Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this 3rd day of
September, 1999, and having an "Effective Date" of September 3,
1999, is by and between SCHOOL SPECIALTY, INC., a Delaware
corporation (the "Company") and DANIEL P. SPALDING ("Employee").
RECITALS
The Company desires to continue to employ Employee and to
have the benefit of his skills and services, and Employee desires
to accept employment with the Company, on the terms and
conditions set forth herein.
This Employment Agreement supercedes and cancels any other
prior employment agreements or understandings; written or oral,
between the Company and the Employee.
NOW, THEREFORE, in consideration of the mutual promises,
terms, covenants and conditions set forth herein, and the
performance of each, the parties hereto, intending legally to be
bound, hereby agree as follows:
AGREEMENTS
1. Employment and Duties. The Company hereby agrees to
employ the Employee and the Employee hereby accepts
employment as the Chairman and Chief Executive Officer
of the Company and agrees to devote his full business
time and efforts to the diligent and faithful
performance of his duties as Chairman and Chief
Executive Officer of the Company hereunder under the
direction of the Board of Directors of the Company.
Such duties shall be performed from headquarters in the
Appleton, Wisconsin, area. Throughout the term of this
Agreement, the Employee shall be recommended by
management of the Company, to its shareholders as a
suitable candidate for a position on the Board of
Directors of the Company.
2. Term of Employment. Unless sooner terminated as
hereinafter provided, the term of the Employee's employment
hereunder shall commence with and only with the Effective Date
and shall continue for a period of three (3) years (the "Term").
This Agreement may be terminated prior to the end of the Term in
the manner provided herein. In the event that this agreement is
not terminated pursuant to the terms of this Agreement, following
the first year of the Term of three (3) years or the first year
of any renewal terms thereof, said agreement shall extend for
successive renewal terms of three (3) years each measured from
the date of renewal, unless either party shall notify the other
party of their desire to not renew the term of this agreement,
with said notice to be made no later than ninety (90) days prior
to the expiration of the first year of the Term of this agreement
or any then effective first year of any renewal term thereof.
3. Compensation. For all services rendered by Employee,
the Company shall compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the
annual base salary payable to Employee shall be Two
Hundred Twenty-Five Thousand ($225,000) per year or
such greater amount as
determined from time to time
by the Board of Directors of the Company (but not
reviewed less frequently than on an annual basis),
payable on a regular basis in accordance with the
Company's standard payroll procedures, but not less
than monthly. It is understood that the base salary
is a minimum amount, and shall not be reduced
during the term of this Agreement.
(b) Incentive Bonus. During the initial term and any
extensions thereof, Employee shall be eligible to
receive an incentive bonus based upon his
participation in the Company's senior management
bonus program as specified in Exhibit A as attached
hereto, or successor senior management bonus
programs. The first and last years of employment
will be prorated.
(c) Perquisites, Benefits, and Other Compensation.
During the initial term and any extensions thereof,
Employee shall be entitled to receive all
perquisites and benefits as are customarily
provided by the Company to its executive employees,
subject to such changes, additions, or deletions as
the Company may make generally from time to time,
as well as such other perquisites or benefits as
may be specified from time to time by the Board of
Directors or the Chief Executive Officer of the
Company.
4. Covenants and Conditions.
(a) The Employee will acquire information and knowledge
respecting the intimate and confidential affairs of
the Company in the various phases of its business.
Accordingly, the Employee agrees that he shall not
for a period of two (2) years following the
termination of his employment with the Company, use
for himself or disclose to any person not employed
by the Company any such knowledge or information
heretofore acquired or acquired during the term of
this employment hereunder including but not limited
to the prescribed requirements of S.134.90 of the
Wisconsin Statutes, as hereinafter amended from
time to time. Nothing in this agreement shall be
construed to limit or supersede the common law of
torts or statutory or other protection of trade
secrets where such law provides the Company with
greater protections or protections for a longer
duration than that provided in this section 4 of
this Agreement.
(b) The Employee agrees that all memoranda, notes,
records, papers, or other documents and all copies thereof
relating to the Company's operations or business, some of which
may be prepared by him, and all objects associated therewith
(such as models and samples) in any way obtained by him shall be
the Company's property. This shall include, but is not limited
to, documents and objects concerning any process, apparatus, or
product manufactured, used, developed, investigated, or
considered by the Company. The Employee shall not, except for
Company use, copy or duplicate any of the aforementioned
documents or objects, nor remove them from the Company's
facilities, nor use any information concerning them except for
the Company's benefit, either during his employment or
thereafter. The Employee agrees that he will deliver all of the
aforementioned documents and objects that may be in his
possession to the Company on termination of his employment, or at
any other time on the Company's request, together with his
written certification of compliance, except for those documents
and objects received as a director of the Company.
5. Death or Disability of the Employee. The
Employee's employment shall terminate immediately upon
his death. In the event the Employee becomes physically
or mentally disabled so as to qualify for disability
payments under the then current disability coverage for
full time employees of the Company, the Company may at
its option terminate his employment upon not less than
thirty (30) days written notice. The Company's right to
terminate the Employee's employment pursuant to the
preceding sentence shall cease in the event the notice
of termination provided for therein shall not be given
during the period of the Employee's disability or within
ninety (90) days after such disability ceases. In the
event of termination, the Company shall be obligated to
pay the Employee's salary under paragraph 3 hereof, net
of the gross amount of Long Term disability benefits
received by the Employee, through the balance of the
term of this Agreement and any then currently effective
extension thereof.
6. Termination and Severance Compensation. The Company
reserves the right to immediately terminate the
Employee's employment under this agreement should any of
the following occur:
(a) The Employee's commission of a felony that is an
act which, in the opinion of the Board of
Directors, is either abhorrent to the community or
is an intentional act, which the Board of Directors
considers materially damaging to the reputation of
the Company or its successors or assigns.
(b) The Employee's breach of or failure to perform his
obligations in accordance with the terms and
conditions of this agreement. However the right of
the Company to terminate the employment of the
Employee under the terms of this paragraph 6(b)
shall be conditioned upon the Company promptly
providing to the Employee a written notice which
describes the Employee's breach of or failure to
perform his obligations in accordance with the
terms and conditions of this agreement. The
Employee shall have thirty (30) days from the date
of the Company's issuance of this notice to cure
the described breach or failure. Notwithstanding
the above described language, should the Company
issue more than one (1) notice in any twelve (12)
month period under the terms of this paragraph
6(b), the Employee shall have no cure rights for
such breach or failure to perform.
(c) The death of the Employee.
(d) The disability of the Employee, as described in
Section 5 above.
Should the term of the Employee's employment with the
Company be terminated pursuant to the terms of Section
6(c) and 7 herein, the Company shall pay to the
Employee the Base Salary described in Section 3(a) for
the balance of the then effective term of this
Agreement.
7. Rights and Obligations of Successors. In the event
that any of the following events occur, a "Change in
Control" shall be deemed to occur for the purpose of
this Agreement: (a) any person or group of persons
acting in concert becomes the beneficial owner,
directly or indirectly (excluding ownership by or
through employee benefit plans), of securities of the
Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities; (b) the Company is combined (by merger,
share exchange, consolidation, or otherwise) with
another corporation and as a result of such combination
less than seventy five percent (75%) of the
outstanding
securities of the surviving or resulting corporation
are owned in the aggregate by the former shareholders
of the Company; or (c) any person or group of persons
acting in concert obtains direct or indirect control of
the Board of Directors of the Company, other than the
current shareholders of the Company. The Employee shall
have the right to terminate his employment under the
terms of this Agreement for a period of sixty (60) days
following the Change in Control. In the event that the
Employee shall not so elect to terminate this
Agreement, then this agreement shall be assignable and
transferable by the Company to any subsidiary or
affiliate or to any subsidiary or affiliate of the
Company affiliated with the Change in Control and shall
inure to the benefit of and be binding upon the
Employee and his heirs and personal representatives and
the Company and its successors and assigns. In the
event the Employee elects to terminate employment, the
Employee shall be paid through the term of this
Agreement and any then currently effective extension
thereof.
8. Covenant Not to Compete. In consideration of the
employment hereunder, the Employee hereby agrees that
during the term of his employment by the Company and
for a period of twenty four (24) months following the
termination of his employment with the Company, the
Employee will not either directly or indirectly own,
have proprietary interest (except for less than 5% of
any listed company or company traded in the over-the-
counter market) of any kind in, be employed by, or
serve as a consultant to or in any other capacity for
any firm, other than the Company and its subsidiaries,
engaged in the manufacture and distribution of school
supplies, equipment, furniture or other products made
and distributed by the Company or any of the Company's
present or future subsidiary corporations (acquired
during the term of this Agreement) during the period of
the Employee's employment in the area where they are
engaged in business without the express written consent
of the Company. The Employee agrees that a breach of
the covenant contained herein will result in
irreparable and continuing damage to the Company for
which there will be no adequate remedy at law and in
the event of any breach of such agreement, the Company
shall be entitled to injunctive and such other and
further relief including damages as may be proper.
9. Notice. All notices, demands and other communications
hereunder shall be deemed to have been duly given, if delivered
by hand or mailed, certified or registered mail with postage
prepaid:
To the Company: School Specialty, Inc.
426 W. College Avenue
P.O. Box 1579
Appleton, WI 54911
Attention: Mr. Daniel P. Spalding
Fax: (920) 882-5863
With a copy to: Joseph F. Franzoi IV, Esq.
Franzoi & Franzoi, S.C.
514 Racine Street
Menasha, WI 54952
Fax: (920) 725-0998
To Employee: Daniel P. Spalding
350 Park Street
Menasha, WI 54952
or to such other address as the person to whom notice
is to be given may have specified in a notice duly
given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or
other communication shall be deemed to have been given
as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be
deemed given only when actually received by the
addressees.
10. Entire Agreement; Amendment; Waiver. This Agreement
(including any documents referred to herein) sets forth
the entire understanding of the parties hereto with
respect to the subject matter contemplated hereby. Any
and all previous agreements and understandings between
or among the parties regarding the subject matter
hereof, whether written or oral, are superseded by this
Agreement. This Agreement shall not be amended or
modified except by a written instrument duly executed
by each of the parties hereto. Any extension or waiver
by any party of any provision hereto shall be valid
only if set forth in an instrument in writing signed on
behalf of such party.
11. Expenses. Each party hereto will pay their respective
fees, expenses and disbursements of their agents,
representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement,
and its enforcement.
12. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of
Wisconsin, without regard to its conflict of laws
principles.
IN WITNESS WHEREOF, the parties hereto have cause this
Agreement to be duly executed as of the date first written above.
COMPANY: SCHOOL SPECIALTY, INC.
/s/ David Vander Zanden
-----------------------------------
David Vander Zanden, President
EMPLOYEE:
/s/ Daniel P. Spalding
------------------------------------
Daniel P. Spalding, Individually
School Specialty
Fiscal 2000
Incentive Program
Executive Plan:
Corporate criteria: 100% on consolidated EBITA
Budget EBITA: $62,829,000
Payout:
Below budget: $-0-
At budget: 50% of base salary
Max at Budget + 20%, or $75,395,000 = 100% of base salary
Specialty/Traditional Companies Plan:
Corporate criteria: 25% based upon consolidated EBITA, as above.
Division criteria: 75% based upon Division performance in three areas:
1. Budget EBITA: Max payout: 37.5% of base salary
Below budget: $-0-
At budget: 18.75% of base salary
Max: budget + 20% of Division EBITA: 37.5% of base salary
2. Return on Average Operating Assets: Max payout: 18.75% of base salary
Calc: EBITA/Gross A/R + Gross Inv. + Net F/A - A/P =
Return on Average Operating Assets (RAOA)
(average calculated using month-end balance)
Payout:
0 - 20% RAOA 0
21 - 60% RAOA 0 - 18.75% of base salary
3. Return on Sales: Max payout: 18.75% of base salary
Calc: EBITA/Net Sales
Payout:
Spec. Co's
7 - 20% Return on Sales: 0 - 18.75% of base salary
Trad. Co.
6 - 12% Return on Sales: 0 - 18.75% of base salary
Example:
Corporate EBITA budget $63 million
Spec. Co. EBITA budget $10 million
Executive Base Salary $100,000
If actual performance is a follows:
EBITA Div. $11 million
Avg. Operating Assets $28 million
Net Sales $61 million
EBITA Corp. $68 million
Bonus:
25% Corp. EBITA: $68-$63 = $5 mil. = 75% X $100,000 X 25% = $18,750
37.5% Div. EBITA: $10-$11 = $1 mil. = 75% X $100,000 X 37.5% = $28,125
18.75% RAOA: 11 mil/28 mil = 40 RAOA = 75% X $100,000 X 18.75% = $14,063
18.75% Rtn on Sales: 11 mil/61 mil = 18% = 85% X $100,000 X 18.75% = $15,938
Total Bonus $76,876
May 17, 1999