AMENDED AND RESTATED EMPLOYMENT AGREEMENT entered as of the 27th day of
February, 2004.
AMONG: HF HOLDINGS, INC., a Delaware corporation.
("COMPANY")
ICON HEALTH & FITNESS, INC., a Delaware
corporation.
("SUBSIDIARY")
GARY E. STEVENSON, acting in his personal capacity, of
the City of PROVIDENCE, State of UTAH.
("EMPLOYEE")
THE PARTIES AGREE AS FOLLOWS:
1 PREAMBLE
1.1 The COMPANY and the SUBSIDIARY made an exchange offer for all
outstanding 13% Senior Subordinated Notes due 2002 of the SUBSIDIARY,
15% Senior Secured Discount Notes due 2004 of IHF Holdings, Inc. and 14%
Senior Discount Notes due 2006 of ICON Fitness Corporation, pursuant to
an Exchange Offer and Consent Solicitation, dated July 30, 1999, as
supplemented (the "Exchange Offer").
1.2 In connection with the Restructuring (as defined in the Equity Letter
Agreement (the "Equity Letter"), dated July 8, 1999 and attached, as
amended, to the Exchange Offer as Annex H) the COMPANY concluded an
agreement for the employment of the EMPLOYEE as President and Chief
Operating Officer of the COMPANY, according to the terms and conditions
set forth in such agreement, dated September 27, 1999.
1.3 That agreement was amended by a First Amendment to Employment Agreement,
dated April 29, 2002 and a Second Amendment to Employment Agreement,
dated May 17, 2003 (as amended from time to time, the "Original
Agreement").
1.4 EMPLOYEE has informed the COMPANY of his intent to perform full-time
church service, as contemplated in Section 9.3 of the Original
Agreement, and to return to employment with the Company upon completion
of such church service.
1.5 The EMPLOYEE and the COMPANY want to provide for the EMPLOYEE's ability
to perform such full-time church service for approximately three (3)
years pursuant to a Leave of Absence (as hereinafter defined).
1.6 The Original Agreement is hereby amended and restated in its entirety to
record the terms and conditions which govern the mutual relations of the
parties hereto with respect to its subject matter and to expressly
provide for EMPLOYEE's performance of full-time church service pursuant
to the Leave of Absence and subsequent return to the Company (as hereby
amended and restated, the "Agreement").
1.7 In this Agreement, "BUSINESS" means the manufacture, sale and
distribution of SPORTING GOODS as carried on by the COMPANY, the
SUBSIDIARY, and their respective various divisions and subsidiaries,
from time to time. "SPORTING GOODS" means fitness equipment and
accessories, which presently involve treadmills, home gyms, aerobic
exercises, trampolines, weights and benches and exercise accessories,
but the content of such product lines may vary from time to time.
1.8 In this Agreement, AFFILIATES means any entity in which the COMPANY or
the SUBSIDIARY holds more than a twenty percent (20%) voting interest
direct or indirect.
2 EMPLOYMENT
2.1 The Original Agreement came into effect on September 27, 1999
("Effective Date").
2.2 Subject to earlier termination as hereinafter provided, the COMPANY
hereby employs the EMPLOYEE and the EMPLOYEE agrees to serve the COMPANY
in the positions of President and Chief Operating Officer from the
Effective Date until July 31, 2008, (the "TERM"). Except as expressly
provided herein, the TERM shall include a one time leave of absence,
during which the EMPLOYEE is relieved of his obligation to perform the
duties specified in Section 5.1 through 5.8 hereof, otherwise required
pursuant to this Agreement for the COMPANY, including any current and
future SUBSIDIARY, commencing on July 1, 2004 and ending not later than
July 31, 2007 so that the EMPLOYEE can serve as a Mission President for
The Church of Jesus Christ of Later- day Saints, which the Company
acknowledges is full time church service (the "Leave of Absence").
2.3 Although this agreement is concluded between the COMPANY and the
EMPLOYEE, it is agreed that the duties and obligations of the EMPLOYEE
hereunder extend to the SUBSIDIARY and to all of the COMPANY's other
subsidiaries, present and future, although the EMPLOYEE will not
necessarily be an employee of such entities. The EMPLOYEE agrees to
serve, if requested by the COMPANY, as an officer or director of the
SUBSIDIARY and any other subsidiaries, in each case without additional
consideration.
3 BASE SALARY, EXPENSES AND BENEFITS
3.1 In consideration for the faithful performance of services, the other
obligations of the Employee hereunder which continue during the Leave of
Absence and the Employee's execution of this amended and restated
Agreement, by the EMPLOYEE to be rendered to the COMPANY as herein
provided during the TERM but not during the Leave of Absence, the
COMPANY shall pay to the EMPLOYEE during the TERM (which shall include
the Leave of Absence) an annual base salary of FIVE HUNDRED SEVENTY-FIVE
THOUSAND DOLLARS ($575,000) payable in semi-monthly installments or in
accordance with the general policy of the COMPANY which may change from
time to time but in no event less frequently . than monthly.
3.2 The annual base salary mentioned in Section 3.1 above shall be reviewed
by the Board of Directors of the COMPANY and may be adjusted upwards in
the Board's discretion, annually for each year of the TERM, taking into
account, among other things:
(a) the performance by the EMPLOYEE of his duties and functions pursuant
to this Agreement,
(b) the general economic situation,
(c) the development and performance of the BUSINESS, and
(d) other matters deemed relevant by the Board of Directors such as an
increase in shareholder equity and the rate on return on investment.
3.3 The COMPANY shall reimburse the EMPLOYEE for all reasonable expenses
which are incurred during the TERM by the EMPLOYEE in the performance of
his duties hereunder and (i) subject to the COMPANY's annual budget or
(ii) as authorized by the Board of Directors of the COMPANY or (iii) in
accordance with the policies and procedures established from time to
time by the Board of Directors of the COMPANY or a committee delegated
for such purpose.
3.4 During the TERM, but not during the Leave of Absence, the COMPANY shall
provide the EMPLOYEE with the use of a new automobile of his choice,
acting reasonably (and consistently with his past practice) every three
(3) years for the purposes of his employment commensurate with the
position of the EMPLOYEE and having regard to COMPANY policy in force
from time to time.
The COMPANY shall assume all costs and expenses of said automobile and
its operation, including, without limitation, insurance, maintenance,
gas and use of such automobile. Upon the expiry of the TERM, the
EMPLOYEE shall deliver such automobile to the COMPANY.
3.5 During the TERM (including the Leave of Absence), the EMPLOYEE shall be
entitled to participate in the COMPANY's life, welfare, and health
insurance plans for senior executives on the same terms as those of
other senior executives.
3.6 During the TERM, the EMPLOYEE shall be entitled to participate in fringe
benefit programs and general salary adjustment increases which are not
less favorable than those extended by the COMPANY to its senior
executives, including without limitation the deferred compensation plan
previously established by the Board of Directors, but excluding for this
purpose any such plan or program adopted exclusively for the benefit of
junior management.
4 ANNUAL BONUS
4.1 The EMPLOYEE shall receive (a) with respect to (i) each fiscal year
ending during the TERM but not during the Leave of Absence, and (ii)
that portion of any fiscal year ending after TERM but not during the
Leave of Absence, during which he is employed hereunder, a bonus equal
to one and thirty-two hundredths percent (1.32%) or one and one-tenth
percent (1.10%) in the event of the application of the proviso set forth
in Section 9.8 hereof, of the consolidated EBITDA (as that term is
defined in the Credit Agreement, dated April 9, 2002, among the
SUBSIDIARY, General Electric Capital Corporation and the other lenders
thereunder, without regard to any amendments thereto) of the SUBSIDIARY
and its subsidiaries (but not including the COMPANY) and (b) with
respect to each fiscal year ending during the Leave of Absence, a bonus
equal to one and one-tenth percent (1.10%) of the consolidated EBITDA
(as defined in Section 4.1(a) above) calculated using the Company's
fiscal year ending May 31, 2003, which annual bonus shall be payable in
equal monthly installments during each year of the Leave of Absence
commencing (on an estimated basis if necessary) with the first pay
period of the first month of the Leave of Absence; provided, however,
that such bonus payments (i) shall, in the event of a Material
Acquisition (as reasonably determined in good faith by the Board of
Directors) by the COMPANY or the SUBSIDIARY and absent an agreement to
the contrary between the COMPANY and the EMPLOYEE, be calculated without
taking account of any EBITDA (as defined above) properly attributable to
such Material Acquisition, and (ii) shall not be payable with respect to
any such fiscal year unless such EBITDA for such fiscal year exceeds
five and one half percent (5.5%) of the consolidated net sales of the
SUBSIDIARY and its subsidiaries (but not including the COMPANY)
determined in accordance with generally accepted accounting principles
and provided, further, that for purposes of this Agreement, EBITDA shall
be calculated without regard to any bonuses payable hereunder.
4.2 The sole basis for the bonus calculation shall be the audited financial
statements of the SUBSIDIARY and its subsidiaries for the fiscal year in
question.
4.3 Any bonus to which EMPLOYEE is entitled under the provisions of this
Agreement for any fiscal year shall be paid to him (regardless of
whether the TERM has terminated) in accordance with the COMPANY's
previous practice, with a first installment equal to forty percent (40%)
of a good faith estimate of the bonus for such year, to be paid during
the month of December of such year and a final installment to be paid as
promptly as reasonably practicable after the end of, but not later than
the 75th day after the end of each such fiscal year.
5 DUTIES
5.1 During the TERM but not during the Leave of Absence, the EMPLOYEE shall
perform those functions which are normally the functions of the
President and Chief Operating Officer of the COMPANY and such other
offices as he may hold pursuant to Section 2.3, and shall further
perform those functions which shall be reasonably determined from time
to time by the Board of Directors of the COMPANY, such functions not to
be inconsistent with those herein set forth. The EMPLOYEE shall report
to, and be subject to the authority of, the Board of Directors of the
COMPANY.
5.2 During the TERM but not during the Leave of Absence, the COMPANY shall
give the EMPLOYEE a notice of six (6) months prior to any relocation of
the EMPLOYEE (the COMPANY shall not relocate the EMPLOYEE during the
Leave of Absence).
5.3 During the TERM but not during the Leave of Absence, it is the specific
responsibility of the EMPLOYEE, between regular meetings of the Board,
to apprise Board Members of significant business matters.
5.4 During the TERM but not during the Leave of Absence, EMPLOYEE shall
devote his entire working time, attention and energies to the business
of the COMPANY, the SUBSIDIARY, and their respective AFFILIATES.
5.5 During the TERM but not during the Leave of Absence, the EMPLOYEE shall
not, except under Section 5.6, be engaged in any other business
activity, whether or not such business activity is pursued for gain,
profit or other pecuniary advantage. Notwithstanding the prohibition
contained in the present clause, the EMPLOYEE shall be entitled to .
continue to sit on the boards of directors of the companies listed on
Schedule I hereto, and on the boards of directors of other companies if
such activity is approved in writing by the Board of Directors of the
COMPANY. In the case of non-profit corporations or charities, such
approval shall not be unreasonably withheld, but, in all other cases,
the Board of Directors shall have sole discretion to grant, delay or
withhold approval, with or without conditions.
5.6 During the Term but not during the Leave of Absence, the EMPLOYEE shall
not invest his personal assets in any business other than NON- COMPETING
BUSINESSES, and even in the case of such investments:
(a) No services are required or furnished on the part of the EMPLOYEE in
the operations of the companies in which such investments are made
and in which his participation is solely that of an investor
provided that this subsection is not infringed by the EMPLOYEE's
providing counseling (and not acting in a "line" capacity) on a
non-remunerative basis to all such companies for a maximum of 5
hours per week and 200 hours per year; and
(b) If the EMPLOYEE purchases securities in any corporation whose
securities are regularly traded in a recognized securities market,
such purchases shall not result in his collectively owning
beneficially at any time five percent (5%) or more of the equity
securities of any corporation engaged in a business other than a
NON-COMPETING BUSINESS.
The foregoing restrictions shall not apply to any investment of whatever
extent the EMPLOYEE may take in the shares of the COMPANY or of any
successor company.
For the purposes of this subsection, NON-COMPETING BUSINESSES are all
businesses other than those which compete with:
(a) the BUSINESS; or
(b) any other business carried on in the future by the COMPANY, the
SUBSIDIARY or any AFFILIATES, provided that the EMPLOYEE has access
to confidential information concerning such business.
Moreover, the EMPLOYEE shall not knowingly assist any RELATIVE to make
any investment which the EMPLOYEE is not permitted to make by this
section.
5.7 The EMPLOYEE is a member of the Board of Directors and acknowledges that
he has a significant interest in this Agreement and undertakes during
the Term but not during the Leave of Absence, the following:
5.7.1 To seek independent legal counsel at the COMPANY's expense to
negotiate and review this Agreement on the EMPLOYEE's behalf;
5.7.2 To disclose his interest in this Agreement to the other
members of the Board of Directors; and
5.7.3 To retire from and abstain from the discussion and vote at any
meeting of the Board of Directors at which this Agreement or any
default by EMPLOYEE or matter arising therefrom is the subject of
a discussion or a vote.
5.8 The EMPLOYEE also undertakes during the Term but not during the Leave of
Absence, the following:
5.8.1 To use every best effort (including the establishment of written
procedures known to operation personnel) to promptly bring to the
attention of the Board of Directors of the COMPANY any matter
requiring the COMPANY's decision or action where his own
interests or those of a RELATIVE are involved and to abstain from
taking such decision or action until the Board of Directors
decides.
5.8.2 If requested, to be absent from and abstain from the discussion
and vote at any meeting of the aforementioned Board of Directors
where the subject matter being discussed and voted upon is any
matter covered by Section 5.8.1.
5.8.3 For the purposes of this Agreement, RELATIVE means the EMPLOYEE's
spouse, parent, sibling, child or sibling's children, the spouses
of the foregoing and any other person who could be claimed as a
dependent on the EMPLOYEE's or RELATIVE's federal income tax
return, any corporation or partnership in which a RELATIVE or the
EMPLOYEE holds a five percent (5%) interest or of which a
RELATIVE or the EMPLOYEE is an officer or director, and any trust
of which any of the foregoing is a beneficiary.
Notwithstanding anything contained herein to the contrary, no provision of
this Agreement shall be deemed to excuse the Executive during the Leave of
Absence of any and all fiduciary obligations imposed on a member of the Board of
Directors by applicable law.
6 EQUITY GRANT
6.1 The COMPANY previously issued to the EMPLOYEE 291,700 shares of Common
Stock of the COMPANY in connection with the execution of the Original
Agreement, at no cost to EMPLOYEE, which the COMPANY represents and
warrants is equal to 2.91617% of the COMPANY's Common Stock outstanding
on a fully diluted basis upon closing of the Restructuring.
7 CONFIDENTIALITY, ETC.
7.1 The EMPLOYEE recognizes and acknowledges that the confidential
information, trade secrets and proprietary processes of the COMPANY, its
AFFILIATES and subsidiaries as they may exist from time to time are
valuable, special and unique assets of the BUSINESS of the COMPANY, its
AFFILIATES and subsidiaries, access to and knowledge of which are
essential to the performance of the EMPLOYEE's duties hereunder. The
EMPLOYEE will not, during the TERM or at any time 3 within five (5)
years following its termination, for any reason whatsoever, in whole or
in part, disclose such confidential information, secrets or processes to
any person, firm, corporation, association or other entity for any
reason or purpose whatsoever, nor shall the EMPLOYEE make use of such
property for his own purposes or for the benefit of any person, firm,
corporation or other entity (except the COMPANY, its AFFILIATES and
subsidiaries) under any circumstances whatsoever, except as may be
required in the fulfillment of his function with the COMPANY within the
terms of this Agreement or except as provided by law, provided these
restrictions shall not apply to such information, secrets and processes
which are then in the public domain (provided that the EMPLOYEE was not
responsible, directly or indirectly, for permitting such secrets or .
process to enter the public domain without the COMPANY's consent).
7.2 The EMPLOYEE furthermore agrees that upon termination of the TERM he
will remit to the COMPANY all writings and materials, in his possession
or under his control, which either belong to the COMPANY and AFFILIATES
or which may contain confidential information concerning the COMPANY and
AFFILIATES. The EMPLOYEE may, however, retain his personal diary/agenda
after removing or destroying all confidential COMPANY or AFFILIATES
material therein.
7.3 Any and all inventions, discoveries, development, methods, processes,
compositions, works, concepts and ideas (whether or not patentable or
copyrightable) conceived, made, developed, created or reduced to
practice by the EMPLOYEE (whether at the request or suggestion of the
COMPANY or otherwise, whether alone or in conjunction with others, and
whether during regular hours of work or otherwise) during the TERM which
may relate to the business, ventures or other activities of or products
manufactured or sold by the COMPANY or any of its subsidiaries
(collectively, "Proprietary Rights"), shall be promptly and fully
disclosed by the EMPLOYEE to an appropriate executive officer of the
COMPANY and shall be the COMPANY's exclusive property as against the
EMPLOYEE and his heirs and personal representatives, and the EMPLOYEE
hereby assigns to the COMPANY his entire right, title and interest
therein and shall promptly deliver to an appropriate executive officer
of the COMPANY all papers, drawings models, data and other material
relating to any of the foregoing Proprietary Rights, conceived, made,
developed, created or reduced to practice by him as aforesaid. All
copyrightable Proprietary Rights shall be considered "works made for
hire."
The EMPLOYEE shall, upon the COMPANY's request and without any payment
therefor, execute any documents reasonably necessary or advisable in the
opinion of the COMPANY's counsel to assign, and confirm the COMPANY's
title in, his entire right, title and interest in the foregoing
Proprietary Rights and to direct issuance of patents or copyrights to
the COMPANY with respect to such Proprietary Rights as are the COMPANY's
exclusive property as against the EMPLOYEE and his heirs and personal
representatives under this Section 7.3 or to vest in the COMPANY title
to such Proprietary Rights as against the EMPLOYEE and his heirs and
personal representatives, the expense of securing any such patent or
copyright, however, to be borne by the COMPANY. In addition, the Company
shall reimburse the EMPLOYEE for any reasonable expenses incurred in
having such documents reviewed by EMPLOYEE's counsel.
8 VACATION
8.1 During the TERM but not during the Leave of Absence, the EMPLOYEE shall
have the right to an annual paid vacation of no less duration than four
(4) weeks.
9 TERMINATION OF EMPLOYMENT; LEAVE OF ABSENCE
9.1 Notwithstanding any other provision contained herein, the COMPANY may on
or after the Effective Date send to the EMPLOYEE notice of one of the
following events and should the EMPLOYEE fail to cure the matter giving
rise to the notice within thirty (30) days after receipt of such notice,
the TERM shall terminate without any delay stipulated therein or any
indemnity payable in lieu thereof:
(a) EMPLOYEE's willful misconduct or gross negligence;
(b) The commission of a criminal act by the EMPLOYEE against the COMPANY
involving material harm (whether nor not charges are filed);
(c) The commission by the EMPLOYEE of a criminal act of moral turpitude
bringing the COMPANY into disrepute (whether or not charges are
filed);
(d) Willful insubordination to any directive of the Board of Directors
provided reasonable prior notice of such directive is given; or
(e) Actions contrary to Sections 5.4, 5.5, 5.6, 5.8, 7 or 10 causing
COMPANY or AFFILIATES material harm; provided, however, during the
Leave of Absence (i) in the case of paragraph "(d)" above, the Board
of Directors shall not make any "directives" to the EMPLOYEE that
are not consistent with the EMPLOYEE's actual circumstances during
the Leave of Absence, and (ii) in the case of paragraph "(e)" above,
the cross reference to Sections 5.4, 5.5,5.6, 5.7 and 5.8 shall not
apply.
9.2 Notwithstanding any other provision contained herein (in which case the
provisions of Section 9.9(d) shall apply), the TERM shall terminate
automatically, without notice or indemnity in lieu thereof, upon the
occurrence of one of the following events:
(a) The bankruptcy or voluntary state insolvency filing of the EMPLOYEE;
or
(b) The death of the EMPLOYEE.
9.3 Except during the Leave of Absence, the EMPLOYEE may terminate the TERM
by sending his resignation in writing to the Board of Directors not less
than six (6) months prior to the effective date of such resignation,
failing which notice the EMPLOYEE may be subject to any and all damages
incurred as a result of such failure.
9.4 Except under the circumstances described in Section 9.6 and except
during the Leave of Absence other than as provided in Section 9.9(c),
the COMPANY may terminate the TERM by sending a notice in writing to the
EMPLOYEE. Notwithstanding the foregoing, the Company may at any time
following an occurrence of a "Change of Control" as defined in the
Stockholders Agreement of HF Holdings, Inc. dated September 27, 1999
terminate the TERM by sending notice in writing to EMPLOYEE.
9.5 The EMPLOYEE may immediately terminate the TERM by sending a notice of
termination to the Board of Directors with immediate effect following
any material diminution of the EMPLOYEE's responsibilities or in the
event that the EMPLOYEE is asked by the Board of Directors to perform
any act which a reasonable person would consider illegal or unethical
and the COMPANY has not withdrawn its request to the EMPLOYEE to perform
such act within five (5) days of receiving a written notice from the
EMPLOYEE to withdraw such a request.
9.6 The COMPANY may immediately terminate the TERM, but not the Leave of
Absence, by sending a notice in writing to the EMPLOYEE with immediate
effect:
9.6.1 after a period of six (6) consecutive months (or aggregating six
(6) months in any twelve (12) month period) of absence by the
EMPLOYEE from his employment as a result of sickness or
disability, or
9.6.2 after sixty (60) days of absence by the EMPLOYEE from his
employment as a result of sickness or disability and a
certification by three (3) physicians that the EMPLOYEE is likely
to be disabled for a period of at least six (6) months from the
initial date of sickness or disability. One (1) such physician
shall be chosen by the EMPLOYEE, one (1) shall be chosen by the
COMPANY and the third shall be chosen by the other two (2)
selected physicians. The EMPLOYEE agrees that in the event of his
sickness, he shall submit himself for examination by such
physicians if reasonably requested to do so by the COMPANY. For
the purposes of this section, "disabled" or "disability" shall
mean a temporary or permanent substantial inability because of a
physical or mental illness to continue to discharge the
EMPLOYEE's duties hereunder.
Notwithstanding any other provision hereof, the EMPLOYEE's compensation
during any period of the EMPLOYEE's disability shall be reduced to the
extent of any payments to the EMPLOYEE for such period under any
disability plan or program maintained for the EMPLOYEE by the COMPANY
for his benefit.
9.7 In the event of the termination of the TERM by virtue of section 9.6 in
addition to the payments described therein, the COMPANY shall pay to the
EMPLOYEE a severance pay equal to one (1) month base salary in effect at
termination for each calendar year, or part thereof, of the EMPLOYEE's
employment with the COMPANY, the SUBSIDIARY, IHF Capital, Inc. or IHF
Holdings, Inc. (or any predecessor companies of the COMPANY, the
SUBSIDIARY, IHF Capital, Inc., or IHF Holdings, Inc.) after January 1,
1988.
9.8 In the event of the termination of the TERM by virtue of Section 9.3,
9.4 or 9.5, the COMPANY shall pay to the EMPLOYEE a severance payment
equal to the EMPLOYEE's base salary then in effect and the bonus
referred to in Section 4 hereof, pro-rated (meaning paid in equal
monthly installments each year over the period of the payment), for (a)
twelve (12) months following the termination of the TERM if such
termination occurs after the date which is three (3) months after the
Return Date or (b) the number of months remaining in the TERM if such
Termination occurs prior to the date which is three (3) months after the
Return Date; provided, however, that (i) if the EMPLOYEE's resignation
is submitted by EMPLOYEE pursuant to Section 9.3, then the bonus
referred to in Section 4.1 hereof shall be calculated at the rate of one
and one-tenth percent (1.10%), (ii) the aggregate severance pay payable
to the EMPLOYEE pursuant to this Section 9.8 (irrespective and
independent of any payments pursuant to Section 10.3 hereof) shall not
exceed (a) 36 months in the event that the EMPLOYEE elects not to return
to employment with the Company following the Leave of Absence and (b) 48
months in the event that the EMPLOYEE is terminated by the Company for
any reason and (iii) for purposes of the preceding clause (ii) in
calculating the amount of severance pay, payments of base salary and
bonus during the Leave of Absence shall be deemed to constitute
severance pay. For the purposes of this Section 9.8, the bonus referred
to in Section 4.1 hereof shall be determined using EBITDA (as defined in
Section 4.1 hereof) for the fiscal year immediately preceding
termination and shall be paid to the EMPLOYEE within ninety (90) days
from the end of the COMPANY's applicable fiscal year, and the base
salary shall be paid to the EMPLOYEE on the same payment schedule as was
applicable to the EMPLOYEE during his employment; provided however if
termination occurs during the Leave of Absence the bonus referred to in
Section 4.1 shall be determined using EBITDA as of May 31, 2003.
9.9 (a) Notwithstanding the foregoing, the COMPANY has agreed to the
EMPLOYEE taking the Leave of Absence commencing not later than July
1, 2004 (the "Commencement Date") and ending not later than July 31,
2007 (the "Return Date"). In no event will the Leave of Absence by
the EMPLOYEE be deemed a resignation by EMPLOYEE; provided, however,
that if EMPLOYEE does not return to the COMPANY to resume his duties
on or prior to the Return Date, the EMPLOYEE will be deemed to have
terminated the TERM pursuant to Section 9.3 hereof as of the Return
Date but without being subject to any damages for lack of notice
provided therein.
(b) During the Leave of Absence, this Agreement shall remain in full
force and effect and the COMPANY shall continue to pay EMPLOYEE his
(i) base salary in effect on the date such Leave of Absence begins,
payable on the same schedule as was payable to EMPLOYEE prior to the
Leave of Absence, and (ii) the annual bonus payments referred to in
Section 4.1 hereof.
(c) At such time as the EMPLOYEE determines to end the Leave of Absence,
EMPLOYEE shall provide the COMPANY not less than two (2) months
prior written notice of his intent to return to the COMPANY to
resume his full duties as its President and Chief Operating Officer,
as set forth in this Agreement, and state the Return Date. On the
Return Date, the EMPLOYEE will be reinstated as the Company's
President and Chief Operating Officer for the duration of the TERM,
subject to the provisions of this Agreement, and any bonus payments
following the Leave of Absence shall be calculated pursuant to
Section 4.1(b).
(i) Notwithstanding the foregoing, in the event that during Leave of
Absence David Watterson shall cease to be Chairman and Chief
Executive Officer of the COMPANY, the COMPANY will give prompt
notice thereof to Scott Watterson and to the EMPLOYEE, asking
Scott Watterson to return to the COMPANY as its Chairman and
Chief Executive Officer as provided in an Employment Agreement
of even date with Scott Watterson. In the event Scott Watterson
does not so return to the COMPANY, the COMPANY shall ask the
EMPLOYEE to return to the COMPANY as its Chairman and Chief
Executive Officer. In the event that the EMPLOYEE accepts the
COMPANY'S request and actually does return to the COMPANY within
60 days after the COMPANY's request, the EMPLOYEE will thereupon
become the Chairman and Chief Executive Officer. In the event
the EMPLOYEE does not so return to the COMPANY, this Agreement
shall continue in effect, however (x) Section 9.4 shall
thereupon apply without the words "and except during the Leave
of Absence", (y) if the COMPANY during the remainder of the
Leave of Absence terminates the TERM pursuant to Section 9.4 as
then applicable, EMPLOYEE shall have the right until September
30, 2007 to reemployment with the COMPANY, but only in an
executive position, with salary and duties commensurate with
such position, and for such term, in each case, as the EMPLOYEE
and the Board of Directors shall then agree (subject to the
Board of Directors' fiduciary duties), and (z) if in the case of
clause (y) EMPLOYEE is unable to reach agreement with the Board
of Directors on the executive position (whether because of the
Board of Directors' exercise of its fiduciary duties or
otherwise), then EMPLOYEE shall receive the remaining severance
payments to which he would then be entitled to in Section 9.8 as
a result of the prior termination of the TERM by the Company
pursuant to Section 9.4, which shall be EMPLOYEE's sole remedy
under law, equity or otherwise.
(ii) In the event that during the Leave of Absence the COMPANY shall
have terminated the TERM pursuant the last sentence of Section
9.4 following the occurrence of a Change of Control, EMPLOYEE
shall have no obligation to return to the COMPANY as Chief
Operating Officer or in any other executive position, but
EMPLOYEE shall have the right until September 30, 2007 to
reemployment with the COMPANY but only in an executive position,
with salary and duties commensurate with such position, and for
such term, in each case, as the EMPLOYEE and the Board of
Directors shall then agree (subject to the Board of Directors'
fiduciary duties). If EMPLOYEE is unable to reach agreement with
the Board of Directors with respect to executive position
(whether because of the Board of Directors' exercise of its
fiduciary duties or otherwise), then EMPLOYEE shall receive the
remaining severance payments to which he would then be entitled
to in Section 9.8 as a result of the prior termination of the
TERM by the Company pursuant to Section 9.4, which shall be
EMPLOYEE's sole remedy under law, equity or otherwise.
(d) In the event the Agreement is terminated pursuant to Section 9.2 (b)
during the Leave of Absence, the estate of the Employee shall be
entitled to all payments that would otherwise have been due to the
Employee hereunder during the Leave of Absence.
10 RESTRICTIVE COVENANT
10.1 EMPLOYEE shall not, during the TERM and for a period of one (1) year
from its termination, either directly or indirectly, individually or in
partnership, carry on or be engaged in, or concerned with or interested
in, in any capacity whatsoever (including that of principal, agent,
shareholder (subject to section 5.6(b)), consultant, employee, lender or
surety), any person, firm, association, syndicate or company engaged in
or concerned with or interested in the conception, development,
fabrication, transformation, marketing, distribution, advertising,
franchising or sale in Canada, the United States or the European
Economic Community, or any of them, of any products or services similar
or identical to any of those manufactured, distributed, or sold by the
COMPANY or any of its subsidiaries in the course of his employment with
the COMPANY, its AFFILIATES and subsidiaries.
10.2 (a) EMPLOYEE shall not, during the TERM hereunder and for a period
of twelve (12) months from its termination, directly or indirectly,
hire any Designated Employee.
(b) EMPLOYEE shall not, during the TERM hereunder and for a period of
eighteen (18) months from its termination, directly or indirectly,
solicit, interfere with or endeavor to entice away, any Designated
Employee.
(c) For purposes of this Section 10.2, the term "Designated Employee"
shall mean any person if that person is or was a Senior Employee of
the COMPANY or any of its AFFILIATES or subsidiaries during the
period beginning six (6) months prior to the termination of the TERM
and ending (i) in the case of clause (a), twelve (12) months
thereafter and (ii) in the case of clause (b), eighteen (18) months
thereafter, but shall exclude Scott R. Watterson or any RELATIVE.
For purposes of this Section 10.2 "Senior Employee" shall mean each
of the two hundred (200) most highly compensated employees of the
COMPANY or any of its subsidiaries or AFFILIATES.
10.3 With respect to any termination, such period shall be extended by
written notice to the EMPLOYEE within thirty (30) days of such
termination by an additional two (2) years (i.e., for a total of three
(3) years from the termination of EMPLOYEE's employment) if and to the
extent that the COMPANY, at its option, pays to the EMPLOYEE additional
severance pay equal to the EMPLOYEE's base salary then in effect and the
bonus referred to in Section 4 hereof, pro-rated (meaning paid in equal
monthly installments each year over the period of the payment) for the
period of the payment, for an additional two (2) years beyond that
required to be paid by the COMPANY to the EMPLOYEE under Section 9.8. If
paid at the COMPANY's option, such bonuses, which shall be determined
using EBITDA (as defined in Section 4.1 hereof) for the fiscal year
immediately preceding termination, are to be paid within ninety (90)
days from the end of the COMPANY's applicable fiscal year, and the base
salary shall be paid to the EMPLOYEE on the same payment schedule as was
applicable to the EMPLOYEE during his employment.
11 REASONABLENESS AND REMEDIES
11.1 The EMPLOYEE agrees that all the conditions and restrictions established
in this Agreement are reasonable taking into account the circumstances
surrounding this Agreement.
11.2 The EMPLOYEE recognizes that in the view of the serious and irreparable
harm which a violation hereof would have on the COMPANY, and without
prejudice to the COMPANY's other remedies, injunctive relief would
constitute an available and appropriate remedy and, to the extent
permitted by law, the COMPANY shall not be required to furnish any
security or bond in respect thereof.
12 [INTENTIONALLY OMITTED]
13 GENERAL LIMIT ON EMPLOYEE'S LIABILITY
13.1 As a general and overall limitation of the EMPLOYEE's liability to the
COMPANY and AFFILIATES, the COMPANY agrees that the EMPLOYEE shall not
be liable, for any reason except as set forth below, to the COMPANY or
any of its AFFILIATES for an amount in excess of the amount provided in
the next sentence hereof. Accordingly, as and for their sole remedy
against the EMPLOYEE, the COMPANY agrees that for any claim or cause of
action that the COMPANY or any of its AFFILIATES may have against the
EMPLOYEE, whether past or future, their sole remedy shall be the
forfeiture of the EMPLOYEE's salary, bonus and other compensation (but
not the equity grant under Section 6.1 hereof, which shall not be
subject to forfeiture) received by the EMPLOYEE during the COMPANY's
fiscal year in which the EMPLOYEE's termination occurred plus
subsequently accruing compensation. In this regard, the COMPANY agrees,
to the extent permitted by applicable law, to indemnify the EMPLOYEE
from and against any liability the EMPLOYEE may have in excess of that
provided in the immediately preceding sentence (i) hereunder or (ii) for
any other claim the COMPANY or any of its AFFILIATES may have against
the EMPLOYEE. However, nothing in this Section 13 shall limit the
EMPLOYEE's liability to the COMPANY or any of its AFFILIATES or provide
the EMPLOYEE any indemnity (i) for any act by the EMPLOYEE involving
theft, fraud or embezzlement against the COMPANY or any of its
AFFILIATES, (ii) in respect of any equitable remedy against the
EMPLOYEE, (iii) in respect of any agreement listed on Schedule I of the
Old Employment Agreement (as defined in that separate Termination
Agreement among IHF Capital, Inc., IHF Holdings, Inc., SUBSIDIARY and
EMPLOYEE, dated September 27, 1999 (the "Termination Agreement")) or any
agreement heretofore or hereafter entered into by the EMPLOYEE after the
date of the Old Employment Agreement, (iv) in respect of any claim or
cause of action asserted by the COMPANY or any of its AFFILIATES as a
counterclaim (to the extent of any liability the COMPANY or any of its
AFFILIATES may have by reason of the EMPLOYEE claim in question) or as a
set off, or (v) under Section 7, 9.3 or 10 of this Agreement or under
the Non-Competition Agreement (as defined in the First Amended and
Restated Master Transaction Agreement dated as of October 12, 1994 among
ICON Health & Fitness, Inc. and the other parties thereto (the "Master
Transaction Agreement")); provided, however, that the aggregate of the
liability of the EMPLOYEE to the COMPANY or any of its AFFILIATES, under
Section 7, 9.3 or 10 of this Agreement or to the COMPANY, any of its
AFFILIATES, IHF Capital, Inc. or any of its AFFILIATES (as defined in
the Old Employment Agreement) under the Non-Competition Agreement and of
the liability of the EMPLOYEE to IHF Capital, Inc. or any of its
AFFILIATES (as so defined) in respect of claims subject to the
$18,000,000 limits set forth in the third to last sentence of Section
10.3.1.1 of the Master Transaction Agreement, shall not exceed
$1,240,000.
14 AMENDMENTS
14.1 This Agreement may be amended only by written instrument duly executed
by all the parties hereby and approved by the Board of Directors of the
COMPANY.
15 NO ASSIGNMENT
15.1 No party hereto shall assign, in whole or in part, this agreement or any
of its or his respective rights and obligations hereunder without the
express prior written consent of the other parties hereto; for this
purpose the merger or reorganization of the COMPANY or the SUBSIDIARY or
any AFFILIATES shall not be considered an assignment.
16 NO WAIVER
16.1 No waiver by any party of any breach of the obligations of any other
party hereunder shall be a waiver of any subsequent breach or of any
other obligation, nor shall any forbearance to seek a remedy for any
breach be a waiver of any rights and remedies with respect to any
subsequent breach.
17 SEVERABILITY
17.1 The invalidity of one of the provisions of this Agreement shall not
invalidate or otherwise affect any of the other provisions of this
Agreement, which shall remain in full force and effect, and each such
invalid provision shall be construed by limiting it so as to be valid
for the maximum extent permitted by law.
18 CURRENCY, ETC.
18.1 All references in this Agreement to dollar or $ mean lawful currency of
the United States of America.
18.2 The COMPANY shall have the right to withhold, from or in respect of any
payment, benefit or other item of compensation due to the EMPLOYEE
hereunder, any federal, state or local taxes of any kind required by law
to be withheld with respect thereto. In the event that at the time any
withholding is required hereunder, the amount of cash payments from
which the applicable withholding taxes may be deducted is less than the
withholding taxes due, the EMPLOYEE shall pay to the COMPANY, in
immediately available funds, an amount equal to such shortfall.
19 GOVERNING LAW; ARBITRATION
19.1 This Agreement shall be governed by and construed in accordance with the
domestic substantive laws of the State of Utah, without giving effect to
any choice or conflict of law provision or rule that would cause the
application of the domestic substantive laws of any other jurisdiction;
provided, however, that any dispute relating to the provisions of
Section 19.2 shall be governed by the United States Arbitration Act as
then in force.
19.2 Except solely as set forth in Section 19.4, each dispute, difference,
controversy or claim arising in connection with or related or incidental
to, or question occurring under, this Agreement or the subject matter
hereof shall be finally settled under the Commercial Arbitration Rules
of the American Arbitration Association (the "AAA") by an arbitral
tribunal composed of three (3) arbitrators, at least one (1) of whom
shall be an attorney experienced in corporate transactions, appointed by
agreement of the parties in accordance with said Rules. In the event the
parties fail to agree upon a panel of arbitrators from the first list of
potential arbitrators proposed by the AAA, the AAA will submit a second
list in accordance with said Rules. In the event the parties shall have
failed to agree upon a full panel of arbitrators from the second list,
any remaining arbitrators to be selected shall be appointed by the AAA
in accordance with said Rules. If, at the time of the arbitration, the
parties agree in writing to submit the dispute to a single arbitrator,
said single arbitrator shall be appointed by agreement of the parties in
accordance with the foregoing procedure, or, failing such agreement, by
the AAA in accordance with said Rules. The foregoing arbitration
proceedings may be commenced by any party by notice to all other
parties.
19.3 The place of arbitration shall be Salt Lake City, Utah.
19.4 The parties hereto exclude any right of appeal to any court on the
merits of the dispute. The provisions of this Section 19 may be enforced
in any court having jurisdiction over the award of any of the parties or
any of their respective assets and judgment on the award (including
without limitation equitable remedies) granted in any arbitration
hereunder may be entered in any such court. Nothing contained in this
Section 19 shall prevent any party from seeking interim measures of
protection in the form of pre-award attachment of assets or preliminary
or temporary equitable relief.
19.5 To the extent not prohibited by applicable law which cannot be waived,
each of the parties hereto hereby waives, and covenants that he or it
will not assert (whether as plaintiff, defendant, or otherwise), any
right to trial by jury in any forum in respect of any issue, claim,
demand, cause of action, action, suit or proceeding arising out of or
based upon this Agreement or the subject matter hereof, in each case
whether now existing or hereafter arising and whether in contract or
tort or otherwise. Any of the parties hereto may file an original
counterpart or a copy of this Section 19.5 with any court as written
evidence of the consent of each of the parties hereto to the waiver of
his or its right to trial by jury.
19.6 Each of the parties hereto acknowledges that he or it has been informed
by each other party that the provisions of Section 19 constitute a
material inducement upon which such party is relying and will rely in
entering into this Agreement and the transactions contemplated hereby.
20 BINDING ON HEIRS
20.1 This Agreement binds and inures to the benefit of the parties, their
heirs, executors, administrators, successors and permitted assigns
(subject to Section 9.2(b)).
21 ENTIRE AGREEMENT
21.1 This Agreement embodies the entire Agreement between the parties hereto
concerning the subject matters mentioned herein and supersedes all
previous discussions, correspondence, understandings or agreements,
whether written or oral, with respect to such matters, except as
provided in the Termination Agreement. This Agreement shall constitute
an agreement between employer and employee of the type referred to in
Section 1, Chapter 28, Title 34 of the Utah Code, Annotated.
22 ATTORNEY'S FEES
22.1 In the event that any party hereto shall be found in default or in
breach of this Agreement pursuant to arbitral or judicial proceedings,
such party shall be liable to pay all reasonable attorney's fees, court
costs and other related collection costs and expenses incurred by the
non-defaulting or non-breaching party in pursuing its rights hereunder.
23 NOTICES
23.1 All notices and other communications necessary or contemplated under
this Agreement shall be in writing and shall be delivered in the manner
specified herein or, in the absence of such specification, shall be
deemed to have been duly given three (3) business days after mailing by
certified mail, when delivered by hand, or when delivered by facsimile
upon confirmation of receipt, or one (1) day after sending by overnight
delivery service, to the respective addresses of the parties set forth
below:
(a) for notices and communications to the COMPANY or the SUBSIDIARY:
HF HOLDINGS, INC.
ICON HEALTH & FITNESS, INC.
1500 South 1000 East
Logan, Utah 84321
Fax: 435-750-5238
Attn: Board of Directors
(b) For notices and communications to the EMPLOYEE:
Gary E. Stevenson
370 Abbey Lane
Providence, Utah 84332
(c) With a copy in each case to:
Weil, Gotshal & Manges LLP 100 Federal Street 34th Floor Boston, MA
02110 Fax: 617-772-8333 Attn: Charles W. Robins, Esq.
and
Ropes & Gray
One International Place
Boston, MA 02110
Fax: 617-951-7050
Attn: R. Newcomb Stillwell, Esq.
24 JOINT AND SEVERAL LIABILITY
24.1 The COMPANY and the SUBSIDIARY shall be jointly and severally liable in
respect of all payment obligations of the COMPANY hereunder.
[Remainder of Page Intentionally Left blank]
[Stevenson Amended and Restated Employment Agreement]
IN WITNESS WHEREOF the parties have hereto signed this Agreement as of the date
first written above.
HF HOLDINGS, INC.
/s/ Debra Stephenson By: /s/ S. Fred Beck
- -------------------- ---------------------
Witness Name: S. Fred Beck
Title: Vice President
ICON HEALTH & FITNESS, INC.
/s/ Debra Stephenson By: /s/ S. Fred Beck
- -------------------- --------------------
Witness Name: S. Fred Beck
Title: Vice President
/s/ F. By: /s/ Gary E. Stevenson
- ----------------------- -------------------------
Witness Gary E. Stevenson
SCHEDULE I
To
EMPLOYMENT AGREEMENT
Among
HF HOLDINGS INC.
ICON HEALTH & FITNESS, INC.
And
GARY E. STEVENSON
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Board Seats
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Boy Scouts of America, Local Council
Utah State Business College