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EXHIBIT 10.36
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and effective as of September 1, 1998 by and between
NITCHES, INC., a California corporation ("Company"), and Xxxxxx X. Xxxxxx
("Executive"), an individual residing in the State of Texas, with reference to
the following:
WHEREAS, Executive is currently employed by the Company in the capacity
as its President, CEO, and CFO, and Executive's background, expertise, and
efforts have contributed to the success and financial strength of the Company;
and
WHEREAS, the relative rights and obligations of employers and employees
in Texas may be, in the absence of agreement or policy, subject to the
uncertainties of future changes in Texas law and judicial decisions; and
WHEREAS, the Company and Executive desire to define their respective
rights and obligations as provided herein; and
WHEREAS, the Company wishes to assure itself of the continued
opportunity to benefit from Executive's services for the period provided in this
Agreement, and Executive is willing to serve in the employ of the Company on a
full-time basis solely in accordance with the terms hereof for said period; and
WHEREAS, the Board has determined that the best interests of the Company
would be served by Executive's continued employment under the terms of this
Agreement by the Company and its Affiliates in Executive's current capacity or
such capacities as the Board may delegate to him from time to time during the
term of this Agreement.
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NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereby agree as follows:
1. Definitions.
(a)"Affiliate" shall mean any Person that controls or is
controlled by or under common control with the Company, whether now or hereafter
formed, including but not limited to Body Drama, Inc., a California corporation.
(b) "Agreement" means this Employment Agreement and any
amendments hereto complying with section 15(f) hereof.
(c) "Base Amount" shall have the meaning set forth in Section
280G of the Code.
(d) "Board" means the Board of Directors of the Company unless
the context otherwise requires.
(e) "Cause" means (1) Executive's personal dishonesty, gross
incompetence (which is intended to be far beyond failure to meet performance
goals), willful misconduct, conflict of interest or breach of fiduciary duty
involving intent for or obtainment of personal or family profit, willful
violation of any law, rule, or regulation to the extent detrimental to the
Company's business or reputation or the Executive's ability to perform this
Agreement, causing the issuance of a final cease-and-desist order, or a material
breach of any provision of this Agreement; or (2) the willful and continued
failure by Executive to substantially
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perform Executive's duties with the Company or its Affiliates (other than any
failure resulting from Disability) after a written demand for substantial
performance is given to Executive by the Board which demand specifically
identifies the manner in which the Board believes that Executive has not
substantially performed his duties.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(g) compensation Committee" is the committee of the Board
appointed as such under Corporations Code Section 311 to act on behalf of the
full Board in matters of executive compensation and benefits.
(h) "Disability" means physical or mental illness resulting in
Executive's absence on a full-time basis from Executive's duties with the
Company or its Affiliates for one hundred eighty (180) consecutive calendar
days, subject to the procedure referenced in Section 9(a).
(i) "Expiration" means the termination of this Agreement
(including Executive's employment hereunder) and of any further obligations of
the parties (except as specified in the Agreement) upon completion of the Term.
(j) "Fiscal Year" means the year ending August 31.
(k) (Definition not used.)
(l) "Parachute Payment" shall have the meaning set forth in
Section 280G of the Code and the regulations promulgated thereunder.
(m) "Person" means an individual, a group acting in
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concert, a corporation, a partnership, an association, a joint stock company, a
trust, any unincorporated organization or a government or political subdivision
thereof.
(n) "Retirement" or "Retire" means the Termination by Executive
of his employment with the Company and its Affiliates based upon retirement in
accordance with the Retirement Plan.
(o) "Retirement Plan" means any retirement plans of Company
applicable to Executive in effect on the date of Executive's Termination or
resignation.
(p) "Term" means the initial term of this Agreement and any
extensions hereof, as provided in Section 4.
(q) "Termination" and "Terminate(d)" means the termination of
Executive's employment hereunder for any of the following reasons unless the
context indicates otherwise: (i) Retirement, (ii) Death of Executive, (iii)
Disability, (iv) Expiration, (v) resignation by Executive, (vi) liquidation of
the Company, (vii) Termination Without Cause, and (viii) Termination for Cause.
(r) "Termination Without Cause" and "Terminate(d) Without Cause"
means the cessation of Executive's employment hereunder for any reason except
(i) a voluntary resignation by Executive, (ii) Termination for Cause, (iii)
Retirement, (iv) Disability, (v) liquidation of the Company, (vi) Death, or
(vii) Expiration.
(s) "Unexpired Term" has the meaning specified in Section
10(e)(1).
2. Employment.
The Company agrees to continue Executive in its employ,
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and Executive agrees to remain in the employ of the Company, for the period
stated in Section 4 hereof and upon the terms and conditions herein provided.
3. Position and Responsibilities.
The Company shall employ Executive in his current capacity with
the Company, and Executive shall serve the Company as such for the Term and on
the conditions hereinafter set forth. Executive agrees to perform such services
not materially inconsistent with Executive's position as shall from time to time
be assigned to Executive by the Board or its designee.
4. Term of Employment.
Subject to the provisions and conditions of this Agreement, the
period of Executive's employment under this Agreement shall be deemed to have
commenced as of Sept 1, 1998 and shall continue for a term ending on August 31,
2002. In the event the Company retains Executive as an employee following the
expiration of the Term, such employment, absent a written agreement to the
contrary, will be on an at-will basis with such compensation to which the
parties may then agree, subject to termination at any time with or without
cause, and without liability. If the Company does not retain Executive as an
employee after Expiration of the Term, Executive's employment shall cease
without further liability to Executive unless otherwise provided in this
Agreement. Executive's employment shall also terminate, and the Term of this
Agreement will expire, upon Executive's resignation, Retirement, Death or
Disability as described in Section 9(a), or upon Executive's Termination for
Cause as described in Section 9(b).
5. Duties.
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(a) The Company and Executive hereby agree that, subject to the
provisions of this Agreement, the Company shall employ Executive, and Executive
shall serve the Company as an executive for the Term of this Agreement. The
specific executive position(s) in which Executive will serve will be designated
from time to time by the Board or its Compensation Committee, with his initial
positions to be as set forth in this Agreement.
(b) In the event that Executive is assigned to a position
involving different responsibilities and duties of office than those he is
currently exercising or is provided with a different title than that stipulated
in this Agreement, then such changed position and title shall at a minimum be
equivalent to Executive's then current position and title including but not
limited to his reporting relationship within the Company.
(c) During the Term hereof, Executive shall devote substantially
all of his business time, attention, skill and efforts to the faithful
performance of the business of the Company to the fullest extent necessary to
properly discharge his duties and responsibilities hereunder, whether such
business is operated directly by the Company or through one or more of its
Affiliates. Executive's position and duties with Affiliates, if any, shall be as
identified from time to time by the Board of Directors of such Affiliate(s).
Further, with the approval of the Board, from time to time, Executive may serve,
or continue to serve, on the boards of directors of, and hold any other offices
or positions in, companies or charitable, political or civic organizations,
which, in the Board's judgment, will not present any material conflict of
interest with the Company or its
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Affiliates, and will not unfavorably affect the performance of Executive's
duties pursuant to this Agreement.
6. Working Facilities.
Executive shall be furnished with a private office, secretarial
or other necessary clerical assistance, and such other facilities, amenities and
services as are presently or may hereafter be furnished to similarly situated
executives of the Company, and as are appropriate for Executive's position and
adequate for the performance of his duties hereunder.
7. Place of Performance.
The Company shall provide and the Executive shall maintain an
office located within 30 miles of the Executive's residence or such other
location as the Company and the Executive shall mutually agree upon.
8. Salary, Bonus, Expenses and Benefits.
(a) Salary. The Company shall pay Executive a base annual salary
of $250,000 or such higher amount as the Board may set in its sole discretion,
payable in at least monthly installments. Any increase in annual salary shall
not serve to limit or reduce any other obligations to Executive under this
Agreement.
(b) Bonus. In addition to said salary, Executive may receive an
annual bonus ("Bonus") for each fiscal year in an amount that is recommended by
the Compensation Committee and approved by the Board of Directors.
Executive must be employed for the entire fiscal year in order to
receive such bonus except that a pro rata portion of the Bonus shall be paid to
Executive based on the period Executive
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worked during the fiscal year in the event Executive is Terminated Without
Cause. the Board may elect in its sole discretion to pay an additional Bonus for
any year. The Bonus shall be paid within 30 days of the Company's independent
accountants' audit opinion date on the Company's annual fiscal year-end
financial statement. Executive shall also receive such additional compensation
and rights as the Board may, from time to time, expressly grant to him in its
sole discretion.
(c) Reimbursement of Expenses. The Company shall pay or
reimburse Executive, on a monthly basis, for reasonable travel, entertainment,
promotional and other expenses incurred by Executive in the performance of his
obligations under this Agreement, pursuant to Company expense reimbursement
policies in effect for all executive employees from time to time. The Company
also will reimburse Executive for initiation fees and dues associated with
membership in such professional, social, civic and service clubs of which
Executive is now a member, and which have been or are hereafter approved for
reimbursement on a case by case basis by the Board of Directors.
(d) vacation Leave. Executive shall be entitled to vacation time
each year during the Term hereof in accordance with normal Company policy for
executives of comparable tenure and position.
(e) Holidays, Leave Days, Etc.. Executive shall be entitled to
such holidays, sick leave, leaves of absence and other absences in accordance
with normal Company policy for executives of comparable tenure and position.
(f) Participation in welfare and Benefit Plans.
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During the Term hereof, in addition to the foregoing, Executive shall be
entitled to participate in (personally and/or for the benefit of his family or
other beneficiaries) any Company welfare, insurance and benefit plans that are
available to other executives of the Company of comparable tenure and position,
in accordance with the terms of such plans.
(g) Pension and Profit-Sharing Plans. In accordance with the
general terms and provisions of such plans, Executive shall be entitled to all
benefits payable under the Company's qualified profit-sharing plan, or other
present or future retirement plans or programs, which are available to other
executives of the Company of comparable tenure and position.
9. Termination.
Executive's employment during the Term may be ended by the Board
or its designee, or by Executive, as herein provided, without further obligation
or liability except as expressly provided herein:
(a) Resignation, Retirement, Death or Disability. Executive's
employment hereunder shall cease at any time by Executive's voluntary
resignation or by Executive's Retirement, Death or Disability. Disability shall
be deemed to have occurred only after the following procedure has been
satisfied: If within thirty (30) days after written notice of proposed
Termination for Disability is given to Executive by the Company, Executive has
not returned to the full-time performance of his duties, the Company may end
Executive's employment by giving written notice of Termination for Disability.
Such notice may be given by the Company following Executive's absence from
Executive's duties by reason of physical or mental disability for one hundred
fifty
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(150) consecutive calendar days.
(b) Termination for Cause. Executive's employment hereunder
shall cease upon a good faith finding of Cause by the President; provided,
however, that Executive shall be given written notice of the President's finding
of conduct by Executive amounting to Cause for such Termination, specifying the
particulars thereof.
(c) Termination Without Cause. Executive's employment may be
Terminated Without Cause upon five (5) days' notice for any reason, subject to
the payment of all amounts required by Section 10(e) hereof.
(d) Expiration. Executive's employment shall cease, or shall
continue on an at-will basis as provided in Section 4, upon the expiration of
the Term of this Agreement as provided in Section 4.
10. Payments to Executive Upon Termination.
(a) Disability or Retirement. In the event of Termination of
this Agreement due to Executive's Retirement, Death or Disability, Executive or
Executive's spouse and/or estate shall be entitled to all benefits generally
available to Company employees, or their spouses and/or estates, as of the date
of such, Disability or Retirement, without reduction, including but not limited
to payments under the plans identified in Sections 8(f) and (g).
(b) Death. In the event of Termination of this Agreement due to
Executive's death, Executive or Executive's spouse and/or estate shall be
entitled to all benefits generally available to Company executives, or their
spouses and/or estates,
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as of the date of such Death without reduction, including but not limited to
payments under the plans identified in Sections 8(f) and (g).
(c) Resignation or Expiration. In the event of Executive's
voluntary resignation, or upon Expiration, neither the Company nor any Affiliate
shall have any further obligation to Executive under this Agreement or
otherwise, except as may be expressly required by law.
(d) Termination for Cause. In the event Executive is Terminated
by the Company for Cause, neither the Company nor any Affiliate shall have any
further obligation to Executive under this Agreement or otherwise, except as may
be expressly required by law.
(e) Termination Without Cause. Upon the occurrence of a
Termination Without Cause the Company shall, as damages for breach of contract:
(1) Pay to Executive within 15 days of said termination,
a lump sum payment equal to the amount that the Executive would have received
(without reduction for the time value of money) if this Agreement would have
remained in effect, without renewal, but for such Termination Without Cause
("Unexpired Term"); and
(2) Pay to Executive a pro rata portion of the Bonus
under the terms set forth under Section 8(b).
(3) Continue to provide to Executive during the
Unexpired Term hereof, at the Company's expense, those benefits afforded to
Executive under Section 8(f) as if Executive continued to remain in the employ
of the Company or, if that is infeasible, shall compensate Executive for the
value thereof.
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(4) within ninety (90) days of the end of each plan year
during the Unexpired Term hereof, pay to Executive sums equivalent to those
which Executive would have received under Section 8(g) but for such Termination
Without Cause. The objective of this provision is to place Executive, so far as
is financially reasonable, in the same position as if he had been employed
throughout the Unexpired Term of this Agreement and any such retirement plans
continued to provide the same benefits after the Executive's Termination Without
Cause as before such Termination without Cause.
(5) The receipt of the amounts and benefits provided by
this Section 10(e) shall constitute the sole remedy of Executive as against the
Company, its Affiliates and their respective past, present and future officers,
directors, shareholders, employees and agents, in the event of a Termination
Without Cause, or other material breach by the Company of the terms of this
Agreement unless specified to the contrary herein.
(f) Liquidation of Company. In the event the Company plans to
liquidate, prior to the liquidation of the Company the Company shall pay to
Executive a lump sum payment equal to the remaining amount that would have been
due Executive pursuant to Section 8(a) for the remainder of the Term of this
Agreement; provided, however, that if the liquidation occurs after August 31,
1999, Executive shall also receive an additional one year's salary set forth in
Section 8(a). In the event of a liquidation of the Company, this Agreement shall
terminate and the Company shall have no further obligation to Executive except
as set forth herein.
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(g) Payment Limitation. Notwithstanding anything to the contrary
in this Agreement which is treated as a Parachute Payment, the total
compensation paid to Executive pursuant to this Agreement, together with any
other payment or the value of any benefit received or to be received by the
Executive which is treated as a Parachute Payment shall not exceed 2.99 times
the Executive's Base Amount. In the event a reduction of the payments set forth
in this Agreement is required pursuant to this Section, the Executive may select
the compensation which will be reduced in order to fall within the 2.99 times
Base Amount limitation.
(h) Source of Payments. All payments provided in Section 10
shall be paid in cash from the general funds of the Company, and no special or
separate fund need be established and no other segregation of assets need be
made to assure payment. Executive shall have no right, title, or interest
whatever in or to any investments which the Company may make to aid the Company
in meeting its obligations hereunder.
(i) Sole Remedy. The receipt of the amounts described in this
Section 10 shall constitute the Executive's sole remedy for breach of this
Agreement against the Company, its Affiliates, and their respective officers,
directors, shareholders, employees and agents.
11. Confidential Information.
During the Term of this Agreement and thereafter, Executive
shall not, to the detriment of the Company or its Affiliates, disclose or reveal
to any unauthorized person any confidential information relating to the Company
or its Affiliates, or to any of the businesses operated by them, and
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Executive confirms that such information constitutes the exclusive property of
the Company and its Affiliates.
12. Federal Income Tax Withholding.
The Company may withhold from any compensation or benefits
payable under this Agreement, including amounts payable under Section 10, all
federal, state, city or other taxes or deductions as shall be required pursuant
to any law, governmental regulation or ruling.
13. Effect of Prior Agreements.
This Agreement contains the entire understanding between the
parties hereto with respect to the subject matter hereof and supersedes any
prior or contemporaneous agreements, representations or understandings, whether
oral or written, express or implied, between the Company, its Affiliates, and
Executive with respect to Executive's employment by the Company. The parties do
not intend for this Agreement to supersede or invalidate the terms of any
written employee benefit or welfare plans with the Company covering Executive,
unless necessary to carry out the purposes of this Agreement.
14. Arbitration.
Any controversy between the parties hereto, including the
construction, application or breach of any of the terms, covenants or conditions
of this Agreement, and all claims relating to or arising from Executive's
employment or termination, including all statutory claims (including but not
limited to all statutes dealing with employment discrimination), shall on timely
written request of one party served upon the other, be submitted to confidential
arbitration and be governed
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by the California Arbitration Act as set forth in the California Code of Civil
Procedure (presently Sections 1280 et seq.). The parties agree that any written
request for arbitration must be made within twelve months after the initiating
party first learned or should have learned in the exercise of reasonable
diligence of the essential facts upon which the claim is based, or first
suffered any harm, or first learned or should have learned in the exercise of
reasonable diligence of the breach of this Agreement, whichever is earlier. Any
claim not raised within such time limitation shall be waived and forever barred.
The arbitration shall take place in the City of San Diego, California. The
parties may agree upon one arbitrator, but in the event they cannot agree the
arbitrator shall be a retired judge designated by the then Presiding Judge of
the San Diego Superior Court. Arbitration shall be the exclusive remedy of
Executive and the Company and the award of the arbitrator shall be final and
binding upon the parties.
15. General Provisions.
(a) Nonassignability. Neither this Agreement nor any right or
interest hereunder shall be assignable by Executive or Executive's beneficiaries
or legal representatives without the Company's prior written consent, provided,
however, that nothing in this Section 15(a) shall preclude (i) Executive from
designating a beneficiary to receive any benefits payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives of
Executive or his estate from assigning any rights hereunder to the person or
persons entitled thereto.
(b) Assumption. The Company shall require any
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successor in interest (whether direct or indirect or as a result of purchase,
merger, consolidation, Change in Control or otherwise) to all or substantially
all of the business and/or assets of the Company to expressly assume and agree
to perform the obligation under this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place.
(c) No Attachment. Except as required by law, no right to
receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect.
(d) Effect of Termination of Agreement. Notwithstanding any
Termination of this Agreement and Executive's employment in accordance with the
provisions hereof, such Termination shall not be construed to relieve any party
of the obligation to pay any sums which are accrued and owing under this
Agreement unpaid as of the date of such Termination, or to affect benefits which
have become vested either pursuant to the terms hereof or to the plan under
which such benefits have been granted.
(e) Binding Agreement. This Agreement shall be binding upon, and
inure to the benefit of, Executive, the Company and its Affiliates, and their
respective heirs, successors and assigns. Each party acknowledges that no
representations, inducements, promises, or agreements have been made by any
party,
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or anyone acting on behalf of any party, which are not embodied herein and that
no other agreement, statement, or promise not contained in this Agreement shall
be valid or binding on either party except as provided herein.
(f) Amendment or Augmentation of Agreement. This Agreement may
not be modified or amended except by an instrument in writing signed by the
parties hereto. unless expressly agreed to in writing by the parties hereto, no
additional rights or compensation, even if given or accepted, shall be deemed to
modify or otherwise affect the express terms and conditions of this Agreement.
(g) Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement except by written instrument of
the party charged with such waiver or estoppel. No such waiver shall be deemed a
continuing waiver unless specifically stated therein, and each waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
(h) Severability. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity shall
in no way affect the rest of such provision not held so invalid, and the rest of
such provision together with all other
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provision of this Agreement shall, to the full extent consistent with law,
continue in full force and effect.
(i) Notices. All notices, requests, demands and other
communications hereunder shall he in writing and shall be deemed to have been
duly given if personally delivered or if mailed by United States certified or
registered mail, prepaid, to the parties or their permitted assignees at the
following addresses (or at such other address as shall be given in writing by
either party to the other):
To: Nitches, Inc.
00000 Xxxxxx Xxxxx Xx
Xxx Xxxxx, XX 00000
Attention: Assistant Secretary
To: Executive at the last known address contained
in the Personnel Records of the Company
(j) Headings. The headings of paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provision of this Agreement.
(k) Governing Law. This Agreement has been executed and
delivered in the State of California, and its validity, interpretation,
performance, and enforcement shall be governed by the laws of said State.
(1) Advice of Counsel. Executive has been encouraged to consult
with legal counsel of his choosing concerning the terms of this Agreement prior
to executing this Agreement. Any failure by Executive to consult with competent
counsel prior to executing this Agreement shall not be a basis for rescinding or
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otherwise avoiding the binding effect of this Agreement. The parties acknowledge
that they are entering into this Agreement freely and voluntarily, with full
understanding of the terms of the Agreement. Interpretation of the terms of this
Agreement shall not be construed for or against either party on the basis of the
identity of the party who drafted the provision in question.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by a duly authorized representative, and Executive has signed this Agreement,
all as of the day and month first above written.
NITCHES, INC. EXECUTIVE
By: /s/ XXXXXXX X. XXXXX /s/ XXXXXX X. XXXXXX
---------------------------- ----------------------------
Director, Compensation Committee Xxxxxx X. Xxxxxx
