an annual bonus with respect to any fiscal year of the
Company ("Annual Bonus"). The Annual Bonus, if earned with respect to a
particular fiscal year, is targeted at sixty-six percent (66%) of the
Executive's Base Salary for the fiscal year with respect to which the Annual
Bonus is being paid and is commensurate with the position of President and Chief
Executive Officer of the Company. The Annual Bonus is subject to the performance
of both the Company and the Executive and is dependent upon the approval of the
Compensation Committee of the Company. The award and amount of any Annual Bonus
shall be determined under the Company's short-term incentive plan, at the sole
discretion of the Company's Compensation Committee.
5.3. Long-Term Incentives. During the Term of this Agreement, the Executive
shall be eligible to participate in the Company's long-term incentive plan, to
the extent that the Board of Directors of the Company or the Compensation
Committee, in their discretion, determines is appropriate. The Board of
Directors will make its determination consistent with the methodology used by
the Company for compensating its comparably situated employees.
Specifically, subject to the terms and conditions of the applicable
long-term incentive plan of Circuit City Stores, Inc. ("Circuit City"), the
Executive shall be awarded forty five thousand (45,000) shares of restricted
stock of Circuit City, i.e., "Turnaround Shares" that will be scheduled to vest
in February 2006. Executive must formally accept such award of Turnaround
Shares, in writing, on a form acceptable to Circuit City. Moreover, subject to
the terms and conditions of the applicable stock option plan(s) of Circuit City,
the Executive shall also be awarded seventy-five thousand (75,000)
"nonqualified" stock options in Circuit City stock, that will be scheduled to
vest in June 2006.
In addition, the Executive will receive fifty thousand (50,000) "sign-on"
nonqualified stock options in Circuit City stock, that will be scheduled to vest
in four (4) equal installments over the next four (4) years from the date of the
formal grant of such stock options.
5.4. Retirement Benefits. During the Term of this Agreement, the Company
shall provide to the Executive the opportunity for participation in all Company
pension, insurance, fringe benefit, and executive compensation plans and
programs, subject to the eligibility and participation requirements of such
plans. The Executive's opportunity for participation in all of the plans offered
to Canada-based employees will comply with the requirements of this Article 5.4.
In any event, the Executive's current insurance and fringe benefit plans will
remain in force until such time as they may be replaced by plans at least
similar in benefit type and amount to those in which the Executive is currently
provided so long as the Executive's principal employment is in Canada and in
accordance with applicable Canadian law.
5.5. Employee Benefits. During the Term of this Agreement, the Company
shall provide the Executive all benefits, as commensurate with the position of
President and Chief Executive Officer of the Company, but at a minimum not less
than those provided by the Company to other comparably situated employees
subject to the eligibility requirements and other provisions of such
arrangements. Such benefits may include group term life insurance, comprehensive
health and major medical insurance, dental and life insurance, and short-term
and long-term disability. The provision of benefits comparable to other Canada
based officers will comply with the requirements of this Article 5.5.
5.6. Perquisites. During the Term of this Agreement, the Company shall
provide to the Executive, at the Company's cost, all perquisites, which are
commensurate with the position of President and Chief Executive Officer of the
Company.
5.7. Right to Change Plans. By reason of Articles 5.4 and 5.5 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan or perquisite, so long as such
changes are similarly applicable to comparably situated employees. . In any
event, the Executive's current insurance and fringe benefit plans will remain in
force until such time as they may be replaced by plans at least similar in
benefit type and amount to those in which the Executive is currently provided so
long as the Executive's principal employment is in Canada and in accordance with
applicable Canadian law.
5.8 Company Deferred Compensation Plan. The Company will assume all
liabilities under the InterTan, Inc. Deferred Compensation Plan (for purposes of
this Article 5.8 only, the "Plan") and that the Plan will be amended to provide
that the Executive's Plan Benefit Amount, as that term is defined in the Plan
($3,725,000 US), may be payable to the Executive in three equal installments as
follows: $1,229,250 US $ payment of the Executive's Plan Benefit Amount will be
paid immediately upon the last to occur of (i) the successful closing of the
tender offer contemplated by that certain Tender Agreement and Acquisition
Agreement and Agreement and Plan of Merger dated on or about March 30, 2004 (the
"Closing"), and (ii) the full execution of this Agreement by all required
parties; and second and third installments, as described below, shall be
deposited directly into an escrow account immediately after Closing. Assuming
that the first $1,229,250 US $ payment is made, the second $1,229,250 US $
payment of the Executive's Plan Benefit Amount shall be paid as soon as
reasonably practicable following the date that is two years following the
Closing. Assuming that the first and the second payments are made, the third and
final payment of $1,226,500 US $ of the Executive's Plan Benefit Amount shall be
paid as soon as reasonably practicable following the date that is three (3)
years following the Closing.
In the event that the Executive's employment terminates as the result of
his death pursuant to Article 7.1 before all payments are made under this
Article 5.8, then such payments will be made to the Executive's estate, when
due. In the event that the Executive's employment is terminated due to
disability under Article 7.2 before all payments are made under this Article
5.8, then such payments will be made to the Executive, or to the Executive's
personal representative, if applicable. Circuit City Stores, Inc. ("Circuit
City") will guarantee the obligations of the Company to the Executive under the
Plan, as it is amended consistent with this Article. Notwithstanding anything to
the contrary in this Article 5.8, the Executive shall not be entitled to any
payments, or any further payments, under this Article 5.8 if his employment is
terminated under this Agreement pursuant to Article 7.5 (c) of this Agreement.
Article 6. Expenses
During the Term of this Agreement, the Company shall pay or reimburse the
Executive for all ordinary and necessary expenses, in a reasonable amount, which
the Executive incurs in performing his duties under this Agreement including,
but not limited to, travel, entertainment, professional dues and subscriptions,
and all dues, fees, and expenses associated with membership in various
professional, business, and civic associations and societies in which the
Company finds that the Executive's participation is in the best interests of the
Company. The payment of reimbursement of expenses shall be subject to such rules
concerning documentation of expenses and the type or magnitude of such expenses
as the Compensation Committee of the Board of Directors may establish from time
to time.
Article 7. Employment Termination
7.1. Termination Due to Retirement or Death. In the event the Executive's
employment ends by reason of Retirement (defined as voluntary "Normal
Retirement" under the then established definitions and rules of the Company's
tax-qualified retirement plan in which the Executive participates) or the
Executive's death during the term of this Agreement, the Executive's benefits
shall be determined in accordance with the Company's retirement, survivor's
benefits, insurance, and/or other applicable programs of the Company then in
effect. In addition, all stock grants, except performance-based grants in the
case of Retirement, will become immediately vested and may be exercised by the
Executive, the Executive's personal representatives, distributees, legatees, or
estate at any time before the expiration date of the grant.
The Effective Date of Termination due to Retirement or death shall be (a)
ninety (90) days following the date the Executive provides the Company with
written notice that the Executive is ending employment by reason of Retirement
or (b) on the Executive's date of death, as the case may be. Upon the Effective
Date of Termination, the Company shall be obligated to pay the Executive or, if
applicable, the Executive's estate; (a) any salary that was accrued but not yet
paid as of the Effective Date of Termination;(b) the unpaid Annual Bonus, if
any, with respect to the calendar year preceding the Effective Date of
Termination (such Annual Bonus, if any, to be determined in the manner it would
have been determined and payable at the time it would have been payable under
Section 4.2 had there been no termination of the Employment Period); (c) a pro
rata share of the target Annual Bonus for the calendar year in which the
Effective Date of Termination occurs (the calculation by which the target Annual
Bonus is multiplied by a fraction, the numerator of which is the number of full
completed days in the bonus plan year through the Effective Date of Termination,
and the denominator of which is three hundred sixty-five (365)); and (d) all
other rights and benefits that the Executive is vested in, pursuant to other
plans and programs of the Company or Circuit City Stores, Inc.
7.2. Termination Due to Disability. The Company shall have the right to
terminate the Executive's employment for disability. For the purposes of this
Agreement, disability shall mean any physical or mental illness or injury that
causes the Executive to be unable to substantially perform the Executive's
normal duties; provided however that the Executive shall not be considered
disabled until: (i) the Executive has been so disabled for 180 days during any
period of twelve (12) consecutive months; (ii) the Executive's attending
physician shall have furnished to the Company certification that the return of
the Executive to his normal duties is impossible or improbable; or (iii) the
Executive is determined to be totally disabled by the disability insurer then
insuring the Executive, if any.
The Effective Date of Termination due to Disability shall be specified, in
a written notice, by the Executive's immediate manager, and such written notice
shall be delivered to the Executive, but shall be no less than thirty (30)
calendar days after the delivery of such written notice to the Executive. Upon
the Effective Date of Termination, the Company shall be obligated to pay the
Executive [or, if applicable, the Executive's estate]: (a) any salary that was
accrued but not yet paid as of the Effective Date of Termination; (b) the unpaid
Annual Bonus, if any, with respect to the calendar year preceding the Effective
Date of Termination (such Annual Bonus, if any, to be determined in the manner
it would have been determined and payable at the time it would have been payable
under Article 5.2 had there been no termination of the Employment Period); and
(c) all other rights and benefits that the Executive is vested in, pursuant to
other plans and programs of the Company.
It is expressly understood that the Disability of the Executive for a
period of one hundred eighty (180) calendar days or less in the aggregate during
any period of twelve (12) consecutive months, in the absence of any reasonable
expectation that his Disability will exist for more than such a period of time,
shall not constitute a failure by him to perform his duties hereunder and shall
not be deemed a breach or default, and the Executive shall receive full
compensation for any such period of Disability or for any other temporary
illness or incapacity during the term of this Agreement.
If the employment of the Executive terminates because of disability, all of
the Executive's outstanding stock grants, including performance based grants,
will become immediately vested, effective as of the date of the Executive's
disability. Then, the Executive, the Executive's personal representatives,
distributees, or legatees may exercise the Executive's grants at any time before
the expiration date of the grant.
7.3. Voluntary Termination by the Executive. The Executive may terminate
his employment and this Agreement at any time by giving the Company at least
forty-five (45) days written notice. The Company reserves the right to require
the Executive not to work during the notice period but shall pay the Executive
his full Base Salary, at the rate then in effect as provided in Article 5.1
herein, through the notice period plus all other benefits to which the Executive
has a vested right on the last day of employment (for purposes of this
paragraph, the Executive shall not be paid any Annual Bonus with respect to the
fiscal year in which voluntary termination under this Article 7.3 occurs). The
Company thereafter shall have no further obligations under this Agreement.
7.4. Involuntary Termination by the Company Without Cause. The Company may
terminate the Executive's employment, at any time, for any reason other than
death, Disability, Retirement, or for Cause ("involuntary termination without
Cause"), by providing the Executive with at least forty-five (45) days written
notice. In the event that the Company exercises this Article 7.4 within the
first twenty-four (24) months of employment, the Executive will not be entitled
to the provisions of this Article 7.4. The Executive will however, be provided
with his Deferred Compensation as described in Article 5.8 above.
In the event that the Company exercises this Article 7.4 after the conclusion of
twenty-four (24) months of employment, the following terms apply:
(a) The Company's decision not to renew this Agreement at the Expiration
Date of the Initial Term or any Renewal Period shall be deemed an involuntary
termination without cause; provided, however, that for purposes of this Article
7.4(a), no variation, alteration, modification, cancellation, change or
amendment made to this Agreement pursuant to Article 12.3 or 12.4 at a time
other than the Expiration Date of the Initial Term or any Renewal Period, shall
be deemed an involuntary termination without Cause.
(b) Upon the Effective Date of Termination specified by the Company for
termination by the Company without cause, the Company shall pay to the
Executive, in equal monthly installments over the following eighteen (24) month
period an amount equal to the product of two (2) times both the Executive's Base
Salary and the Executive's target Annual Bonus established for the fiscal year
in which the Executive's Effective Date of Termination occurs. In addition, the
Company shall continue, at the same cost to the Executive as existed as of the
Effective Date of Termination, all health and welfare benefit plan participation
for one (1) full year following the Executive's termination of employment
(c)The Company shall also provide the Executive with six months of outplacement
services.
(d) Any unvested stock options or any outstanding restricted stock,
excluding restricted stock grants issued under a performance based plan, that
would become vested (that is, transferable and non-forfeitable) if the Executive
remained an employee through the Initial Term or the then current Renewal Period
of this Agreement will become vested as of the date of the Executive's
termination of employment. The Executive must satisfy the tax withholding
requirements.
The Company thereafter shall have no further obligations under this
Agreement.
7.5. Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Company from terminating the Executive's employment under this
Agreement, without notice or liability for doing so, for "Cause."
For purposes of this Agreement, "Cause" means:
(a) The Executive's material breach of this Agreement, which breach is not
cured within ten (10) days of receipt by the Executive of written notice from
the Company specifying the breach;
(b) The Executive's gross negligence in the performance of his material
duties hereunder, intentional nonperformance or intentional misperformance of
such duties, misconduct or refusal to abide by or comply with the directives of
the Board, his superior officers, or the Company's policies and procedures,
which actions continue for a period of ten (10) days after receipt by the
Executive of written notice of the need to cure or cease;
(c) Conviction of a felony or other crime involving moral turpitude;
(d) The Executive engaging in illegal conduct, dishonesty or fraud with
respect to the business or affairs of the Company that in the reasonable
judgment of the Company materially and adversely affects the operations or
reputation of the Company; or
(e) Failure of the Executive to disclose to the Executive's superior a
conflict of interest, of which the Executive knew or, with reasonable diligence,
would have known, in connection with any transaction entered into on behalf of
the Company.
(f) Failure of the Executive to agree to a modification of this Agreement,
pursuant to paragraph 12.3 below, when the purpose of the modification is to
comply with applicable federal, state and/or local laws or regulations, or when
such modification is designed to further define the restrictions of Article 8 or
otherwise enhance the enforcement of Article 8 without increasing the scope of
the Article 8 restrictions.
In the event this Agreement is terminated for Cause, the Company shall pay
the Executive his Base Salary through the Effective Date of Termination for
cause and the Executive shall immediately thereafter forfeit all rights and
benefits (other than vested benefits) he would otherwise have been entitled to
receive under this Agreement. The Company thereafter shall have no further
obligations under this Agreement.
7.6. Termination for Good Reason. At any time during the term of this
Agreement, the Executive may terminate this Agreement for Good Reason (as
defined below) by giving the Company forty-five (45) days written notice, which
notice sets forth in detail the facts and circumstances claimed to provide a
basis for such termination. However, Company shall, at its option, have thirty
(30) days from receipt of such written notice to cure any event or circumstance
that could constitute Good Reason.
If Company chooses not to cure, the Effective Date of Termination for Good
Reason shall occur upon the expiration of the forty-five (45) days prior notice
period that is specified by the Executive in the written notice, and the Company
shall pay and provide to the Executive the benefits set forth in this Article
7.6.
For purposes of this Agreement, Good Reason shall mean, without the
Executive's express written consent, the occurrence of any one (1) or more of
the following:
(a) Failing to maintain the Executive's participation in the Company's
annual bonus and long-term incentive plan in a manner that is consistent with
other similarly situated Executive employees of the Company; or
(b) Failing to maintain the Executive's benefits under, or relative level
of participation in, the Company's employee benefit or retirement
plans, perquisites, policies, practices, or arrangements in which the
Executive participates as of the Effective Date of this Agreement at a
level consistent with other similarly situated Executive employees of
the Company.
(c) Reducing the Executive's Base Salary;
(d) Terminating the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(e) Failing to comply with and satisfy Article 10.1 by requiring any
successor to the Company to assume and agree to perform the Company's
obligations hereunder.
Upon the Effective Date of Termination, the Executive shall be entitled to
receive the same payments and benefits as he is entitled to receive following an
involuntary termination of his employment by the Company without Cause, as
specified in Article 7.4 herein. Said payment shall commence within forty-five
(45) calendar days following the Effective Date of Termination.
The Executive's right to terminate employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness.
Article 8. Noncompetition and Confidentiality
8.1. Noncompetition.
(a) During the Executive's employment and for a period of eighteen (18)
months following the last day of the Executive's employment, the Executive shall
not directly or indirectly compete with the Company and any related entity by
engaging, in a competitive capacity, in any business that is engaged in the same
or similar business of the Company and any related entity in one or more
Metropolitan Statistical Areas or their Canadian equivalent ("MSAs") in which
the Company and any related entity is doing business on the last day of the
Executive's employment. A business will not be considered to be in competition
with the Company or any related entity for purposes of this paragraph 8.1(a) or
paragraph 8.1(b) below if:
(i) The business or the operating unit of the business in which the
Executive is employed or with which the Executive is associated (collectively
the "Business Unit") is not engaged in the retail sales of consumer electronics;
(ii) If sales of the Business Unit's products or services in the retail
sales and service of consumer electronics constitute less than ten percent (10%)
of such Business Unit's sales; or
(iii) If the sales of the Business Unit in the retail sales and service
of consumer electronics do constitute more than ten percent (10%) of the sales
of the Business Unit, but there is no geographic overlap between such Business
Unit's and the Company's business locations.
Notwithstanding the foregoing, nothing herein shall be deemed to prevent or
limit the right of the Executive to invest in the capital stock or other
securities of any corporation whose stock or securities are regularly traded on
any public exchange, nor shall anything herein contained be deemed to prevent
Employee from investing in real estate for his own benefit (as long as such
investment is not related to or in support of any entity engaged in the same or
similar business as the Company or any related entity in competition with the
Company and any related entity in one or more MSA's in which the Company and any
related entity is doing business during the Executive's employment).
(b) During the Executive's employment and for a period of eighteen (18)
months following the last day of the Executive's employment, the Executive shall
not directly or indirectly compete with the Company and any related entity by
engaging, in a competitive capacity, in any business engaged in the same or
similar business of the Company and any related entity in one or more MSAs
where, on the last day of the Executive's employment, the Company and any
related entity is engaged in real estate site selection or has taken further
steps toward the commencement of operations in the future, of which the
Executive is aware.
(c) The Executive agrees that competition, as set forth in Article 8.1(a)
above, shall include, but not be limited to, engaging in competitive activity,
as an individual, as a partner, as a joint venturer with any other person or
entity, or as an employee, agent, or representative of any other person or
entity.
(d) It is the specific intent of the parties that the Executive shall be
restricted from competing directly or indirectly with any segment of the
Company's business and related entity's business in which the Executive engaged
prior to the last day of his employment and from any segment of the Company's
business and related entity's business about which the Executive acquired
proprietary or confidential information during the course of his employment.
(e) If any provision of this Article 8.1 relating to the time period,
geographic area or scope of restricted activities shall be declared by a court
of competent jurisdiction to exceed the maximum time period, geographic area or
scope of activities, as applicable, that such court deems reasonable and
enforceable, said time period, geographic area or scope of activities shall be
deemed to be, and thereafter shall become, the maximum time period, scope of
activities or largest geographic area that such court deems reasonable and
enforceable and this Agreement shall automatically be considered to have been
amended and revised to reflect such determination.
(f) The Executive and the Company have examined in detail this Covenant Not
to Compete and agree that the restraint imposed upon the Executive is reasonable
in light of the legitimate interests of the Company, and it is not unduly harsh
upon the Executive's ability to earn a livelihood.
8.2. Non-Solicitation/Non-Hire of Employees. The Executive agrees that
during the Executive's employment with the Company and for a period of eighteen
(18) months following the last day of the Executive's employment, the Executive
shall not, directly or indirectly, solicit or induce, or attempt to solicit or
induce, any employee of the Company and any related entity to leave the Company
and any related entity for any reason whatsoever or hire any individual employed
by the Company and related entity. For purposes of this Article 8.2, employee
shall mean any individual employed by the Company and any related entity on the
last day of the Executive's employment or within the three-month period prior to
the last day of the Executive's employment.
8.3. Confidentiality. The Company has advised the Executive and the
Executive acknowledges that it is the policy of the Company to maintain as
secret and confidential all Protected Information (as defined below), and that
Protected Information has been and will be developed at substantial cost and
effort to the Company. The Executive agrees to hold in strict confidence and
safeguard any information of or about the Company and any related entity gained
by the Executive in any manner or from any source during the Executive's
employment. The Executive shall not, without the prior written consent of the
Company, at any time, directly or indirectly, divulge, furnish, use, disclose or
make accessible to any person, firm, corporation, association, or other entity
(otherwise than as may be required in the regular course of the Executive's
employment), either during the Executive's employment with the Company or
subsequent to the last day of the Executive's employment, any Protected
Information, or cause any such information of the Company and any related entity
to enter the public domain.
The Executive understands and agrees that any information, data and/or
trade secrets about Company and any related entity or its suppliers and/or
distributors is the property of the Company and is essential to the protection
of the Company's goodwill and to the maintenance of the Company's competitive
position and accordingly should be kept secret. For purposes of this Agreement,
"Protected Information" means trade secrets, confidential and proprietary
business information of or about the Company and any related entity, and any
other information of the Company and any related entity, including, customer
lists (including potential customers), sources of supply, processes, plans,
materials, pricing information, internal memoranda, marketing plans, promotional
plans, internal policies, research, purchasing, accounting and financial
information, computer programs, hardware, software, and products and services
which may be developed from time to time by the Company and any related entity
and its agents or employees, including the Executive; provided, however, that
information that is in the public domain (other than as a result of a breach of
this Agreement), approved for release by the Company or lawfully obtained from
third parties who are not bound by a confidentiality agreement with the Company,
is not Protected Information.
Nothing contained in this Article is intended to reduce in any way
protection available to the Company pursuant to the Uniform Trade Secrets Act as
adopted in Virginia or any other state or other applicable laws which prohibit
the misuse or disclosure of confidential or proprietary information.
8.4. Acknowledgement of Covenants. The parties hereto acknowledge that the
Executive's services are of a special, extraordinary, and intellectual character
which gives him unique value, and that the business of the Company and its
subsidiaries is highly competitive, and that violation of any of the covenants
provided in this Article 8 would cause immediate, immeasurable, and irreparable
harm, loss, and damage to the Company not adequately compensable by a monetary
award. The Executive acknowledges that the time, scope of activities and
geographical area restrained by the provisions of this Article 8 are reasonable
and do not impose a greater restraint than is necessary to protect the goodwill
of the Company's business. The Executive further acknowledges that he and the
Company have negotiated and bargained for the terms of this Agreement and that
the Executive has received adequate consideration for entering into this
Agreement. In the event of any such breach or threatened breach by the Executive
of any one or more of such covenants, the Company shall be entitled to such
equitable and injunctive relief as may be available to restrain the Executive
from violating the provisions hereof. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available at law or in
equity for such breach or threatened breach, including the recovery of damages
and the immediate termination of the employment of the Executive hereunder for
cause.
Article 9. Change in Control
9.1. Change in Control. This Article 9 shall not become effective, and the
Company shall have no obligation hereunder, if the employment of the Executive
with the Company shall terminate prior to a Change in Control (as defined in
Article 9.2 below) of the Company.
9.2. Definition of Change in Control. Change in Control of the Company
means, and shall be deemed to have occurred, upon the first to occur of any of
the following events:
(a) The acquisition by any individual, entity, or group (a "Person"),
including a "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), but excluding
an Affiliate (as defined below) of the Company, of beneficial ownership within
the meaning of Rule 13d-3 promulgated under the Exchange Act, of thirty-five
percent (35%) or more of either: (i) the then outstanding shares of common stock
of Circuit City (the "Outstanding Common Stock"); or (ii) the combined voting
power of the then outstanding securities of Circuit City entitled to vote
generally in the election of directors (the "Outstanding Voting Securities");
excluding, however, the following: (A) any acquisition directly from Circuit
City (excluding an acquisition resulting from the exercise of an option,
conversion right, or exchange privilege unless the security being so exercised,
converted or exchanged was acquired directly from Circuit City); (B) any
acquisition by Circuit City; (C) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by Circuit City or any corporation
controlled by Circuit City; or (D) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i), (ii), and (iii) of subsection
(c) of this Article 9.2;
(b) Individuals who, as of the Effective Date, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least a
majority of such Board; provided that any individual who becomes a director of
Circuit City subsequent to the Effective Date, whose election, or nomination for
election by Circuit City's stockholders, was approved by the vote of at least a
majority of the directors then comprising the Incumbent Board shall be deemed a
member of the Incumbent Board; and provided further, that any individual who was
initially elected as a director of Circuit City as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board shall not be deemed a member of the Incumbent Board;
(c) The consummation of a reorganization, merger or consolidation of
Circuit City or sale or other disposition of all or substantially all of the
assets of Circuit City (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which: (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Common Stock and the Outstanding Voting Securities immediately prior
to such Corporate Transaction will beneficially own, directly or indirectly,
more than sixty percent (60%) of, respectively, the outstanding shares of common
stock, and the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction (including,
without limitation, a corporation, which as a result of such transaction owns
Circuit City or all or substantially all of Circuit City's assets either
directly or indirectly) in substantially the same proportions relative to each
other as their ownership, immediately prior to such Corporate Transaction, of
the Outstanding Common Stock and the Outstanding Voting Securities, as the case
may be; (ii) no Person (other than: Circuit City; any employee benefit plan (or
related trust) sponsored or maintained by Circuit City or any corporation
controlled by Circuit City; the corporation resulting from such Corporate
Transaction; and any Person which beneficially owned, immediately prior to such
Corporate Transaction, directly or indirectly, twenty-five percent (25%) or more
of the Outstanding Common Stock or the Outstanding Voting Securities, as the
case may be) will beneficially own, directly or indirectly, twenty-five percent
(25%)or more of, respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined voting
power of the outstanding securities of such corporation entitled to vote
generally in the election of directors; and (iii) individuals who were members
of the Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate Transaction;
(d) The consummation of a plan of complete liquidation, dissolution, or
sale of substantially all the assets of Circuit City; or
(e) The consummation of a reorganization, merger or consolidation of the
Company after which the Company is not an Affiliate of Circuit City or the sale
or other disposition of all or substantially all of the assets of the Company to
an entity that is not an Affiliate of Circuit City.
For purposes of this Article 9, "Affiliate" shall mean with reference
to a specified Person, any Person that directly or indirectly through one (1) or
more intermediaries controls or is controlled by or is under common control with
the specified Person. For purposes of this definition, "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with"), as used in respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of such Person, whether through ownership of voting securities or by
contract or otherwise.
9.3. Change-in-Control Severance Benefits. If at any time during the Term
of this Agreement there is a Change in Control of the Company and the
Executive's employment is terminated for any reason other than death,
Disability, Retirement, Voluntary Termination other than Good Reason or Cause
within the two (2) year period following the Change in Control, the Company
shall provide to the Executive the following:
(a) Base Salary and all other benefits due him as if he had remained an
employee pursuant to Article 5 through the remainder of the month in which the
termination occurs, less applicable withholding taxes and other authorized
payroll deductions;
(b) A lump-sum severance allowance in an amount that is equal to the
product of two (2) times both the Executive's Base Salary at the rate in effect
immediately prior to the termination and the Executive's target Annual Bonus
established for the fiscal year in which the Executive's termination of
employment occurs;
(c) Continuation at the same cost to the Executive as existed as of the
Effective Date of Termination of Agreement of all health, welfare, and benefit
plan participation for two (2) full years following employment termination;
(d) Provision of six months of outplacement services for the Executive; and
(f) A lump-sum payment equal to the two (2) year costs of perquisites
outlined in Article 5.6 above.
(g) Any unvested stock options that would become vested if the Executive
remained an employee through the Initial term or the then current
Renewal Period of this Agreement will become vested as of the date of
the Executive's termination of employment. The Executive must satisfy
the tax withholding requirements.
9.4 Excise Tax Equalization Payment. In the event that the Executive
becomes entitled to severance benefits under this Agreement or any other
agreement with or plan of the Company (in the aggregate, the "Total
Payments"), if any of the Total Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code or any similar excise tax
that may hereafter be imposed, whether by the government of Canada or the
government of the United States), the Company shall pay to the Executive in
cash an additional amount (the "Gross -Up Payment"), such that the net
amount retained by the Executive after deduction of any Excise Tax upon the
Total Payments and any provided for by the Article 9.4 (including any
applicable FICA and FUTA), shall be equal to the Total Payments. The
Company shall make such payment to the Executive as soon as practicable
following the Effective Date of Termination, but in no event beyond (30)
days from such date.
For the purposes of determining the amount of the Gross-Up Payment, the
Executive shall be required to furnish the Company with a Statement
documenting the calculation of the Excise Tax at the Executive's expense.
Article 10. Assignment
10.1. Assignment by Company. This Agreement may and shall be assigned or
transferred to, and shall be binding upon and shall inure to the benefit of, any
successor of the Company, and any such successor shall be deemed substituted for
all purposes of the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm, corporation, or
business entity which, at any time, whether by merger, purchase, or otherwise,
acquires all or substantially all of the assets or the business of the Company.
In addition, the obligations of the Executive under Articles 8 and 12 of this
Agreement shall continue after the termination of the Executive's employment and
shall be binding on the Executive's heirs, executors, legal representatives and
assigns.
Failure of the Company to obtain the agreement of any successor to be bound
by the terms of this Agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement, and shall immediately entitle the Executive
to compensation from the Company in the same amount and on the same terms as the
Executive would be entitled in the event of a Termination of Employment for Good
Reason as provided by Article 7.6. Except as provided herein, the Company may
not otherwise assign this Agreement.
10.2. Assignment by Executive. The services to be provided by the Executive
to the Company hereunder are personal to the Executive, and the Executive's
duties may not be assigned by the Executive; provided, however, that this
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive dies while any
amounts payable to the Executive hereunder remain outstanding, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee, or other designee or, in the
absence of such designee, to the Executive's estate.
Article 11. Dispute Resolution and Notice
11.1. Issue Resolution. Except for actions initiated by the Company to
enjoin a breach by, and/or recover damages from the Executive related to
violation of any of the restrictive covenants in Article 8 of this Agreement,
which Company may bring in an appropriate court of law or equity, any
disagreement between the Executive and the Company concerning anything covered
by this Agreement or concerning other terms or conditions of the Executive's
employment or the termination of the Executive's employment will be settled by
final and binding arbitration pursuant to the Company's Associate Issue
Resolution Program. The Dispute Resolution Agreement and the Dispute Resolution
Rules and Procedures are incorporated herein by reference as if set forth in
full in this Agreement. The decision of the arbitrator will be final and binding
on both the Executive and the Company and may be enforced in a court of
appropriate jurisdiction.
11.2. Notice. Any notices, requests, demands, or other communications
provided for by this Agreement shall be sufficient if in writing, and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company or, in the case of the Company, at its principal
offices.
Article 12. Miscellaneous
12.1. Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto, with respect to the
subject matter hereof, and constitutes the entire agreement of the parties with
respect thereto. Without limiting the generality of the foregoing sentence, this
Agreement completely supersedes any and all prior employment agreements entered
into by and between the Company, and the Executive, and all amendments thereto,
in their entirety.
12.2. Return of Materials. Upon the termination of the Executive's
employment with the Company, however such termination is effected, the Executive
shall promptly deliver to Company all property, records, materials, documents,
and copies of documents concerning the Executive's business and/or its customers
(hereinafter collectively "Company Materials") which the Executive has in his
possession or under his control at the time of termination of his employment.
The Executive further agrees not to take or extract any portion of the Company
Materials in written, computer, electronic or any other reproducible form
without the prior written consent of the Chairman, President and Chief Executive
Officer.
12.3. Modification. This Agreement shall not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their legal
representatives.
12.4. Severability. It is the intention of the parties that the provisions
of the restrictive covenants herein shall be enforceable to the fullest extent
permissible under the applicable law. If any clause or provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term hereof, then the remainder of this
Agreement shall not be affected thereby, and in lieu of each clause or provision
of this Agreement which is illegal, invalid or unenforceable, there shall be
added, as a part of this Agreement, a clause or provision as similar in terms to
such illegal, invalid or unenforceable clause or provision as may be possible
and as may be legal, valid, and enforceable.
12.5. Counterparts. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
12.6. Tax Withholding. The Company may withhold from any benefits payable
under this Agreement all applicable taxes as may be required pursuant to any law
or governmental regulation or ruling.
12.7. Restrictive Covenants of the Essence. The restrictive covenants of
the Executive set forth herein are of the essence of this Agreement; they shall
be construed as independent of any other provision in this Agreement; and the
existence of any claim or cause of action of the Executive against the Company,
whether predicated on this Agreement or not, shall not constitute a defense to
the enforcement by the Company of the restrictive covenants contained herein.
The Company shall at all times maintain the right to seek enforcement of these
provisions whether or not the Company has previously refrained from seeking
enforcement of any such provision as to the Executive or any other individual
who has signed an agreement with similar provisions.
12.8 Beneficiaries. The Executive may designate one (1) or more persons or
entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement. Such designation must be in the form of a signed
writing acceptable to the Executive's immediate manager. The Executive may make
or change such designation at any time.
12.9. Payment Obligation Absolute. The Company's obligation to make the
payments and the arrangement provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against the Executive or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or demand.
Each and every payment made hereunder by the Company shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive or from whomsoever may be entitled thereto, for any reasons
whatsoever.
The Executive shall not be obligated to seek other employment in mitigation
of the amounts payable or arrangements made under any provision of this
Agreement, and the obtaining of any such other employment shall in no event
effect any reduction of the Company's obligations to make the payments and
arrangements required to be made under this Agreement; provided, however, that
continued health, welfare, and benefit plan participation pursuant to Article
7.4 or Article 9.3 herein shall be discontinued in the event the Executive
becomes eligible to receive substantially similar benefits from a successor
employer.
12.10. Contractual Rights to Benefits. This Agreement establishes and
vests in the Executive a contractual right to the benefits to which he is
entitled hereunder. However, nothing herein contained shall require or be deemed
to require, or prohibit or be deemed to prohibit, the Company to segregate,
earmark, or otherwise set aside any funds or other assets, in trust or
otherwise, to provide for any payments to be made or required hereunder.
12.11 Guarantee of Benefits. Circuit City Stores, Inc. will guarantee the
obligations of the Company to the Executive under this Agreement.
Article 13. Governing Law
To the extent not preempted by federal law, the provisions of this
Agreement shall be construed and enforced in accordance with the laws of the
Province of Ontario, without reference to its choice of law statutes or
decisions.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the Effective Date.
Circuit City Stores, Inc.
By: /s/ W. Xxxx XxXxxxxxxx
----------------------
Chairman
EXECUTIVE:
/s/ Xxxxx X. Xxxx
------------------
Xxxxx X. Xxxx
ATTEST: ____________________________________
INTERTAN CANADA, LTD.
By /s/ Xxxxxxx X. Xxxxx
---------------------------------
Xxxxxxx X. Xxxxx
Xx. V.P. & Secretary
