1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, effective as of the 1st day of October , 1997
(the "Effective Date") by and between SOLO SERVE CORPORATION, a Delaware
corporation (the "Company"), and CHARLES M. SIEGEL ("Employee") (the Company
and the Employee are sometimes collectively referred to as the "Parties").
WHEREAS, the Employee has been in the employment of the Company under
the terms of an Employment Agreement dated August 8, 1996, executed by and
between them (the "Original Agreement");
WHEREAS, the Company desires to continue to employ the Employee;
WHEREAS, the Employee desires to continue to be employed by the
Company; and
WHEREAS, the Employee and the Company desire to continue their
relationship under different terms and conditions from the Original Agreement,
and are therefore, entering into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the Parties agree as follows:
1. Definitions. As used herein, the following terms shall have
the meanings set forth below.
"Agreement" shall mean this Employment Agreement executed between the
Employee and the Company.
"Cause" shall have the meaning set forth in Section 8(b).
"Disability" means the Employee is unable to perform his duties as
required by the terms of this Agreement for a period of more than 60
consecutive days or more than 120 non-consecutive days during any 12-month
period.
2
"Employment Commencement Date" shall be the effective date of the
Original Agreement.
"Employment Termination Date" means the date of termination of
Employee's employment pursuant to this Agreement.
"Original Base Salary" shall mean Three Hundred Thousand Dollars
($300,000.00).
2. Employment and Term. The Company hereby employs the Employee,
and the Employee hereby accepts such employment by the Company, for the
purposes and upon the terms and conditions contained in this Agreement. The
term of such employment shall be until October 1, 2002 or until such earlier
Employment Termination Date as is prescribed by this Agreement (the "Employment
Term").
3. Compensation. For all services rendered by the Employee
during the Employment Term, the Company shall pay the Employee as follows:
(a) The Employee shall be paid an annual base salary of
$312,000 (subject to agreement as set forth herein the "Base Salary")
in biweekly payments of 1/26th of that base salary. Thereafter, on
each succeeding anniversary date of the Effective Date of this
Agreement during the Employment Term, the Employee shall be granted an
annual 4% increase in Base Salary. All salary, bonuses, severance and
deferred compensation, as well as any other payments to Employee so
classified under applicable IRS Regulations, paid to the Employee or
his designee, shall be subject to withholding for applicable taxes,
including F.I.C.A., federal income taxes, and any taxes required by
state or local law;
2
3
(b) The Employee may be paid a discretionary annual bonus
each year during the Employment Term; provided, however, Employee
shall be paid a bonus of not less than $30,000.00 for the Company's
fiscal years ending on or about January 31, 1998, and January 31,
1999. Any bonuses paid to the Employee shall be payable on April 1st
of the year following the year for which the bonus was due, and the
Employee must be employed by the Company to be eligible to receive any
such discretionary bonus; provided, however, if Employee's employment
is terminated prior to January 31, 1999 for reasons other than as set
forth in Section 8(b) or 8(e) hereof, Employee shall be paid in
addition to such other amounts as may be set forth in this Agreement
the proportionate part of any prescribed bonus as set forth in this
paragraph through the Employment Termination Date
4. Insurance and Other Benefits. During the Employment Term the
Employee shall be eligible for all medical, life insurance and retirement
benefits as set forth in the Company's existing policies for senior executives
and/or employees in general, whichever are greater. Except as may be provided
for in this Agreement, the Employee shall be eligible for vacations, sick leave
and other personal time in accordance with the Company's existing policies and
procedures for senior executives. Upon the Employment Commencement Date, the
Employee shall be eligible for a minimum of 5 weeks vacation per annum. This
vacation time shall not accrue from year to year and any unused vacation time
shall not be paid to the Employee upon the Employment Termination Date. The
Company shall take such actions as shall be necessary or appropriate to cause
Employee to be covered by the Company's current director's and officer's
liability insurance policy and any successor policy that the Company may
secure.
3
4
5. Duties.
(a) During the Employment Term, the Employee shall be
employed as the President and Chief Executive Officer of the Company,
and as such his duties shall be the overall direction, supervision and
management of the Company and its business. As President and Chief
Executive Officer, Employee shall report directly to the Board of
Directors of the Company and, if there shall be one, the Chairman of
the Board of Directors.
(b) The Employee shall have such other duties and
responsibilities as the Board of Directors of the Company may from
time to time determine.
(c) During the Employment Term, the Employee shall devote
his full time and attention to the business affairs of the Company,
except for such vacations as shall be provided pursuant to this
Agreement.
However, subject to Section 12 hereof, nothing in this Agreement shall preclude
the Employee from (a) being a passive investor in other business enterprises
and/or (b) in a manner consistent with any policies or procedures the Company
may have and/or implement, devoting a reasonable amount of his time and efforts
to civic, community, charitable, personal, professional and trade association
affairs and matters. Notwithstanding the foregoing, the Employee shall not
become a member of any board of directors without the prior written approval of
the Company's Board of Directors. The Employee has the approval of the
Company's Board of Directors to join the International Mass Retailers
Association and become a member of the Board of Directors of that organization,
so long a serving in that function does not interfere with the Employee's
duties as provided for in this Section 5.
4
5
6. Working Facilities. The Company shall furnish the Employee in
San Antonio, Texas with an office, equipment and such other facilities and
services as are suitable for the performance of the Employee's duties and in
keeping with Employee's position as President and Chief Executive Officer of
the Company.
7. Reimbursement of Expenses. The Company shall pay or reimburse
the Employee for reasonable expenses paid or incurred by the Employee on behalf
of the Company in accordance with the existing policies and procedures of the
Company, as such may be amended from time to time by the Company.
8. Termination. The Employee's employment by the Company shall
terminate effective upon the first to occur of the following:
(a) October 1, 2002 or a date mutually agreed to in
writing by the Company and the Employee, which date in either case
shall be the Employment Termination Date.
(b) The date on which Employee receives notice of his
termination for cause, which date shall be the Employment Termination
Date. The Board of Directors of the Company may terminate Employee's
employment with the Company at any time "for Cause" upon notice to the
Employee. As used in this Agreement, "Cause" shall mean the
occurrence of any one or more of the following events:
(i) the Employee has engaged in willful
misconduct in the performance of his duties, functions and
responsibilities, as prescribed from time to time by the Board
of Directors of the Company;
(ii) the Employee has breached a policy or
procedure of the Company which is generally applicable to
officers of the Company, which breach is material and
continues for a period of thirty (30) days after being given
written notice of such breach by the Company;
5
6
(iii) the Employee has failed in any material
respect to perform his duties as reasonably prescribed and
amended from time to time by the Board of Directors of the
Company which failure continues for a period of thirty (30)
days after being given notice of such breach by the Company;
(iv) the Employee has been charged by a
governmental agency or department with any violation of law,
regulation or ordinance of a governmental entity (other than
traffic violations and similar minor offenses) which
violation, if proven, would result in a felony conviction of
Employee; or the Employee has violated any judicial decree
applicable to the Company or the Employee; or
(v) the Employee has materially breached any of
the terms of this Agreement or any other written agreement
between Employee and the Company, which breach continues for a
period of thirty (30) days after being given written notice of
such breach by the Company.
(c) The death or Disability of the Employee, in which
case the Employment Termination Date shall be the date of death or the
date on which the Disability is determined as the case may be.
(d) A date specified by the Company to the Employee for
any reason other than a reason specified in the above-referenced
subparagraphs, so long as the Company provides the Employee with
sixty (60) days notice of termination, or pays the Employee sixty (60)
days Base Salary in lieu of notice of termination. The Employment
Termination Date shall be the date sixty days following delivery of
notice of termination.
(e) A date specified by the Employee to the Company for
any reason so long as the Employee provides the Company with sixty
(60) days notice of the termination. The date so specified upon sixty
(60) days notice shall be the Employment Termination Date.
6
7
From and after the Employment Termination Date, the Employee shall
have no obligation or duty to be employed by the Company in any
capacity and the Company shall have no obligation to employ the
Employee in any capacity.
9. Post-Employment Payments. The Company shall pay to the
Employee the respective amounts provided below upon expiration of the
Employment Term.
(a) If the Employee's employment is terminated pursuant
to Section 8(b) or (e)hereof, then the Company shall pay the Employee
his Base Salary compensation through the Employment Termination Date
and the Company shall have no further obligations to the Employee,
except with respect to his vested and exercisable options and ERISA
benefits.
(b) If the Employee's employment is terminated pursuant
to Section 8(a) or (c) hereof, then the Company shall pay to Employee
his Base Salary compensation through the Employment Termination Date
and any deferred compensation that shall have vested pursuant to
Section 9(d) hereof, the latter being payable as set forth in Section
9(d). Other than payment of such amounts, the Company shall have no
further obligations to Employee, except with respect to his vested and
exercisable options and ERISA benefits.
(c) If the Employee is terminated under Section 8(d),
then the Company shall pay to Employee his Base Salary compensation
through the Employment Termination Date, any deferred compensation
amounts that have vested pursuant to Section 9(d) hereof (payable as
set forth therein), and two (2) years of his Base Salary or the
aggregate Base Salary that would have been payable between the
Employment Termination Date and October 1, 2002, whichever is less,
the amount of Base Salary calculated as provided above being
hereinafter referred to as Severance Pay. The Severance Pay shall be
7
8
payable in bi-weekly payments over two (2) years or the period between
the Employment Termination Date and October 1, 2002, whichever is
applicable.
(d) On October 1, 2002 or such earlier Employment
Termination Date as may occur for any reason other than pursuant to
Sections 8(b) or 8(e) hereof, the Company shall pay the Employee
deferred compensation in the amount and manner as set forth herein:
The Employee shall be entitled to up to two times the Original Base
Salary in deferred compensation (the "Aggregate Deferred Compensation
Amount"), subject to the vesting schedule set forth below: At the end
of the first year after the Effective Date of the Agreement, Employee
shall vest to the extent of 15% of the Aggregate Deferred Compensation
Amount; at the end of the second year from the Effective Date of the
Agreement, the Employee shall vest to the extent of 30% of the
Aggregate Deferred Compensation Amount; at the end of the third year
from the Effective Date, the Employee shall vest to the extent of 45%
of the Aggregate Deferred Compensation Amount; at the end of the
fourth year from the Effective Date, the Employee shall vest to the
extent of 60% of the Aggregate Deferred Compensation Amount; and at
the end of the fifth year from the Effective Date, the Employee shall
vest to the extent of 100% of the Aggregate Deferred Compensation
Amount. One half of any deferred compensation amount that becomes due
shall be paid in a lump sum on or within ten (10) days after the
Employment Termination Date. The remaining deferred compensation
shall be payable in monthly payments of $12,500 per month payable on
the first day of the month beginning with the first month following
the Employment Termination Date until the entire amount due and owing
Employee pursuant to this Section 9(d) is paid in full, after which
time the Company shall have no further obligation
8
9
to Employee pursuant to the terms of this Agreement, except with
respect to his vested and exercisable options and ERISA benefits.
10. Warranty. Employee represents and warrants that Employee is
capable of fulfilling the terms of this Agreement and that Employee is not
bound in any manner, whether by written or oral agreement, contract or other
obligation, which would prevent Employee from providing the services to the
Company contemplated under this Agreement. Specifically, Employee represents
and warrants that he is not bound by any non-competition agreement or other
covenant which would prevent or interfere with his abilities to perform the
functions required under this Agreement. Employee agrees that if litigation is
commenced by a prior employer of Employee which would challenge the legal right
of Employee to enter into this Agreement or to perform the functions required
under this Agreement, such action shall constitute cause under Section 8 for
termination of this Agreement.
11. Confidentiality. The Employee acknowledges that by reason of
the nature of the Employee's duties, the Employee will or may have access to
and become informed of confidential and secret information which is a
competitive asset of the Company, including without limitation (i) customer
information such as names, addresses, sales histories, purchasing habits,
credit status, and pricing levels, (ii) certain prospective customer
information and lists, (iii) merchandise and product information, (iv)
merchandise and product suppliers, and prospective suppliers' names, addresses
and contacts, (v) future corporate planning data, (vi) marketing strategies,
(vii) the Company's financial results and business condition, and (viii) any of
the foregoing which belong to any other person or company but to which the
Employee has had access by reason of his employment with the Company
(collectively, "Confidential Information"). The Employee agrees to keep in
strict confidence, and not, either directly or indirectly, including through
other entities, corporations, partnerships or
9
10
limited liability companies, to make known, divulge, reveal, furnish, make
available or use (except for use in the regular course of the Employee's duties
hereunder), any Confidential Information. The Employee acknowledges that all
sales manuals, instructions books, catalogs, price lists, information and
records, technical manuals and documentation, drafts of instructions, guides
and manuals, and other sales or technical information and aids relating to the
Company's business and any and all other documents containing Confidential
Information furnished the Employee by any employee of the Company or otherwise
acquired or developed by the Employee shall at all times be the property of the
Company. Upon termination of the Employee's employment with the Company, the
Employee shall return to the Company any materials containing Confidential
Information which are in the Employee's possession, custody or control. The
Employee's obligations under this Section shall survive such termination of the
Employee's employment with the Company, but shall not be applicable to (i) any
such Confidential Information which becomes, through no fault of the Employee,
generally known to the trade, (ii) information which the Employee can
demonstrate was known to him prior to commencing his employment with the
Company, (iii) information in the public domain, (iv) information required to
be disclosed under or by subpoena or lawful court order or by direction of the
Board of Directors, and (v) information which the Employee needs to disclose to
his personal financial or legal advisors. The Employee's obligations under
this Section are in addition to, and not in limitation or pre-emption of, all
other obligations of confidentiality which the Employee may have to the Company
under general common law or pursuant to other legal or equitable principles.
10
11
12. Non-Competition.
(a) For the purposes of this Section 12, Entity shall
include, without limitation, a person, firm, partnership, limited
liability company, corporation or any other form of business
enterprise.
(b) The Employee acknowledges that during the term of
this Agreement, the Employee's access to the Confidential Information
will enable the Employee to benefit from the Company's goodwill and
know-how. To protect these vital interests of the Company, the
Employee agrees that during the term of this Agreement and for a
period of twenty-four (24) months following the Employment Termination
Date, the Employee will not, without the prior written consent of the
Company, directly or indirectly, whether as a director, officer,
employee, agent, consultant, shareholder, partner, inventor or
otherwise:
(i) become employed by or associated with 50-OFF
Stores, Inc. or any of its successors, assigns,
affiliates, or subsidiaries (including, without
limitation, Lot$ Off Stores); accept employment with
or render services to 50- OFF Stores, Inc. or any of
its respective successors, assigns, affiliates, or
subsidiaries (including, without limitation, Lot$ Off
Stores); or invest in 50-Off Stores, Inc. or any of
its successors, assigns, affiliates, or subsidiaries
(including, without limitation, Lot$ Off Stores),
except as a passive investment constituting less than
5% of the outstanding equity interests of a
publicly-traded corporation; or
(ii) actively solicit the employment or hiring by
any Entity of any employee of the Company.
(c) This covenant not to compete shall apply whether the
Employee acts as an individual or for his own account, or as a
partner, employee, agent, salesman, distributor, consultant or
representative of any other Entity.
11
12
(d) Nothing in this Agreement shall be construed to allow
the Company to cease making payments to the Employee under this
Agreement unless the Employee breaches or threatens to breach any of
the provisions of this Section 12.
13. Remedies for Breach of Confidentiality and Competitive
Activities. If Employee breaches, or threatens to breach, any of the
provisions of Section 12 hereof, the Company shall have the following rights
and remedies, in addition to any others, each of which shall be independent of
the other and severally enforceable:
(i) The right to have the provisions of Section 12 of
this Agreement specifically enforced by any court having equity
jurisdiction, including the right to certain emergency injunctive
relief, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and
that money damages will not provide an adequate remedy to the Company;
(ii) The right to immediately cease making any payments
required under Section 9 and the right to recover any sums previously
paid under such provision.
(iii) The right and remedy to require Employee to account
for and pay over to the Company an amount equal to the monetary
damages sustained by the Company as a result of the breach; provided,
however, except with regard to any purchase or sale of the Company's
common stock and/or any of the assets or liabilities of the Company,
Employee shall not be required to pay over to the Company pursuant to
this provision an amount in excess of all compensation, profits,
monies, accruals, increments or other benefits (hereinafter
collectively the "Benefits") derived or received by Employee pursuant
to this Agreement, and Employee hereby agrees to the extent of the
damages incurred by the Company to pay over said Benefits to the
Company; and
(iv) If this Agreement is still in effect, the right to
terminate this Agreement for Cause pursuant to Section 8 hereof.
14. Additional Remedies - Arbitration of Disputes. Should any
dispute arise between the Parties relating to this Agreement, including without
limitation, any dispute relating to Employee's employment or termination of
employment from the Company, the Parties specifically stipulate and agree to
submit any such dispute to final and
12
13
binding arbitration conducted under the auspices of the National Rules for the
Resolution of Employment Law Disputes, then in effect, of the American
Arbitration Association, with the costs of such arbitration to be split equally
between the Parties; provided, however, that upon conclusion of the
arbitration, the prevailing party in the arbitration shall be entitled to
reimbursement of its costs of arbitration from the non-prevailing party.
Employee, with an adequate opportunity to consult with legal counsel, knowingly
and voluntarily waives any right to trial by jury of any dispute pertaining to
or relating in any way to Employee's employment with or termination from the
Company, including any matters relating to this Agreement, the provisions of
any federal, state or local law, regulation or ordinance notwithstanding. The
Award of the Arbitrator(s) may be entered in any federal or state court having
jurisdiction. Notwithstanding the foregoing provisions, if the Employee
breaches any of the non-disclosure or non-competition provisions of this
Agreement, the Company shall have the right to seek immediate injunctive relief
in the form of a temporary, preliminary or permanent mandatory or restraining
injunction, enjoining the Employee from such further breach of those provisions
of this Agreement.
No delay or omission by the Company or the Employee in exercising any
right or remedy under any of the terms of this Agreement shall operate as a
waiver of any rights or remedies which the Company or Employee may have under
this Agreement, either at law or in equity, and no single or partial exercise
of any such right shall preclude any other or further exercise thereof or of
the exercise of any other right or remedy.
15. Consent to Jurisdiction. For the purposes of obtaining a
temporary, preliminary, or permanent injunction or restraining injunction,
order or decree to enforce the non-disclosure or non-compete provisions of this
Agreement, such action shall be filed and prosecuted solely and exclusively in
a state or federal court sitting in San Antonio, Bexar County, Texas, and
Employee irrevocably accepts the jurisdiction of the
13
14
courts of the State of Texas, and the federal courts located in such State.
Employee expressly submits and consents in advance to such jurisdiction in any
action or suit commenced in any such court, and Employee hereby irrevocably
waives any objection which Employee may have based upon personal jurisdiction,
improper venue or forum non-conveniens and hereby irrevocably consents to the
granting of such legal or equitable relief as is deemed appropriate by such
court. The Employee and the Company, each with an adequate opportunity to
consult with counsel, hereby irrevocably waives any right to a trial by jury in
any injunction or arbitration proceeding. Any injunctive relief obtained by
the Company under this Agreement shall be in addition to any other relief to
which the Company may be entitled to assert in the arbitration proceeding, at
law or in equity. This Agreement was entered into and is performable in San
Antonio, Bexar County, Texas. Employee covenants to Company and Company
covenants to Employee that no litigation arising out of or relating to this
Agreement will ever be commenced in any court other than a court sitting in San
Antonio, Bexar County, Texas. The Parties further agree and covenant that the
sole and exclusive venue for any court or arbitration proceeding shall be in
San Antonio, Bexar County, Texas.
16. Governing Law. This Agreement has been negotiated, executed
and delivered in the State of Texas, and shall in all respects be interpreted,
construed, and governed by and in accordance with the internal substantive laws
of the State of Texas.
17. Headings. The captions set forth in this Agreement are for
convenience of reference only and shall not be considered as part of this
Agreement or as in any way limiting or amplifying the terms and provisions
hereof.
18. Severability. Each provision of this Agreement constitutes a
separate and distinct undertaking, covenant and/or provision hereof. In the
event that any provision of this Agreement shall finally be determined to be
unlawful, such provision shall be
14
15
deemed severed from this Agreement, but every other provision of this Agreement
shall remain in full force and effect, and in substitution for any such
provision held unlawful, there shall be substituted a provision of similar
import reflecting the original intent of the parties hereto to the extent
possible under law. Notwithstanding the foregoing, to the extent the
non-compete provisions of this Agreement are held to be invalid or in any
manner unenforceable, the Company shall be relieved of its obligations to make
any payments to the Employee as provided in Section 9.
19. Prohibition Against Assignment. Employee agrees, for himself
and on behalf of his executors and administrators, heirs, legatees,
distributes, and any other person or persons claiming any benefit under him by
virtue of this Agreement, that this Agreement and rights, interests and
benefits hereunder shall not be assigned, transferred, pledged or hypothecated
in any way by the Employee or any executor, administrator, heir, legatee,
distributee or other persons claiming under the Employee by virtue of this
Agreement. Any attempt to assign, transfer, pledge or hypothecate or otherwise
dispose of this Agreement, or of any rights, interests, and benefits contained
herein, contrary to the foregoing provisions shall be null and void and without
effect and shall relieve the Company of any and all liability hereunder.
20. Entire Agreement
(a) This Agreement constitutes the entire agreement
between the Parties and contains all of the agreements between the
Parties with respect to the subject matter hereof and supersedes any
and all other agreements, either oral or in writing, between the
parties hereto with respect to the subject matter hereof and all such
prior agreements are hereby terminated.
15
16
(b) No change or modification of this Agreement shall be
valid unless the same be in writing and signed by the Employee and an
authorized representative of the Company.
21. Communications. All notices, requests, demands, and other
communications under this Agreement shall be in writing and, unless otherwise
provided herein, shall be deemed to have been duly given upon hand-delivery or
upon deposit in the United States Mail, postage prepaid, certified or
registered mail, return receipt requested, as follows:
If to the Company: Chairman of the Board
c/o Solo Serve Corporation
1610 Cornerway Blvd.
San Antonio, TX 78219
With a copy to: Cox & Smith Incorporated
112 E. Pecan, Suite 1800
San Antonio, TX 78205
Attention: Ms. Donna K. McElroy
If to Employee: Charles M. Siegel
1403 Fortune Hill
San Antonio, TX 78258
with a copy to: Oppenheimer, Blend, Harrison & Tate, Inc.
711 Navarro, Suite 600
San Antonio, Texas 78205
Attn: J. David Oppenheimer
or at such other address as shall have been furnished to the other in writing
in accordance herewith, except that such notice of such change shall be
effective only upon receipt.
22. Policies and Procedures. As used in this Agreement, the
phrases "policies and procedures" or "existing policies and procedures" shall
mean the policies and procedures of the Company as such may be amended from
time to time in the
16
17
discretion of the Company, which amendments the Employee shall be given notice
of by the Company.
23. Termination of Original Agreement. This Agreement shall
supersede and replace the Original Agreement in all respects as of the
Effective Date and neither Party shall have any continuing duties, payment
obligations or other obligations under the Original Agreement, except that the
Employee shall continue to be bound by the terms and conditions of Section
3(e)of the Original Agreement, which shall not be affected by this Agreement.
IN WITNESS WHEREOF, the Employee and the Company have executed this
Agreement effective on the 1st day of October, 1997.
THE EMPLOYEE
/s/ Charles M. Siegel
------------------------------
CHARLES M. SIEGEL
THE COMPANY
SOLO SERVE CORPORATION
By: /s/ Ross E. Bacon
------------------------------
ROSS E. BACON
17