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Exhibit 10.24
EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement") is made and entered into
as of the 2nd day of August, 1993, by and between Mac Frugal's Bargains o
Close-outs Inc., a Delaware corporation (the "Company"), and Patricia J. Wehner
("Executive").
RECITALS
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WHEREAS, the Company desires to employ Executive as a Senior Vice
President on the terms and conditions set forth herein and Executive desires to
accept such employment with the Company;
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing premises, the terms
and conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment and Duties. The Company hereby engages Executive in
the capacity of Senior Vice President, Real Estate and Construction, of the
Company. Executive shall perform such duties and functions as shall be
specified from time to time by the Chief Executive Officer of the Company.
Executive hereby accepts such employment and agrees to perform such duties.
During the term of this Agreement, Executive shall not be required without her
consent to undertake responsibilities not commensurate with her position as a
Senior Vice President.
2. Compensation.
(a) Base Salary. For all services to be rendered by Executive
hereunder, Executive shall be paid a base salary at the rate of one hundred
eighty-six thousand Dollars ($186,000) per year. Executive's base compensation
shall be reviewed at least annually and may be increased at the discretion of
the Board of Directors of the Company (the "Board"), but during the term of
this Agreement may not be decreased below the then-effective base salary.
Executive's salary shall be paid on such basis as is the normal payment pattern
for executive officers of the Company. The base salary payable under this
Section 2(a) shall be in addition to and exclusive of any payments to Executive
from time to time under formal or informal bonus, incentive compensation or
similar plans now in effect or which hereafter may be adopted.
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(b) Performance Bonus. With respect to each full fiscal year of the
Company that this Agreement is in effect throughout and any fiscal year of the
Company in which Executive is terminated pursuant to Section 8(d) hereof (each,
a "Bonus Year"), the Executive shall be entitled to participate in a
performance bonus plan approved annually for executive officers of the Company
by the Compensation Committee of the Board of Directors. The calculation and
payment to Executive of a performance bonus contemplated by this Section 2(b),
if any, shall be made as soon as practicable in the fiscal year of the Company
immediately succeeding such Bonus Year, following preparation of the Company's
annual audited financial statements for such Bonus Year.
(c) Bonus Treated as Expense Item. Performance Bonuses paid to
Executive under Section 2(b) hereof shall be treated as expenses of the Company
in determining whether such bonus is payable.
3. Payment in Event of Termination. In the event of the termination
of Executive's employment hereunder pursuant to Section 8(d), the Company
shall continue to make the payments provided for in Section 2(a) at the rate
then being paid to Executive and shall continue to provide Executive with the
medical, disability and life insurance benefits provided in Section 5(a) hereof
for one (1) year from the date of such termination. Executive shall not be
required or obligated to obtain other employment to mitigate the payments due
hereunder. Executive may, at her sole option, terminate this Agreement and
receive the payments provided for in this Section 3 following the occurrence of
either of the following events (a "Company Breach"): (a) Executive's authority
to function as a Senior Vice President shall be removed or limited in any
material respect, unless such removal or limitation was a result of one or more
events that would permit the Board to terminate Executive's employment For
Cause (as defined in Section 8(c)), or (b) the Company shall have breached in
any material respect any of its covenants and agreements in this Agreement.
Notwithstanding the foregoing, Executive shall not be entitled to terminate
this Agreement unless Executive provides written notice to the Company
specifying in reasonable detail the nature of the Company Breach, and the
Company shall have failed to cure such Company Breach within 45 days
thereafter.
4. Options. The Executive shall be entitled to participate in any
performance stock option plan approved annually for other executive officers
of the Company by the Compensation Committee of the Board of Directors. To
the maximum extent permitted by the Internal Revenue Code of 1986, as amended,
including the rules and regulations thereunder, all such options shall be
incentive stock options, and the remainder of such options shall be non-
qualified stock options.
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5. Benefits.
(a) Executive shall be entitled to such fringe benefits and
perquisites as are generally made available to executive officers of the
Company, and such other fringe benefits as may be approved by the Board
for executive officers of the Company during the term hereof including, without
limitation, major medical, extended medical and extended disability insurance,
group term life insurance in face amount of the base salary payable pursuant to
Section 2(a) and annual vacation time of not less than four weeks.
(b) Every two years during the term of Executive's employment, the
Company shall furnish Executive with a motor vehicle of her choice to use for
business purposes, provided, however, that such motor vehicle shall not have
an original cost to the Company of more than $40,000.
(c) Nothing contained herein is intended or shall be deemed to be
granted to Executive in lieu of any rights or privileges to which Executive
may be entitled as an employee of the Company under any retirement, pension,
insurance, hospitalization, stock option, stock bonus or purchase, incentive
compensation or other plan of the Company which may now be in effect or which
may hereafter be adopted, it being understood that Executive shall have the
same rights and privileges to participate in such plans as any other executive
officers of the Company.
6. Reimbursement of Expenses. The Company shall reimburse Executive
for all reasonable business expenses incurred by Executive in connection with
the performance of her duties hereunder, provided that Executive furnishes to
the Company receipts and other documentation reasonably acceptable to the
Company evidencing such expenditures.
7. Performance of Duties.
(a) In consideration of the payments to be made hereunder, Executive
agrees to devote her entire business time and attention to the performance of
her duties hereunder, to serve the Company diligently and to the best of her
abilities and not to compete with the Company or any of its Affiliates (as
defined below) in any manner whatsoever. Without limiting the generality of
the foregoing, Executive shall not, during the term of her employment by the
Company, directly or indirectly (whether for compensation or otherwise),
alone or as an agent, principal, partner, officer, employee, trustee,
director, shareholder or in any other capacity, own, manage, operate, join,
control or
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participate in the ownership, management, operation or control of or furnish
any capital to or be connected in any manner with or provide any services
as a consultant for any business which competes directly or indirectly
with any of the businesses of the Company or any of its Affiliates (as
defined below) as they may be conducted from time to time; provided,
however, that notwithstanding the foregoing, nothing contained in this
Agreement shall be deemed to preclude Executive from owning not more than
one percent of the publicly-traded capital stock of an entity which is in
competition with any of such businesses. Affiliate of the Company means
any person, association or entity: (a) that, in whole or in part, owns or
is owned by, or otherwise has a material interest (whether debt, equity or
otherwise) in, the Company; (b) that controls or is controlled by the
Company; (c) that is a subsidiary (whether owned in whole or in part) of
the Company; or (d) to which the Company is a "related tax payer" as
defined in Section 1313(c) of the IRC.
(b) Executive may continue her civic, educational and charitable
activities and serve on boards of directors of other companies, if consistent
with this Section 7 and if otherwise approved by the Board.
8. Term and Termination.
(a) The term of Executive's employment with the Company hereunder
shall commence on the date hereof and shall continue until the Executive
resigns or is terminated under this Section 8 or under Section 9 of this
Agreement.
(b) In the event of Executive's death or in the event of Executive's
total disability for any consecutive six-month period during the term of this
Agreement, the Company may at its sole option thereafter (unless Executive,
in the case of disability, shall have resumed her duties in full prior to
such termination) terminate this Agreement, and in such event the sole right
hereunder of Executive, Executive's widower or Executive's legal
representative, as the case may be, shall be to: (i) receive the base salary
due Executive through the last day of the twelfth full calendar month
following the month in which her death or disability shall have occurred;
(ii) have any and all previously accruing bonuses or options or other rights
vest in Executive or in her estate immediately (unless Executive or her
estate shall elect to the contrary); and (iii) in the event of termination by
reason of disability, have the Company continue to maintain in effect at its
sole expense, the major medical, extended medical, extended disability and
term life insurance referred to in Section 5(a) for the one year period
following the date of any such termination.
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(c) The Company, upon 30 days prior written notice to Executive, may
terminate this Agreement For Cause (as defined herein). For the purposes of
this Agreement, the term "For Cause" shall mean: (i) Executive's breach of the
covenants contained in Sections 7, 11 or 13(a) hereof; (ii) Executive's
conviction by, or entry of a plea of guilty or nolo contendere in, a court of
competent jurisdiction for any crime involving moral turpitude or any felony
punishable by imprisonment in the jurisdiction involved; or (iii) Executive's
commission of any act of fraud or dishonesty in connection with, or related
to, her duties hereunder. Upon termination of Executive For Cause, this
Agreement shall immediately terminate, and Executive shall not be entitled to
any further rights or payments hereunder (other than payment under Section
2(a) for services rendered prior to the date of such termination). Without
limiting the generality of the foregoing, Executive shall have no right on or
after the date of such termination to any of the benefits set forth in Section
5 hereof (other than payment for accrued vacation), any payment of base salary
pursuant to Section 2(a), any payment of performance bonus pursuant to Section
2(b) for the Bonus Year in which such termination occurs or any other benefit
or payment of any kind whatsoever.
(d) Subject to the payment of amounts required by Sections 2(b) and
3, the Company shall be entitled to terminate Executive's employment without
cause at any time upon thirty days written notice.
9. Change in Control. If a Change in Control (as defined below) of
the Company occurs during the term of this Agreement, the provisions of this
Section 9 shall become operative. For the purposes of this Agreement, a Change
in Control of the Company shall be deemed to have occurred if any "person" (as
defined in Section 13(d) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act")) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) directly or indirectly of securities of the Company
representing more than 35% of the combined voting power of the Company's then
outstanding securities, as a result of purchases of the Company's securities
which are not expressly approved by the Board of Directors of the Company.
For purposes of this Section 9, the Board of Directors expressly approving
the 35% or more voting power ownership must consist of individuals who for the
previous consecutive twenty-four month period, constituted at least a majority
of such Board of Directors.
For a period of two months after a Change in Control of the Company,
Executive shall have the right to terminate her employment with the Company
pursuant to this Section 9, and the Company shall pay Executive the
following amounts no later than the 15th business day after the date of
termination of Executive's employment:
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(a) A lump sum severance payment equal to 2 multiplied by the sum of
(A) Executive's base annual salary at the highest rate in effect during the
fiscal year of the Company immediately preceding the date Executive's employ-
ment terminates, and (B) the greater of the amount of any incentive, bonus or
other cash compensation that was paid to Executive during either (x) the 12
months immediately preceding the date Executive's employment terminates and
(y) the 12 months immediately preceding the Change in Control; and
(b) A cash payment equal to the amount by which the greater of
(A) the closing price of the Company's Common Stock on the day before the
date Executive's employment terminates or (B) the highest price per share
actually paid in connection with the Change in Control of the Company, exceeds
the per share exercise price of each then vested and exercisable stock option
held by Executive on the day before the date Executive's employment terminates,
multiplied by the number of shares covered by each such option. In exchange
for such payment, Executive will surrender all such options to the Company
without exercising them.
10. Deductibility of Payments to Executive. Notwithstanding
anything else to the contrary in this Agreement, in the event that the payments
to Executive under this Agreement, either alone or together with other payments
Executive has a right to receive from the Company, would be non-deductible (in
whole or in part) by the Company for Federal income tax purposes because of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
then the aggregate present value of amounts payable to Executive pursuant to
this agreement shall be reduced (but not below zero) to the "Reduced Amount."
The Reduced Amount shall be an amount expressed in present value which
maximizes the aggregate present value of all payments to be made to Executive
under this Agreement without causing any payment to be non-deductible by the
Company because of Section 280G of the Code. For purposes of this Section 10,
present value shall be determined in accordance with Section 280G(d)(4) of the
Code. The determination of the Reduced Amount shall be made exclusively by the
Company's outside auditors and in consultation with outside counsel to the
Company (each of whose fees and expenses shall be borne by the Company), and
such determination shall be conclusive and binding on the Company and
Executive.
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11. Confidentiality.
(a) The Company (which for purposes of this Section 11 shall mean
the Company and its Affiliates (as defined in Section 7(a)) and Executive
recognize that during the course of Executive's employment with the Company
she will accumulate certain crucial proprietary and confidential information
and trade secrets for use in the Company's business and will have divulged to
her certain crucial confidential and proprietary information and trade secrets
about the business, operations and prospects of the Company, including,
without limitation, confidential and proprietary information regarding
suppliers and employees of the Company, which constitute valuable business
assets providing the Company the opportunity to obtain an advantage over
competitors who do not know or use such information or have access to it
without the investment of considerable resources. Executive hereby
acknowledges and agrees that such information (the "Proprietary Information")
is confidential and proprietary and a trade secret and that such information
shall include, without limitation:
(i) the identity and location of customers and domestic and foreign
suppliers of quality low-cost close-out merchandise that can profitably be
resold, and their buying and selling histories and creditworthiness;
information regarding the quantity, quality, frequency, pricing and market-
ability of their supply offerings; and lists setting forth the same;
(ii) processes, methods and techniques, including but not limited to
primary contact points in the Company's network; methods of merchandising in
the Company's stores; processes and methods of giving directions and instruc-
tions to the Company's stores and its employees in connection with merchandis-
ing moves; information, techniques, formulas and judgments relating to the
appropriate bidding, pricing and marketing of close-out merchandise; and the
price ranges and techniques by which such merchandise can be profitably resold
at substantial reductions from normal retail rates; and designs, styles and
methods of packaging and distributing close-out merchandise distinctive to
the Company;
(iii) records of research, including but not limited to demographic
studies conducted by the Company and its agents which contribute to the
Company's ability to locate retail store sites;
(iv) proposals and projections, including but not limited to long-
range plans for the Company's growth, expansion, development and continued
fostering of its relationships with its employees, suppliers and customers; and
(v) files, reports, memoranda, computer software or programming and
budgets or other financial plans or information regarding the Company and its
business, properties or affairs.
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(b) Executive agrees that she shall not, at any time subsequent to
the execution of this Agreement, whether during or after the term hereof,
disclose, divulge or make known, directly or indirectly, to any person, or
otherwise use or exploit, any Proprietary Information obtained by Executive
at any time prior to or subsequent to the execution of this Agreement, except
to the extent required by her performance of her duties hereunder for the
Company. Executive agrees to disclose to the Company the identity and nature
of any contacts with any person or entity soliciting from Executive
disclosure of any Propriety Information or soliciting Executive's involvement
in any business venture competitive with the Company. Executive shall not
conceal from or fail to disclose to the Company, or divert or exploit for her
own personal profit or that of others, any business opportunity or other
opportunity to acquire an interest in or a contractual relationship with any
person or entity where such person or entity is in the Company's line of
business or where such contractual relationship involves the acquisition of
real estate and which would be considered a feasible and advantageous
opportunity or acquisition for the Company. Upon termination of this
Agreement, Executive will deliver to the Company all tangible displays and
repositories of customer and supplier lists, files, records of research,
proposals, reports, memoranda, business methods and techniques, computer
software and programming, budgets and other financial plans and information,
and other materials or records or writings of any other type (including all
copies thereof) made, used or obtained by, or provided to, Executive,
containing any Proprietary Information, whether obtained prior to or
subsequent to the execution of this Agreement.
12. Non-Solicitation of Employees.
(a) Executive hereby agrees that for the two-year period following
the date of termination of this Agreement she will not (i) authorize her name
to be used by any person, partnership, corporation or other business entity,
or (ii) engage in or carry on, directly or indirectly, whether as advisor,
principal, agent, partner, officer, director, employee, stockholder,
associate or consultant of any person, partnership, corporation or other
business entity whose primary business is close-out retailing and is in
competition with the bargain close-out business carried on by the Company
or any of its Affiliates in Los Angeles, Orange, Riverside, San Bernardino,
Ventura, Santa Barbara or San Diego Counties in the State of California, or
any other county in California where business is then carried on or
conducted by the Company or any of its Affiliates, or in the States of
Arizona, Colorado, Alabama, Idaho, New Mexico, Texas, Nevada, Utah,
Georgia, Florida or Louisiana.
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(b) Executive further agrees that during the period from the date of
this Agreement until two years after the termination of the Agreement she shall
not contact any employees of the Company or supplier of merchandise to the
Company without advising the Company of such contact and she shall not
participate in any endeavor or activity which would disrupt the Company's or
any of its Affiliate's good business relationships with the employees,
suppliers and/or persons engaged in purchasing activities on behalf of the
Company or such Affiliate, and she shall not make any false, deceptive or
misleading statement or statements to any one or more of such suppliers or
such persons which would be likely to cause such disruptions.
(c) Any and all active and inactive real estate transactions,
involving the leasing of retail space or the purchase of land and/or
buildings, are the property of the Company. Within two years after the
termination of the Agreement, the Executive cannot attempt to stop or
interfere with the Company concluding these transactions and agreements.
13. Miscellaneous.
(a) Executive represents and warrants to the Company that she is not
now under any obligation of a contractual or other nature to any person, firm
or corporation which is inconsistent or in conflict with this Agreement, or
which would prevent, limit or impair in any way the performance by her of
her obligations hereunder.
(b) The waiver by either party of a breach of any provision of this
Agreement must be in writing and shall not operate or be construed as a waiver
of any subsequent breach thereof.
(c) This Agreement constitutes the entire Agreement of Executive and
the Company and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations between the parties with
respect to the subject matter hereof.
(d) Any and all notices referred to herein shall be sufficiently
furnished if in writing, and sent by registered or certified mail, postage
prepaid, or by facsimile transmission (but only if confirmation of receipt is
subsequently received by the sender either orally or in writing), or by
overnight courier (if such overnight courier guarantees next day delivery and
such notice is sent for delivery on a day on which such courier guarantees
such overnight delivery), to the respective parties at the following addresses
or such other address as either party may from time to time designate in
writing in the manner set forth in this Section 13(d):
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The Company:
Mac Frugal's Bargains o Close-outs Inc.
2430 E. Del Amo Boulevard
Dominguez, California 90220
Attention: Board of Directors and
Chief Executive Officer
Telephone Number: (310) 761-4200
Executive:
Patricia J. Wehner
803 Loma Drive
Hermosa Beach, California 90254
(e) If any portion or provision of this Agreement shall be invalid
or unenforceable for any reason, there shall be deemed to be made such minor
changes (and only such minor changes) in such provision or portion as are
necessary to make it valid and enforceable. The invalidity or
unenforceability of any provision or portion of this Agreement shall not
affect the validity or enforceability of any other provisions or portions
of this Agreement. If any such unenforceable or invalid provision or
provisions shall be rendered enforceable and valid by changes in applicable
law, then such provision or provisions shall be deemed to read as they
presently do in this Agreement without change.
(f) The rights and obligations of the parties hereto shall inure
to and be binding upon the parties hereto and their respective heirs,
successors and assigns.
(g) The waiver by either party of a breach of a provision of this
Agreement shall not operate or be construed as a waiver of a subsequent breach
hereof.
(h) This Agreement is intended to and shall be governed by, and
interpreted under and construed in accordance with, the laws of the State of
California, without reference to any conflict of laws or principles.
(i) If any litigation, arbitration or any other proceedings is
instituted in connection with or related to this Agreement, the non-prevailing
party in such litigation, arbitration or other proceeding shall pay the
expenses, including, without limitation, the attorneys' fees and expenses of
investigation, of the prevailing party.
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(j) Arbitration.
(i) Any controversy, claim or dispute between the parties
directly or indirectly concerning this Agreement or the breach hereof, or the
subject matter hereof (except in instances where only injunctive relief is
sought by the Company), shall be finally settled by arbitration held in Los
Angeles, California. The Company and Executive shall each select an
arbitrator from a panel of seven (7) arbitrators (the "Arbitration Pool")
obtained by the Company from the Federal Mediation and Conciliation Service
within thirty (30) days of receiving written notice from either party
demanding any such proceeding. Such two chosen arbitrators shall agree on a
third arbitrator from the Arbitration Pool within fifteen days thereafter.
In the event an agreement has not been reached on the third arbitrator by the
end of such fifteen-day period, the third arbitrator shall be chosen by the
American Arbitration Association. The arbitration shall be held and a final
decision reached within 30 days thereafter. The decision of a majority of the
three chosen arbitrators shall be final and conclusive on the parties, and there
shall be no appeal therefrom. A decision of the arbitrators may be enforced
by the prevailing party in a court of competent jurisdiction. All other
issues in connection with such arbitration shall be in accordance with the
Rules of the American Arbitration Association.
(ii) The parties hereto agree that an action to compel
arbitration pursuant to this Agreement may be brought in any appropriate court
and in connection therewith the laws of the State of California shall control.
Application may also be made to such court for confirmation of any decision or
award of the arbitrators but only if necessary to effectuate such decision or
award. The parties hereto hereby consent to the jurisdiction of the
arbitrators and of such court and waive any objection to the jurisdiction of
such arbitrators or court.
(k) The Company and Executive expressly agree that the provisions of
Sections 11, 12 and 13 shall survive the termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE COMPANY: MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
By: LEONARD S. WILLIAMS
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Leonard S. Williams
Chief Executive Officer
EXECUTIVE:
PATRICIA J. WEHNER
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Patricia J. Wehner
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