EXHIBIT (10.18)
(PAGE NUMBERS REFER TO PAPER DOCUMENT ONLY)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated February 28, 2001, between CONSUMER
PROGRAMS INCORPORATED, a Missouri corporation (the "Corporation"),
and XXXXX XXXXXXX (the "Executive").
WHEREAS, the Corporation desires to employ the Executive in
the capacity of Chairman of the Board and Chief Executive
Officer;
WHEREAS, the Executive will be one of the key executives
of the Corporation;
WHEREAS, there is much competition for the type of business
performed by the Corporation and the Corporation is active in the
product and service markets in which it competes;
WHEREAS, Executive, during his or her employment, will be
entrusted with confidential information;
WHEREAS, Executive and the Corporation recognize and
acknowledge that, to ensure the continued growth and stability of
the Corporation, it is necessary to obtain an agreement
from Executive not to compete with the Corporation and not to
disclose confidential information of the Corporation; and
WHEREAS, the Corporation desires that the Executive commence
and continue employment with the Corporation as a result his or
her potential for making future contributions to the Corporation,
and the Executive is willing to make a commitment to commence and
continue such employment upon the terms and subject to the
conditions of this Agreement.
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NOW, THEREFORE, in consideration of the mutual promises
contained herein and other good and valuable consideration, the
parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliated Companies" shall mean any corporation
(or other business entity) controlling, controlled by or under
common control with the Corporation.
(b) "Beneficiary" shall mean the person designated in
writing by the Executive as his or her beneficiary under this
Agreement, or in the absence of such designation, his or her
estate.
(c) "Benefit Plans" shall mean all benefit plans of the
Corporation and its Affiliated Companies (other than Savings
Plans), including, without limitation, medical, dental,
disability, group life, accidental death and travel accident
insurance plans and programs and all other benefits available to
employees of the Corporation and its Affiliated Companies.
Except as otherwise provided in applicable benefit plan
documents, all benefits available to Executive shall begin on
the date commencement of the Term of Employment.
(d) "Cause" shall mean:
(i) prior to a Change of Control:
(A) Conduct or activity of the Executive
materially detrimental to the Corporation's reputation or
business operations;
(B) Gross or habitual neglect or breach of
duty or misconduct of the Executive in discharging the duties of
his or her position; or
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(C) Prolonged absence by the Executive from
his or her duties (other than on account of illness or
disability) without the consent of the Corporation.
(ii) after a Change of Control:
(A) An act or acts of dishonesty on the
Executive's part which are intended to result in his or her
substantial personal enrichment at the expense of the
Corporation;
(B) Any material violation by the Executive
of his or her obligations and covenants pursuant to this
Agreement which is demonstrably willful and deliberate on the
Executive's part and which results in material injury to the
Corporation; or
(C) The conviction of Executive of a felony or
of a crime involving moral turpitude.
(e) "Change of Control" shall mean a change in control
of a nature that would be required to be reported in response to
Item 1(a) of the Current Report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended ("Exchange Act") or would have
been required to be so reported but for the fact that such event
had been "previously reported" as that term is defined in Rule
12b-2 of Regulation 12B of the Exchange Act unless the
transactions that give rise to the change in control are
approved or ratified by a majority of the members of the
Incumbent Board of CPI Corp. who are not employees of the
Corporation; provided that, without limitation, notwithstanding
anything herein to the contrary, such
a change in control shall be deemed to have occurred if, (i) any
Person is or becomes the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of CPI Corp. representing 40% or more of the combined
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voting power of CPI Corp.'s then outstanding securities
ordinarily (apart from rights accruing under special
circumstances) having the right to vote at elections of
directors ("Voting Securities"), (ii) individuals who constitute
the Board of CPI Corp. on the date hereof (the "Incumbent
Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by CPI Corp.'s shareholders, was approved
by a vote of at least three-quarters of the directors comprising
the Incumbent Board (either by a specific vote or by approval of
the proxy statement of CPI Corp. in which such person is named
as a nominee for director, without objection to such nomination)
shall be, for purposes of this clause (ii), considered as though
such person were a member of the Incumbent Board, or (iii)
approval by the stockholders of CPI Corp. of a reorganization,
merger or consolidation, in each case, with respect to which
persons who were the stockholders of CPI Corp. immediately prior
to such reorganization, merger or consolidation do not,
immediately thereafter, own, directly or indirectly, more than
50% of the combined voting power entitled to vote generally in
the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or a
liquidation or dissolution of CPI Corp. or of the sale of all or
substantially all of the assets of CPI Corp. For purposes of
this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or
other "person," as such term is used in Section 14(d) of the
Exchange Act, other than CPI Corp., the Corporation or an
Affiliated Company or any employee benefit plan(s) sponsored or
maintained by the Corporation or any Affiliated Company.
(f) "Code" shall mean the Internal Revenue Code of
1986, as may be
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amended from time to time.
(g) "Continuing Directors" shall have the meaning set
forth in Paragraph 3(G) of Article Ten of CPI Corp.'s Certificate
of Incorporation.
(h) "Fiscal Year" shall mean the Fiscal Year of the
Corporation.
(i) "Permanent Disability" shall mean the inability of
Executive to perform the services contemplated under this
Agreement for a period of at least one hundred eighty (180)
consecutive calendar days or for thirty-five (35) weeks (whether
or not consecutive) in any twelve (12) month period on account
of any sickness, injury or other infirmity or disability.
(j) "Retirement" shall mean the Executive's voluntary
or involuntary termination of employment with the Corporation
except for termination on account of (i) Cause, (ii) death or
(iii) Permanent Disability before attaining age sixty-five (65).
(k) "Savings Plans" shall mean all compensation plans
and programs, including without limitation, savings plans, stock
option plans, deferred compensation plans and retirement plans
of the Corporation and its Affiliated Companies.
(l) "Term of Employment" shall have the meaning set
forth in Section 3 hereof.
(m) "Vesting Percentage/Supplemental Retirement
Benefits" shall mean the percentage of Supplemental Retirement
Benefits in which Executive has a nonforfeitable interest (except
in the event of termination for Cause) based upon the number of
Years of Service Executive has completed, determined as follows:
Completed Years of Service Vesting Percentage
-------------------------- ------------------
0 0%
5
Completed Years of Service Vesting Percentage
-------------------------- ------------------
1 10%
2 20%
3 30%
4 40%
5 50%
6 60%
7 70%
8 80%
9 90%
10 100%
Notwithstanding anything herein to the contrary, if Executive's
employment with the Corporation terminates following a Change of
Control, unless such termination is for Cause, for purposes of
Subsection 6(c) of this Agreement Executive shall be deemed to
have completed ten (10) years of Service and his or her Vesting
Percentage shall be deemed to be 100%.
(n) "Vesting Percentage/Death and Disability Benefits"
shall mean the percentage of death benefits and disability
benefits in which Executive has a nonforfeitable interest (except
in the event of termination for Cause) based upon the number of
Years of Service Executive has completed, determined as follows:
Completed Years of Service Vesting Percentage
-------------------------- ------------------
0 0%
1 20%
2 40%
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Completed Years of Service Vesting Percentage
-------------------------- ------------------
3 60%
4 80%
5 100%
Notwithstanding anything herein to the contrary, if Executive's
employment with the Corporation terminated following a Change of
Control, unless such termination is for Cause, for purposes of
subsections 6(a) and 6(b) of this Agreement Executive shall be
deemed to have completed five (5) Years of Service and his
Vesting Percentage shall be deemed to be 100%.
(o) "Year of Service" shall mean any Fiscal Year during
which the Executive has worked for the Corporation at least one
thousand (1,000) hours.
2. EMPLOYMENT. The Corporation hereby employs and engages
the services of the Executive as one of its key executives
initially in the position of Chairman of the Board and Chief
Executive Officer of the Corporation for the Term of Employment
set forth in Section 3. The Executive agrees to serve the
Corporation for the Term of Employment as provided herein.
3. TERM OF EMPLOYMENT. The Executive's Term of Employment
shall be a period commencing on March 12, 2001 and ending two
(2) years thereafter; provided, however, that upon the
expiration of the aforesaid period (the "Expiration Date") and
upon each anniversary of the Expiration Date, the Term of
Employment shall automatically be extended for an additional one
(1) year period unless Executive or the Corporation notifies the
other in writing at least sixty (60) days prior to the
commencement of such one (1) year period of an intention to
terminate this Agreement. Notwithstanding anything herein to
the contrary, the Term of Employment shall terminate upon
Executive's death or Permanent Disability as set forth in
subsection 7(a) hereof or upon the Corporation's termination of
Executive's employment for Cause pursuant to subsection
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7(b) hereof. The Term of Employment shall also terminate upon
the Executive's attainment of age 65, unless the Board of
Directors requests that the Executive extend his or her service
to the Corporation after age 65. No such extension after age
65 shall exceed one year, provided that the Term may thereafter
be renewed from year to year by request of the Board of
Directors.
4. EMPLOYMENT PRIOR TO CHANGE OF CONTROL. The following
terms shall apply to Executive's employment prior to a Change of
Control:
(a) POSITION AND DUTIES.
(i) The Executive shall serve the Corporation in
such capacity as the Corporation may determine.
(ii) The Executive agrees to devote his or her
full business time during normal business hours to the business
and affairs of the Corporation (except as otherwise provided
herein) and to use his or her best efforts to promote the
interests of the Corporation and its Affiliated Companies and to
perform faithfully and efficiently the responsibilities assigned
to him or her in accordance with the terms of this Agreement to
the extent necessary to discharge such responsibilities, except
for:
(A) Service on corporate, civic or charitable
boards or committees not significantly interfering with the
performance of such responsibilities; and
(B) Periods of vacation and sick leave to
which he or she is entitled. It is expressly understood and
agreed that the Executive's continuing service on any boards and
committees with which he or she shall be connected, as a member
or otherwise, as of the date hereof, or any such service
approved by the Corporation during the Term of Employment, shall
not be deemed to interfere with the performance of the
Executive's services to
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the Corporation pursuant to this subparagraph 4(a).
(b) COMPENSATION AND BENEFITS.
(i) Base Salary. The Executive shall receive an
annual base salary (the "Base Salary") in equal installments
payable bi-weekly or at such other intervals as salary is
normally paid by the Corporation to its employees, at an annual
rate established by the Corporation and any Affiliated Companies
as of the date hereof. Executive's Base Salary for the
Corporation's Fiscal Year 2001 is set forth on Exhibit A,
attached hereto. The Base Salary shall not be reduced below the
rate for Fiscal Year 2001, but shall be reviewed and may be
increased at any time and from time to time by action of the
Board of Directors of CPI Corp. or committee thereof or any
having authority to take such action, in accordance with the
Corporation's regular practices. Any increase in the Base
Salary shall not serve to limit or reduce any other obligation
of the Corporation hereunder.
(ii) Annual Bonus. In addition to the Base
Salary, the Executive shall be awarded for each Fiscal Year
during the Term of Employment an annual bonus pursuant to the
bonus plan or program of the Corporation applicable to the
Executive, any other incentive plan or program of the
Corporation applicable to the Executive or otherwise in
accordance with the Corporation's regular practice
(the "Annual Bonus").
(iii) Other Compensation Plans. The Executive's
entitlement to participate in the Savings Plans shall be
determined in accordance with the Corporation's regular
practice. Prior to a Change of Control, nothing herein shall be
construed to prevent the Corporation from amending or altering
any such plans in accordance with the terms thereof.
(iv) Benefit Plans. The Executive, his or her
spouse and/or his or her
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dependents shall be entitled to participate in all other Benefit
Plans in accordance with the Corporation's regular practice.
(v) Expenses. The Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses
incurred by the Executive in discharging his or her duties in
accordance with the regular policies and procedures of the
Corporation.
5. EMPLOYMENT FOLLOWING CHANGE OF CONTROL. The following
terms shall apply to Executive's employment after a Change of
Control:
(a) Position and Duties. The Executive's position,
authority and responsibilities, the type of work he or she is
asked to perform, and the status and stature of the people with
whom he or she is asked to work, shall be comparable to that
existing with respect to the Executive as of the date
immediately prior to the Change of Control. The Executive's
services shall be performed at the location where the Executive
was employed as of the date immediately prior to the Change of
Control, or at such other location as may be mutually agreed
between the Corporation and the Executive.
(b) Compensation and Benefits.
(i) Base Salary. The Executive shall receive a
Base Salary at least equivalent to the rate in effect immediately
prior to the date of the Change of Control. The Base Salary
shall be reviewed at least once each year and may be increased
at any time and from time to time by action of the Board of
Directors of CPI Corp., or any committee thereof having
authority to take such action, in accordance with the
Corporation's regular practices. Any increase in the Base
Salary shall not serve to limit or reduce any other obligation
of the Corporation hereunder, and after such increase the Base
Salary shall not be reduced from such
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increased level.
(ii) Annual Bonus. In addition to the Base
Salary, the Executive shall be awarded for each Fiscal Year an
annual bonus Annual Bonus in cash at least equal to the highest
bonus paid or payable to the Executive in respect of any of the
Fiscal Years during the three Fiscal Years immediately prior to
the date of the Change of Control.
(iii) Other Compensation Plans. The Executive
shall be entitled to participate in the Savings Plans on a basis
at least equivalent to that provided by the Corporation and its
Affiliated Companies to the Executive immediately prior to the
date of the Change of Control.
(iv) Benefit Plans. The Executive, his or her
spouse, and/or his or her dependents, as the case may be, shall
be entitled to receive all amounts which he or she, his or her
spouse and/or his or her dependents are or would have been
entitled to receive as benefits under all Benefit Plans on a
basis at least as favorable to the Executive as on the date
immediately prior to the date of the Change of Control.
(v) Expenses. The Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred
by Executive in discharging his or her duties in accordance with
policies and procedures at least as favorable to the Executive as
in effect on the date immediately prior to the date of the Change
of Control.
(vi) Office and Support Staff. The Executive
shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other
assistance, at least equal to those provided to the Executive as
of the date immediately prior to the date of the Change of
Control.
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(vii) No Reduction. After a Change of Control, the
Corporation's obligation to make the payments provided for
herein and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or
other right which the Corporation may have against the Executive
or others.
6. EXECUTIVE BENEFITS. Executive shall be entitled to
receive the following additional benefits:
(a) DEATH BENEFITS. In the event of Executive's death,
unless (i) Executive's employment with the Corporation was
terminated for Cause or (ii) Executive (or his or her
Beneficiary) is entitled to receive Supplemental Retirement
Benefits pursuant to subsection 6(c), the Corporation shall pay
to Executive's Beneficiary an annual death benefit equal to
forty percent (40%) (but not to exceed $150,000) of the highest
annual Base Salary paid to Executive from and after Fiscal Year
2001, payable in equal monthly installments commencing with the
month following the month of Executive's death and ending with
the two hundred fortieth (240th) month following the month of
Executive's death. In the event Executive dies before age 65 and
before Executive completes at least five (5) Years of Service
with the Corporation, death benefits shall be reduced to an
amount equal to the benefits determined under the preceding
sentence multiplied by the Vesting Percentage/Death and
Disability Benefit applicable to the Executive. Payments made
under this subsection 6(a) are in addition to any payments due
under subsection 6(b).
(b) DISABILITY BENEFITS. In the event of Executive's
Permanent Disability prior to attaining age 65 and prior to
termination of employment with the Corporation, unless
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Executive's employment with the Corporation was terminated for
Cause, the Corporation shall pay Executive annual disability
benefits equal to forty percent (40%) (but not to exceed
$150,000) of the highest annual Base Salary paid to Executive
from and after Fiscal Year 2001, payable in equal monthly
installments, commencing with the month following the month in
which Executive terminated employment as a result of Permanent
Disability and ending on the earlier of (i) the month in which
Executive reaches age 65 or (ii) the month of his or her death.
In the event that at the time of Permanent Disability Executive
has not completed at least five (5) Years of Service, the
disability benefits shall be reduced to an amount equal to the
benefits determined under the preceding sentence multiplied by
the Vesting Percentage/Death and Disability Benefits applicable
to Executive. Disability benefits pursuant to this subsection
(b) shall be reduced by any amounts paid to Executive under the
Corporation's long-term disability insurance policy, but shall
not be reduced for any payments received by Executive from
Social Security or from any disability insurance coverage
individually owned by Executive.
(c) SUPPLEMENTAL RETIREMENT BENEFITS.
(i) In the event of Executive's Retirement after
completion of at least ten (10) Years of Service, unless
Executive's employment with the Corporation was terminated for
Cause, the Corporation shall pay Executive retirement benefits
for twenty (20) years in an annual amount equal to forty percent
(40%) (but not to exceed $150,000) of the highest annual Base
Salary paid to Executive from and after Fiscal Year 2001
("Supplemental Retirement Benefits"). In the event of
Executive's Retirement before completion of ten (10) Years of
Service, the Corporation shall pay Executive retirement benefits
on the same terms as set forth in the preceding sentence except
that such retirement benefits shall be reduced to an amount
equal
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to Supplemental Retirement Benefits multiplied by the Vesting
Percentage applicable to Executive.
(ii) Supplemental Retirement Benefits shall be
payable in two hundred forty (240) equal monthly installments
commencing with the month following the later of (i) the month of
Executive's Retirement or (ii) the month during which Executive
reaches age sixty-five (65). If Executive dies prior to the end
of the two hundred forty (240) month period during which
Supplemental Retirement Benefits are payable, Supplemental
Retirement Benefits shall be payable during the remainder of
such 240 month period to his or her Beneficiary.
(iii) Notwithstanding anything herein to the
contrary, in the event of Executive's termination of employment
with the Corporation prior to attaining age 65 as a result of
Permanent Disability, if Executive attains age 65 and his or her
employment with the Corporation was not terminated for Cause,
the Corporation shall pay to Executive the Supplemental
Retirement Benefits set forth in this subsection 6(c) in
accordance with Executive's Vesting Percentage, commencing as of
the month following the month in which Executive attains age 65;
provided, however, that any Supplemental Retirement Benefits
paid pursuant to this sentence shall be reduced by any amounts
paid to Executive under the Corporation's long-term disability
insurance policy after attainment of age 65 (but shall not be
reduced by any payments received by Executive from Social
Security or from an disability insurance coverage individually
owned by Executive) for the same period.
(d) SURVIVABILITY OF DEATH AND SUPPLEMENTAL RETIREMENT
BENEFITS. In the event of Executive's Retirement or death,
Executive's entitlement to death benefits pursuant to subsection
6(a) hereof or Supplemental Retirement Benefits pursuant to
subsection 6(c) hereof
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shall survive the Term of Employment and Executive or his or her
Beneficiary shall be entitled to such death benefits or
Supplemental Retirement Benefits based on the same terms and
conditions as would have been applicable had his or her death or
Retirement, as the case may be, occurred during the Term of
Employment.
7. TERMINATION OF EMPLOYMENT.
(a) DEATH OR PERMANENT DISABILITY. Except for the
obligations of the Corporation set forth in this subsection 7(a),
this Agreement shall terminate automatically upon the
Executive's death or Permanent Disability. In the event of such
termination, the Corporation shall pay to the Executive's
Beneficiary or, in the event of Permanent Disability, the
Executive or his or her legal representative, all benefits,
expense reimbursement and Base Salary accrued through the date
of termination, including, without limitation, amounts payable
under any plan referred to in subsection 4(b) plus any benefits
to which Executive or his beneficiary may be entitled pursuant
to subsection 6(a), subsection 6(b) or subsection 6(c) hereof.
(b) CAUSE. The Corporation may terminate the
Executive's employment for Cause. If the Executive's employment
is terminated for Cause, the Corporation shall pay the Executive
his or her full accrued Base Salary through the effective date
of the termination of his or her employment (which shall be no
earlier than the date of receipt of notice thereof) at the rate
in effect at the time of such termination, and the Corporation
shall have no further obligations to the Executive under this
Agreement.
(c) NOTIFICATION PRIOR TO ONE YEAR EXTENSION. Either
Executive or the Corporation may terminate this Agreement by
notifying the other party in writing of an intention
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to do so at least sixty (60) days prior to the commencement of a
one-year extension period described in Section 3 hereof.
(d) PAYMENTS FOR INVOLUNTARY TERMINATION WITHOUT CAUSE.
(i) If prior to a Change of Control:
(A) the Corporation terminates Executive's
employment (other than for Cause pursuant to subsection 7(b)
hereof) or
(B) the Executive's employment terminates by
reason of the Corporation's termination of this Agreement
pursuant to subsection 7(c) hereof, the Corporation shall pay
Executive following such involuntary termination his or her full
accrued Base Salary through the date of termination of
employment plus an amount equal to two hundred percent (200%) of
the highest annual Base Salary paid or payable to Executive from
and after Fiscal Year 2001 (the "Severance Base Payment"),
payable in fifty-two (52) equal bi-weekly installments or at
such other intervals as salary is normally paid by the
Corporation to its employees. In addition, within ninety (90)
days after conclusion of the Fiscal Year in which the
Executive's employment is involuntarily terminated
without Cause, the Corporation shall pay Executive the Annual
Bonus he or she would have earned for that Fiscal Year, if any,
prorated on the basis of the percentage of the Fiscal Year
preceding such termination of Executive's employment. The
payments pursuant to this subsection 7(d)(i) and any payments to
which Executive or his beneficiary may be entitled pursuant to
subsections 6(a), 6(b) and, 6(c) shall be in full discharge of
any claims, actions, demands or damages of every nature and
description which Executive might have or might assert against
the Corporation or any Affiliated Company in connection with or
arising from the termination of Executive's employment or the
termination
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of this Agreement.
(ii) If following a Change of Control:
(A) the Corporation terminates Executive's
employment (other than for Cause pursuant to subsection 7(b)
hereof) or
(B) the Executive's employment terminates by
reason of the Corporation's termination of this Agreement
pursuant to subsection 7(c) hereof, the Corporation shall, at
the time of such involuntary termination, make a lump sum cash
payment to Executive of the Severance Base Payment, and an
amount in cash equal to the highest Annual Bonus paid or payable
to the Executive in respect of any of the three Fiscal Years
immediately prior to the Change of Control. In addition to the
payment pursuant to this subsection 7(d)(ii) and any payments to
which Executive or his beneficiary may be entitled pursuant to
subsections 6(a), 6(b) and 6(c), Executive shall be entitled to
all remedies available under this Agreement or at law in respect
of any damages suffered by Executive as a result of an
involuntary termination of employment without Cause.
(iii) Notwithstanding the provisions of subsections
7(d)(i) and (ii) above, unless the Board of Directors requests
that the Term of Employment be extended after Executive's
attaining age 65:
(A) No Severance Base Payment shall be
payable to the Executive after age 65; and
(B) The amount of Severance Base Payment
payable to the Executive shall be reduced by an amount equal to
one month of his Base Salary for every month of Executive's
employment after age 63. If, however, the Term of Employment is
extended at
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the request of the Board of Directors after Executive's attaining
age 65, the Severance Base Payment shall continue to be payable
and shall not be subject to reduction pursuant to
subsection 7(d)(iii)(B) and the provisions of subsection
7(d)(iii)(A) shall not apply to the extent of such extension.
(iv) For purposes of this Section 7, any reduction
in Base Salary of more than 10% shall be deemed termination by
failure to renew pursuant to subsection 7(c) above.
(e) EXERCISE OF OPTIONS. In the event of termination
of Executive's employment (other than for Cause pursuant to
subsection 7(b) hereof), as a result of Executive's death,
Permanent Disability, involuntary termination or by reason of the
Corporation's termination of this Agreement pursuant to
subsection 7(c) hereof, all unvested options then held by the
Executive under any stock option plans of the Corporation shall
vest immediately and become exercisable with respect to one
hundred percent (100%) of the shares covered by such options
upon the effective date of such termination and all options then
held by the Executive under such plans shall be exercisable
until the earlier of (i) the expiration dates of such options as
in effect immediately prior to such termination or (ii) twelve
(12) months after the effective date of such termination.
8. GROSS-UP FOR PARACHUTE TAX.
(a) GENERAL. In the event that Executive becomes
entitled to any payments (whether pursuant to this Employment
Agreement or any other plan, arrangement or agreement) from the
Corporation in the nature of compensation ("Parachute Payments")
that in the opinion of a certified public accounting firm
(selected in the manner set forth in subsection 8(b)) or that
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under the provisions of a notice of assessment from the Internal
Revenue Service causes imposition of the tax under Section 4999
of the Code or any similar tax that may hereafter be imposed (the
"Excise Tax"), the Corporation shall pay Executive, at the time
specified in subsection 8(d), the Gross-Up Payment (as determined
in accordance with subsection 8(c)).
(b) SELECTION OF C.P.A. Within fifteen (15) days after
any termination of Executive's employment following the
occurrence of a transaction that causes an Excise Tax to become
due, the majority of the Continuing Directors as of the date
immediately prior to such a transaction shall select a certified
public accounting firm (the "C.P.A.") reasonably acceptable to
Executive to determine the amount, if any, of the Excise Tax
and the amount, if any, of the Gross-Up Payments.
(c) AMOUNT OF GROSS UP-PAYMENTS.
(i) The Gross-Up Payment shall equal an amount
such that, after payment by the Executive (or the withholding
and crediting on Executive's behalf) of all taxes imposed on the
Gross-Up Payment (including Federal, State and local income
taxes and any Excise Tax, and any interest or penalties imposed
with respect to such taxes), the Executive shall retain (or have
withheld and credited on Executive's behalf for tax purposes) an
amount equal to the Excise Tax (and any interest and penalties
borne by Executive with respect to the Excise Tax) imposed upon
the Parachute Payments.
(ii) The Executive and the Corporation shall each
provide the C.P.A. with access to and copies of any books,
records, tax returns and documents in the possession of the
Executive or the Corporation, as the case may be, reasonably
requested by the C.P.A. and otherwise cooperate with the C.P.A.
in connection with the preparation and issuance of the
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determinations contemplated by this Section 8.
(iii) In the event that the Excise Tax is
subsequently determined to exceed the amount taken into account
at the time the Gross-Up Payment is made pursuant to subsection
8(d) hereof (including any excess attributable to any Parachute
Payments the existence or amount of which could not be
accurately determined at the time of the Gross-Up Payment), the
Corporation shall make an additional Gross-Up Payment in respect
of such excess (plus any interest and addition to tax payable
with respect to such excess) within fifteen (15) days after the
amount of such excess is determined by the C.P.A. or by the
Internal Revenue Service (the "IRS") in a notice of assessment.
(d) TIMING OF GROSS-UP PAYMENTS. Gross-Up Payments
other than Gross-Up Payments pursuant to subsection 8(c)(iii)
shall be paid not later than forty-five (45) days following
payment of any Parachute Payments to which the Gross-Up Payments
are attributable; provided, however, that if the amount of such
Gross-Up Payment or portion thereof cannot be finally determined
on or before such day, the Corporation shall pay to Executive on
such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments and shall
pay the remainder of such payments (together with interest at
the applicable federal rate provided in Section l274(d) of the
Code) as soon as the amount thereof can be determined by the
C.P.A., but in no event later than forty-five (45) days after
payment of such estimated Gross-Up Payments. In connection with
the preparation of his tax returns for the year in which a
Gross-Up Payment was made, the Executive shall submit for review
to the C.P.A. drafts of such tax returns. If the C.P.A.
determines that the prior Gross-Up Payments were not correct,
(i) if the prior Gross-Up Payments were too low, the Corporation
shall, within fifteen
20
(15) days after the C.P.A.'s delivery of such revised calculation
to Executive and the Corporation, pay to the Executive or to a
tax authority on Executive's behalf, as the case may be, an
additional Gross-Up Payment in the amount determined pursuant to
the C.P.A.'s revised calculation; and (ii) if the prior Gross-Up
Payments were too high, Executive shall, within fifteen (15)
days after delivery of such revised calculation to the Executive
and the Corporation, pay to the Corporation the excess of the
prior Gross-Up Payments over the C.P.A.'s revised computation of
the Gross-Up Payment.
(e) CORPORATION'S RIGHT TO DESIGNATE TAX
REPRESENTATIVE; ASSIGNMENT OF REFUND PROCEEDS. If the IRS
proposes an assessment of the Excise Tax against Executive or
proposes an additional assessment of Excise Tax in excess of the
amount previously reported by Executive:
(i) Executive shall within five (5) days after
receipt from the IRS of notice of the proposed Excise Tax
assessment notify the Corporation in writing and furnish the
Corporation with copies of all correspondence from the IRS
relating to the proposed Excise Tax assessment.
(ii) The Corporation shall be authorized to
designate an attorney and/or accountant (the "Tax
Representative") reasonably acceptable to Executive to serve as
Executive's exclusive representative with respect to all
proceedings with the IRS relating to the proposed Excise Tax
assessment, including but not limited to negotiating a
settlement or compromise of the proposed Excise Tax assessment,
filing a claim for refund with respect thereto, and seeking
judicial review of any disallowance of a claim for refund.
Executive hereby agrees to execute an appropriate power of
attorney authorizing the Tax Representative to represent
Executive with
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respect to the Excise Taxes. Executive further agrees to take
any other appropriate actions reasonably requested by the Tax
Representative in connection therewith; provided, however, that
the Corporation shall reimburse Executive for any expenses
incurred by Executive as a result of compliance with such
requests.
(iii) If the Tax Representative files a claim for
refund of Excise Taxes with respect to which the Corporation has
made a Gross-Up Payment and such refund claim is allowed by
the IRS or by the final judgment of a court of competent
jurisdiction, Executive shall endorse the refund check payable to
the Corporation and shall send the refund check to the
Corporation not later than five (5) days after receipt from the
IRS.
(iv) If the Corporation designates a Tax
Representative, the Corporation shall pay all of his or her
professional fees and expenses and hold Executive harmless from
any claims in connection therewith. The Tax Representative
shall keep Executive timely informed of all significant
developments in the Excise Tax matter and shall send to
Executive copies of all correspondence relating thereto.
(v) Notwithstanding anything herein to the
contrary, if the Corporation is in material breach of any of its
obligations pursuant to this Agreement, the Corporation's rights
(but not its obligations) pursuant to this subsection 8(e) shall
be extinguished and Executive shall have the right to revoke any
power of attorney executed pursuant to this subsection 8(e).
9. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall
not be obligated to mitigate any damages by seeking other
employment or otherwise, and no amount payable hereunder and no
benefit or service credit for benefits shall be reduced in the
event that the Executive shall accept alternative employment.
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10. BENEFITS PAYABLE ONLY FROM CORPORATE ASSETS.
(a) NO TRUST. Nothing contained in this Agreement, and
no action taken pursuant to its provisions by either party hereto
shall create, or be construed to create, a trust of any kind, or
a fiduciary relationship between the Corporation and the
Executive or his or her Beneficiary.
(b) EXECUTIVE'S STATUS AS UNSECURED GENERAL CREDITOR.
The payment of any benefits hereunder to the Executive or his or
her Beneficiary shall be made from assets which shall continue,
for all purposes, to be a part of the general assets of the
Corporation; no person shall have or acquire any interest in
such assets by virtue of the provisions of this Agreement. To
the extent that the Executive or his or her Beneficiary acquires
a right to receive payments from the Corporation under the
provisions hereof, such right shall be no greater than the right
of any unsecured general creditor of the Corporation.
(c) RECOVERY OF COST OF PROVIDING BENEFITS. In the
event that, in its discretion, the Corporation purchases an
insurance policy insuring the life of the Executive to enable
the Corporation to recover, in whole or in part, the cost of
providing any benefits hereunder, neither the Executive nor his
or her Beneficiary under this Agreement shall have or acquire
any rights whatsoever therein. The Corporation shall be the
sole owner and beneficiary of any such policy and, as such,
shall possess and may exercise all incidents of ownership
therein.
11. DETERMINATION OF BENEFITS AND CLAIMS PROCEDURE. The
Corporation shall make all determinations as to rights to
benefits under this Agreement in good faith. Subject to and in
compliance with the specific procedures contained in the
applicable regulations promulgated under the Employee Retirement
Income Security Act of 1974, as amended:
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(a) Any decision by the Corporation denying a claim for
benefits under this Agreement by the Executive or his or her
Beneficiary shall be stated in writing by the Corporation and
delivered or mailed to the claimant.
(b) Each such notice shall set forth the specific
reasons for the denial, written to the best of the Corporation's
ability in a manner that may be understood without legal or
actuarial counsel.
(c) The Corporation shall afford a reasonable
opportunity to the claimant whose claim for benefits has been
denied for a review of the decision denying such claim.
12. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plan
or program provided by the Corporation or any Affiliated
Companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the
Corporation or any Affiliated Companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to
receive under any plan or program of the Corporation or any
Affiliated Companies shall be payable in accordance with the
terms of such plan or program.
13. FULL SETTLEMENT. Unless it is finally determined by a
court of competent jurisdiction after all available appeals that
the Corporation has validly terminated the Executive's
employment for Cause, the Corporation agrees to pay, to the full
extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Corporation, by the
Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any
guarantee of
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performance thereof, plus, in each case, interest compounded
quarterly, on the total unpaid amount determined to be payable
hereunder, such interest to be calculated on the basis of the
prime commercial lending rate announced by FIRSTAR Bank, N.A. in
effect from time to time, for the period commencing on the date
of such contest and ending on the date on which the Corporation
shall pay such amount. If it is finally determined by a court
of competent jurisdiction after all available appeals that the
Executive's employment was validly terminated for Cause,
Executive shall reimburse the Corporation for all legal fees and
expenses paid to him or her, if any, and all legal fees and
expenses incurred by the Corporation, provided that all such
fees and expenses related to the litigation in which Executive's
termination was finally determined to have been for Cause.
14. COVENANTS.
(a) NON-COMPETITION.
(i) Executive recognizes that during the course
of Executive's employment with the Corporation, Executive has
been and will be instructed about and become acquainted with
confidential information of the Corporation, including, without
limitation, customer lists, methods of sales, the existence and
contents and terms of this Agreement, methods of sales
procurement, sales procurement techniques, sales procedures and
equipment/supply information, equipment and supply acquisition
procedures and processes and sources, customer evaluation
procedures, customer maintenance and supply maintenance
procedures and corresponding information relating to persons,
firms and corporations which are or may become customers of the
Corporation and, further, companies from which the Corporation
obtains various products and supplies for sale, resale and
distribution to customers
25
of the Corporation. This confidential information further
includes, but is not limited to, customer identity, supplier
identity and terms, purchase terms, sales techniques, purchase
conditions and rates, customer needs, billing procedures and
processes, contacts and customer information. Further, Executive
agrees and acknowledges that the development and assemblage and
maintenance of the customer base of the Corporation has taken
extraordinary time, money, resources, training, and effort by
the Corporation and its employees.
(ii) Executive agrees that he or she will not
during the Term of Employment and for a period of two (2) years
following cessation of his or her employment at the Corporation
("Restricted Period"), for any cause or reason, directly or
indirectly:
(A) Engage in any business in competition
with the Corporation and its Affiliates or supply and sell
competitive products or services to present customers, former
customers and prospects of the Corporation and its Affiliates;
or
(B) Own, manage, operate, control, advise, be
employed by, consult, or materially participate in, or be
materially involved in any manner with the ownership,
management, operation or control of, individually or through any
other entity or device, any business that competes with the
business then conducted by the Corporation or any Affiliate;
provided, however, that mere ownership as an investor of not more
than five percent (5%) of the securities of a corporation or
other business enterprise shall not in and of itself be deemed
to violate this Section 14(a)(ii)(B).
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
(i) Executive will not, except as authorized by
the Corporation in writing, during or at any time after the
termination of Executive's employment with the
26
Corporation, directly or indirectly, use for himself or herself
or others, or disclose, communicate, divulge, furnish to, or
convey to any other person, firm, or corporation, any secret or
confidential information, knowledge or data of the Corporation
or that of third parties obtained by Executive during the period
of his or her employment with the Corporation. Such
information, knowledge or data includes, without limitation, the
following:
(A) Secret or confidential matters of a
technical nature such as, but not limited to, methods, know-how,
formulations, compositions, processes, discoveries, machines,
inventions, computer programs, and similar items or research
projects involving such items,
(B) Secret or confidential matters of a
business nature such as, but not limited to, marketing policies
or strategies, information about costs, price lists, purchasing
and purchasing policies, profits, market, sales or lists of
customers, customer history information, and
(C) Secret or confidential matters pertaining
to future developments such as, but not limited to, research
and development or future marketing or merchandising.
(D) The foregoing obligation of
confidentiality, however, shall not apply to any knowledge or
information which is now published or which subsequently becomes
public in the form in which it was obtain from the Corporation
or its affiliates , other than as a direct or indirect result of
the breach of this Agreement by Executive.
(ii) Executive, upon termination of his or her
employment with the Corporation, or at any other time upon the
Corporation's request, shall deliver promptly to the Corporation
all manuals, letters, notes, notebooks, reports, formulations,
computer programs and similar items,
27
memoranda, lists of customers, customer history information and
all other materials and copies thereof relating in any way to
the Corporation's business and in any way obtained by Executive
during the term of employment with the Corporation which are in
his or her possession or under his or her control; and Executive
will not make or retain any copies of any of the foregoing and
will so represent to the Corporation upon termination of his or
her employment.
(c) INDUCEMENT.
(i) Executive agrees that during the Term of
Employment and during the Restricted Period, Executive shall not
use any confidential information for the purposes of inducing or
attempting to induce any present, former, or prospective
customer of the Corporation or its Affiliates to become a
customer of Executive or any person, firm, or corporation, or
business association with which Executive is affiliated in any
capacity with respect to the markets supplied by the Corporation
or its Affiliates.
(ii) Executive agrees that during the Term of
Employment and during the Restricted Period, Executive shall not
directly or indirectly solicit for employment or employ any of
the Corporation's employees to work for Executive or any
business association with which/whom Executive is affiliated, or
to work for any other company in the markets supplied by the
Corporation or its Affiliates.
(d) INTEREST OF PARTIES. Executive agrees that the
duration of the limitations set forth in this Section 14 are
reasonable under the circumstances, considering Executive's
position with the Corporation and other relevant factors, and
that this will not constitute a serious handicap to Executive in
securing future employment.
(e) DISCLOSURE TO CORPORATION. Executive shall
promptly communicate and
28
disclose to the Corporation all information, observations and
data obtained by Executive in the course of Executive's
employment. All written materials, records and documents made
by Executive or coming into Executive's possession during the
Term of Employment concerning any inventions, products,
processes or equipment, manufactured, used, developed,
investigated or considered by the Corporation or any Affiliated
Companies shall be the property of the Corporation, and upon
termination of the Term of Employment, or upon request of the
Corporation during the Term of Employment, Executive shall
promptly deliver the same to the Corporation. Executive agrees
to render to the Corporation such reports of the activities of
the business undertaken by Executive or conducted under
Executive's direction during the Term of Employment as the
Corporation may reasonably request.
(f) INVENTIONS.
(i) Executive shall promptly communicate and
disclose in writing to the Corporation all those inventions and
developments whether patentable or not, as well as patents and
patent applications (hereinafter collectively called
"Inventions"), made, conceived, developed or purchased by
Executive, or under which Executive acquires the right to grant
licenses or to become licensed, alone or jointly with others,
during the Term of Employment, which have arisen or may arise
out of Executive's employment, or relate to any matters
pertaining to, applicable to, or useful in connection with, the
business or affairs of the Corporation or any Affiliated
Companies. All of Executive's right, title and interest in, to
and under all such inventions, licenses and rights to grant
licenses shall be the sole property of the Corporation. Any
such inventions disclosed to anyone by Executive within one (1)
year after the termination of the Term of Employment
for any cause whatsoever shall be deemed to have been
29
made or conceived by Executive during the Term of Employment.
(ii) As to all such inventions, Executive shall,
upon request of the Corporation, during the Term of Employment or
thereafter:
(A) Execute all documents which the
Corporation shall deem necessary or proper to enable it to
establish title to such inventions, or other rights, and to
enable it to file and prosecute applications for letters patent
of the United States and any foreign country; and
(B) Do all things (including the giving of
evidence in suits and other proceedings) which the Corporation
shall deem necessary or proper to obtain, maintain or to assert
patents for any and all such inventions or to assert its rights
in any inventions not patented.
All expenses incident to any action required by the
Corporation or taken on its behalf pursuant to the provisions of
this paragraph shall be borne by the Corporation including
without limitation a reasonable payment for Executive's time and
expenses involved in case he or she is not then in its employ.
(g) LITIGATION. Executive agrees that during the Term
of Employment or thereafter, Executive shall do all things,
including the giving of evidence in suits and other proceedings,
which the Corporation shall deem necessary or proper to obtain,
maintain or assert rights accruing to the Corporation during
the Term of Employment and in connection with which Executive
has knowledge, information or expertise. All reasonable
expenses incurred by Executive during the Term of Employment or
thereafter in fulfilling the duties set forth in this Section,
shall be reimbursed by the Corporation to the full extent
legally appropriate including,
30
without limitation, a reasonable payment for Executive's time
in the event the Term of Employment has terminated prior to the
time Executive renders such assistance, advice and counsel.
15. EQUITY. The parties hereto agree that the services to
be rendered by Executive are special, unique and of an
extraordinary character. In the event of the breach by Executive
of any of the provisions of this Agreement, the Corporation, in
addition and as a supplement to such other rights and remedies
as may exist in its favor, may apply to any court of law or
equity having jurisdiction to enforce the specific performance
of this Agreement, and/or may apply for injunctive relief
against any act which would violate any
of the provisions of this Agreement.
16. ENTIRE AGREEMENT. This Agreement, including all
Exhibits hereto, contains the entire understanding of the
parties hereto with respect to the subject matter hereof.
17. NO ASSIGNMENT.
(A) This Agreement is personal to the Executive and
without the prior written consent of the Corporation shall not be
assignable by the Executive other than by will or the laws of
descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives and Beneficiary. (b) This Agreement shall inure
to the benefit of and be binding upon the Corporation and its
successors. The Corporation shall require any successor to all
or substantially all of the business and/or assets of the
Corporation, whether direct or indirect, by purchase, merger,
consolidation, acquisition of stock, or otherwise, by an
agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the
same manner and to the same extent as the Corporation would be
required to perform if no such succession had taken place.
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18. SEVERABILITY. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, and
this Agreement shall be construed in all respects as if such
invalid or unenforceable provision or clause were omitted.
19. ARBITRATION. The parties shall meet in good faith to
resolve any disputes that may arise between them relating to or
arising from the terms or provisions of this Agreement or the
performance by either party of their obligations under this
Agreement. If the parties are unable to resolve any such dispute
within forty-five (45) days of the first meeting held to resolve
any such dispute that arises prior to the second anniversary of
the commencement date of Executive's initial Term of Employment,
either party shall have the right to request an arbitration
which shall be conducted in accordance with the Rules of
Arbitration of the American Arbitration Association conducted in
St. Louis, Missouri. Any such arbitration shall be conducted by
one arbitrator. Each party shall pay the fees of the arbitrator
in accordance with the determination of the arbitrator. Neither
party shall have a right to arbitration after the second
anniversary of the commencement date of the Executive's Term of
Employment.
20. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Missouri, without
reference to principles of conflict of laws. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or
modified other than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
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(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:
Xxxxx Xxxxxxx
____________________
____________________
IF TO THE CORPORATION:
Consumer Programs Incorporated
0000 Xxxxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxx, President
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received
by the addressee.
(c) This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter hereof.
(d) The Corporation may withhold from any amounts
payable under this Agreement such federal, state or local taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement in duplicate, all as of the day and year first above
written.
CONSUMER PROGRAMS INCORPORATED
By: /s/ Xxxx X. Xxxxxx
------------------
Title: Chairman and Chief Executive Officer
/s/ Xxxxx Xxxxxxx
------------------
(Xxxxx Xxxxxxx)
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